Judgment
As delivered
IN THE SECURITIES APPELLATE TRIBUNALAT MUMBAIDATED THIS THE 27TH DAY OF JUNE, 2025CORAM: Justice P.S. Dinesh Kumar, Presiding OfficerDr. Dheeraj Bhatnagar, Technical MemberAppeal No.496 of 2023Rajesh Mokashi,Flat No. 107, B Wing,Everard Towers, Everard Nagar,Priyadarshini, Wadala Road,Mumbai - 400 022. .....Appellant(BY Mr. Pesi Modi, Senior Advocate with Mr. KunalKatariya, Mr.Pulkit Sukhramani, Mr.Anshuman Sugla,Ms. Samreen Fatima and Mr. Juan D' Souza, Advocatesi/b. JSA, Advocates & Solicitors for the Appellant.)Securities and Exchange Board of IndiaSEBI Bhavan, C-4AG Block,Bandra Kurla Complex,Bandra (East), Mumbai - 400 051. ...Respondent(BY Rafique Dada, Senior Advocate with Mr. MihirMody, Mr.Yash Sutaria, Mr. Tushar Bansode and Mr.Akshay Gupte, Advocates i/b. K Ashar & Co. for theRespondent.)THIS APPEAL IS FILED UNDER SECTION 15TOF SEBI ACT, 1992 TO SET ASIDE ORDER DATEDAPRIL 20, 2023 (Ex-A) PASSED BY SEBI.2THIS APPEAL HAVING BEEN HEARD ANDRESERVED FOR ORDERS ON APRIL 29, 2025, COMINGON FOR PRONOUNCEMENT OF ORDER THIS 27THDAY OF JUNE 2025, THE TRIBUNAL MADE THEFOLLOWING:ORDERPer: Justice P.S. Dinesh Kumar, Presiding OfficerThis appeal is directed against order dated April20, 2023 passed by the WTM1, SEBI2 restraining theappellant from associating with any SEBI registeredintermediary, directly or indirectly, for a period of twoyears.2. We have heard Shri Pesi Modi, learned SeniorAdvocate for the appellant and Shri Rafique Dada,learned Senior Advocate for the respondent.3. Brief facts of the case are, CARE Ratings Ltd.('CARE' for short) is a SEBI and RBI3 registered1Whole Time Member2Securities and Exchange Board of India.3Reserve Bank of India3'credit rating agency'. It is listed on BSE4 and NSE5.SEBI received complaints from December, 2018onwards alleging that the two noticees, namely, ShriS.B. Mainak, Non-Executive Chairman and theappellant herein (Shri Rajesh Mokashi, ManagingDirector) were interfering with the rating process andgranting AAA ratings to the clients who were payinghigher fee. SEBI forwarded a complaint to the CAREwith an advice to appoint an independent auditor toenquire into the allegations. CARE appointed Borkar &Muzumdar, Chartered Accountants to conduct theenquiry. The report submitted by Borkar & Muzumdarwas not accepted by SEBI and SEBI instructed CAREto appoint an independent law/audit firm to examine theallegations in the complaints. Accordingly, Ernst &Young LLP ('E&Y' for short) was appointed as theforensic auditor. After considering E&Y's report, SEBIdirected CARE to institute a full- fledged inquiry.4BSE Ltd.5National Stock Exchange of India Ltd.4Accordingly, Hon'ble Justice Shri B.N. Srikrishna,former Judge of Supreme Court of India was appointedto conduct an inquiry. Justice B.N.Srikrishna submittedhis report holding that charges against the noticees werenot established.4. SEBI issued a Show Cause Notice ('SCN' forshort) and a supplementary SCN to both the appellantand Shri S. B. Mainak. The WTM has held that thecharges against Shri S.B. Mainak were not establishedand no directions have been issued against him.Appellant submitted his reply to the SCN. Afterconclusion of the proceedings, the WTM has passed theimpugned order.5. Assailing the impugned order Shri Pesi Modi,learned Senior Advocate for the appellant submittedthat: SEBI has failed to consider Justice B.N. Srikrishnareport, which had exonerated the appellant of all5charges of interference. Justice Shri B.N.Srikrishna was a Judge of the Bombay High Court,Chief Justice of Kerala High Court and thereafterJudge of the Supreme Court of India. He is anexpert in securities laws. SEBI has taken legalopinions from him in various matters. He was alsoa Director of the NSE for several years. Justice B. N. Srikrishna report was also based onthe very same documents, namely, the E&Y reportand the statements recorded by E&Y, which arethe basis of the impugned order. SEBI has concurred with Justice Shri B. N.Srikrishna report on all issues except theallegations of interfering in the rating of DHFL.The impugned order purports to reject the saidreport with regard to DHFL on an incorrectpremise that Justice B. N. Srikrishna report hadexamined whether appellant's interference had animpact on the rating decisions, whereas in the6impugned order the issue is whether interferencein the rating process itself was contrary toregulatory mandate. Justice B. N. Srikrishna report has considered theallegation of interference in the rating process bythe appellant and concluded that there was noevidence of any interference. Therefore, nothingfurther had remained for consideration by theSEBI. The impugned order holds that Justice B.N.Srikrishna report has not considered the WhatsAppconversations. It is held in the impugned orderthat WhatsApp conversations are more reliable.The said finding is contrary to the law laid down inAmbalal Sarabhai Enterprises Limited v. KSInfraspace LLP6. SEBI has ignored the fact that in the crossexamination of several employees, whoseWhatsApp messages have been considered by the6(2020) 5 SCC 4107SEBI have stated that there was no pressure fromthe appellant in the rating decision.6. In substance, appellant's case is that JusticeB. N. Srikrishna report was based on the very sameE&Y report and the statements recorded by E&Y.SEBI has concurred with the