MUMBAI: The Securities Appellate Tribunal (SAT) has overturned an order issued by the markets regulator SEBI banning Rajesh Mokashi, the former managing director and chief executive of Care Ratings, for allegedly securing favourable ratings for a few issuers rated by his agency.
The markets regulator SEBI had in April 2023 had debarred Mokashi from associating with any stock markets or market intermediaries for two years.
The tribunal has also imposed a penalty of Rs 5 lakh on the Securities and Exchange Board for causing “irreparable damages” to the appellant's reputation.
The tribunal in its order dated June 27 and uploaded on its website Wednesday also said SEBI caused reputational and financial damage to Mokashi and wasted judicial time, while ignoring justice BN Srikrishna's exoneration in the ratings case.
“The SEBI action had also caused a colossal loss of judicial time and resources, as well as financial loss, and loss of further opportunities,” the order said.
“This is an unfortunate case in which the SEBI had directed Care Ratings to send the appellant on leave till completion of the forensic audit…Though the Srikrishna report had returned a categorical finding that there was no evidence to suggest that the appellant had interfered with or influenced the rating decision, SEBI embarked on another misadventure to conduct one more proceeding through its WTM,” the SAT order noted.
The SEBI in its April 2023 order had claimed that during Mokashi's tenure from August 2016 to July 2019, he exerted undue influence on Care Ratings' employees to secure favourable ratings for certain issuers, including DHFL, which then went down under due to debt burden.
However, an earlier report by retired Bombay HC justice Srikrishna had exonerated Mokashi, saying there was no substance to the SEBI allegations of his interference in the ratings of DHFL, Yes Bank, and ILFS.
SEBI had agreed with Srikrishna's findings on all issues except the allegations related to DHFL. Ironically, all these three entities soon went belly up. While DHFL was sent to NCLT and was resolved after being picked up by Piramal Enterprises, IF&FS also went down in October 2018 and is yet to be fully resolved -- lenders are yet to fully get their money back; and Yes Bank was rescued other 10 lenders led by SBI in an RBI-managed rescue in March 2020.
The SAT also said SEBI whole-time member who wrote the order had “wholly misconstrued the findings” in the Srikrishna report.
The regulatory proceedings were initiated following whistleblower complaints. In July 2019, SEBI had directed Care Ratings audit committee to conduct a forensic review of the alleged irregularities.
Subsequently, Mokashi was asked to go on leave and was later terminated from his position at the rating agency.