SAT quashes Sebi order against ex-Care Ratings MD & CEO Rajesh Mokashi

The tribunal 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 Securities Appellate Tribunal (SAT) has overturned an order issued by the markets regulator against former managing director (MD) and chief executive officer (CEO) of Care Ratings for allegedly securing favourable ratings for certain issuers.

 

The tribunal has also imposed a penalty of ₹500,000 on the Securities and Exchange Board of India (Sebi), citing “irreparable” damage caused to the appellant's reputation.

 

The regulator had, in April 2023, barred Rajesh Mokashi, former MD and CEO of Care Ratings, from associating with any stock market intermediary for two years, alleging that he had interfered in the ratings process.

 

The SAT, in its order dated June 27, noted that this action had caused “a colossal loss of judicial time and resources,” as well as “financial loss, and loss of further opportunities.” 

 

Sebi’s 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.

 

However, an earlier report by Justice BN Srikrishna had exonerated Mokashi, concluding that there was no substance to the allegations of his interference in the ratings of DHFL, Yes Bank, and ILFS. Sebi had agreed with Justice Srikrishna's findings on all issues except the allegations related to DHFL.

 

The SAT's order highlighted that Sebi’s whole-time member had “wholly misconstrued the findings” in Justice Srikrishna's 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.

 

“This is an unfortunate case in which the Sebi had directed Care to send appellant on leave till completion of the forensic audit…Though Justice BN 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 upon another misadventure to conduct one more proceeding through its WTM,” noted the SAT order.