said report except withregard to the allegation of interference in the rating ofDHFL. The impugned order is based onmisinterpretation of Justice B. N. Srikrishna reportand incorrect appreciation of evidence on record.7. In reply, Shri Rafique Dada, Senior Advocatesupporting the impugned order strongly urged thatCARE's ratings seriously affected the securitiesmarket because the investors would be guided by itsratings. The WTM has recorded cogent reasons insupport of the impugned order.8. It is pleaded in the reply and it was arguedduring the hearing that Justice B. N. Srikrishna report8was found to be reliable in all respects except thefindings in the case of DHFL for reasons stated inpara No.107 of the impugned order.9. It is urged in the written submissions that thestatements of Shri Mithul Budhbhatti and Shri RaviDasari disclose that appellant was not happy with theproposed downgrade action of DHFL by the RatingCommittee. It would further reveal that appellantwas not permitting the rating team to take a contraryview and insisting that in case they wished todowngrade they should take the issuer intoconfidence. In substance, SEBI's case is that thematerial on record discloses that appellant hadinterfered with the rating.10. We have carefully considered the rivalcontentions and perused the records.11. Undisputed facts of the case are, appellantwas working as the Managing Director of CARE.9The specific allegation against him is that he hadinterfered in the rating decisions. Justice B. N.Srikrishna report has exonerated him. The WTM,SEBI has concurred with Justice B. N. Srikrishnareport in all other aspects except the allegation withregard to interference in the case of DHFL. Hence,in the light of the pleadings and submissions oflearned Advocates on both sides the point that arisesfor consideration is whether the appellant interferedwith the DHFL's rating?12. The Rating Committee consisting of differentmembers has met on following dates.Dates of Rating Members of RatingCommittee Meeting CommitteeOctober 29, 2018 Ms. Revati Kasture(Chairperson of theRating Committee)Mr. Mitul Budhbhatti.Mr. Anuj Jain.Ms. Smita Rajpurkar.November 1, 2018 Mr. Arun Kumar(Chairman of the RatingCommittee).10Mr. Yogesh Shah.Mr. Mitul Budhbhatti.December 31, 2018 Ms. Revati Kasture(Chairperson of theRating Committee)Mr. Ranjan Sharma.January 18, 2019 Mr. Milind Gadkari(Chairman of the RatingCommittee).Ms. Jyotsna GadgilMr. Ranjan Sharma.January 25, 2019 Mr. Arun Kumar(Chairman of the RatingCommittee).Mr. Yogesh ShahMr. Sudhir Kumar.13. The meeting on October 29, 2018 wasdeferred on the ground that the Bank sanction letterwas not made available. We have perused thestatements recorded by E&Y. Both Ms. RevatiKasture (Chairman of the Committee) and Ms. SmitaRajpurkar, Member of the Committee have affirmedthat the meeting was deferred for want of banksanction letter.1114. The next meeting was conducted onNovember 1, 2018 and it was chaired by Mr. ArunKumar. On that day, the rating of 'AAA' wasreaffirmed.15. The next meeting was held on December 31,2018 and it was deferred.16. The next meeting was on January 18, 2019and it was headed by Mr. Milind Gadkari. TheCommittee decided to keep the rating under 'Creditwatch'.17. The last meeting was held on January 25,2019 and it was headed by Mr. Arun Kumar.18. During the course of investigation thestatements of employees of CARE have beenrecorded. The statements of following are relevant.12a. Ms. Revati Kasture - Chairman of Rating Committee.b. Mr. Arun Kumar - Chairman of Rating Committee.c. Mr. Mithul Budhbhatti - Member of Rating Committeed. Mr. Ranjan Sharma - Member of Rating Committeee. Mr. Ravi Dasari - General Head of Rating Team19. Before analyzing the evidence, we mayrecord that 'Rating Team' of a rating agencycomprising of analysts prepares a rating note and it isplaced before the rating committee. The compositionof the rating committee is decided by the ChiefRating Officer (CRO). It is the rating committeewhich independently assesses the informationreceived from the client and decides the rating to beassigned to the client. In case, the rating committeerequires any further information, it may call for suchinformation from the client. Once the ratingcommittee decides the rating, a rating letter is issued.In case, the client company does not accept therating, it can request for a review and its13representation is placed before the rating committee,which decides if any review is necessary.20. On November 1, 2018, the DHFL MD andother officials had met the appellant and others.Subsequently, the Credit Rating Committee meetingwas conducted and it was headed by Mr. ArunKumar. After the meeting, 'AAA' rating wasrevalidated. In their statements, Mr. Arun Kumarand Mr. Mitul Budhbhatti have stated that appellanthad met the DHFL officials as the 'Head of theorganization' to fulfill his protocol obligation. Thereis nothing in their statements to even remotelysuggest that the appellant had influenced the ratingcommittee in any manner.21. The next meeting headed by Ms. RevatiRajpurkar was conducted on December 31, 2018 andit was deferred.1422. In the meeting headed by Mr. Milind Gadkariheld on January 18, 2019 the Company's ratingswere kept under credit watch. Later after the meetingon January 25, 2019 headed by Mr. Arun Kumar,'AAA' status was reaffirmed.
23. In its reply affidavit7, SEBI has pleaded thus:
'The Justice Srikrishna report was found to be reliable in all respects by the Impugned Order barring the findings against Appellant for interfering in the rating process of DHFL for reasons more specifically stated at para 107 of the Impugned Order.'
24. We are constrained to note with pain that in
para No.107(a) of the impugned order, the WTM has
recorded distorted version of the report. The actual
findings in Justice B.N. Srikrishna report read thus:
"11.15.On an overall consideration, I am of the opinion that whatever might have been the urgency of the situation that might have induced Mr.Rajesh Mokashi to ask the team to do the rating exercise expeditiously, there is no 7 Dated 14.08.2023 Para no.29(iii) 15
evidence that he interfered with the process of rating and influenced the outcome of the rating committee's decision."
"12.8 In my opinion, there is no evidence to suggest that there was any interference with or influence on the rating decision by Mr. Rajesh Mokashi on this occasion also."
"15.4 There is no material to suggest that Mr.Rajesh Mokashi interfered with the process of rating and influenced the outcome of the rating committee's decision.It is not possible to accept this charge as proved."
25. Finally, it is held in the Justice B.N.
Srikrishna report as follows:
"22. In my opinion, there is no substance in the charges levelled against Mr. Rajesh Mokashi with regard to the allegation that he had interfered with the rating process and influenced the ratings of DHFL, Yes Bank or ILFS."
26. Thus, the finding in Justice B. N. Srikrishna
report is unambiguous holding that there is no
evidence to suggest that there was any interference or 16
influence by the appellant. But unfortunately the
WTM has proceeded on the incorrect premise that the
Justice B. N. Srikrishna report was considering the
question whether interference by the appellant had an
'impact' on the rating decision by recording thus:
"107. .............. I concur with the conclusions reached in the said report on all issues barring the allegation against Noticee 2 for interfering in the rating of DHFL, for the following reasons:
a. The report considers the question of whether the interference by Noticee 2 had an impact on the rating decision whereas I am of the considered view that such interference irrespective of its ultimate impact on the rating decision would fall foul of the regulatory mandate............ ."
27. Thus, the WTM has wholly misconstrued the
findings recorded in Justice B. N. Srikrishna report
and passed the impugned order. Further, in its
attempt to justify the impugned order, SEBI has
pleaded thus in its written submission. 17
"29.d. Justice B.N. Srikrishna did not have the benefit of cross-examination, which was available to the Ld. WTM. Ranjan Sharma, Ravi Dasari and Mitul Budhbhatti, whose statements SEBI seeks to rely on, have stood the cross-examination."
28. We have carefully perused the cross
examination of all three employees referred in the
above extracted written submission. Shri Ranjan
Sharma was asked the following two questions and
both are answered in the negative:
"Q.32. Go to question nos.26 and 27 of your statement dated 15 November 2019. Did Mr. Mokashi ever personally pressure you to change a rating decision?
Q.33. Did anybody in CARE ratings ever put indirect pressure on you to change a rating decision?
18 29. Mr. Ravi Dasari has also answered in the
negative and his cross examination reads as follows:
"Q.5. Did Mr. Rajesh Mokashi ever pressurize you to give a specific rating to any particular company?
Ans: No. Primarily the rating decisions are taken by the Rating Committee and no way in person did Mr. Mokashi tell me about any specific rating to be given."
30. In its written note, SEBI has placed reliance
on the following portion of cross examination of Mr.
"Q.16. Did you ever change the rating of any company on the basis of instructions from Mr. Rajesh Mokashi?
Ans: Our recommendations did get influenced by our discussions with Mr. Mokashi.
Q.17.Kindly explain what do you mean by 'influence'?
Ans: By 'influence' I mean finding difficulty in firming up a rating view.
19 Q.18. Kindly elaborate what do you mean by "difficulty in firming up a rating view"?
Ans: By "firming up" I mean to clearly decide what rating action to recommend."
31. We may record that the further portion of the
cross examination has been conveniently left out and
"Q.19. Is it possible for a single person in the Rating Committee to decide the rating outcome in a case?
Ans: Rating Committee works on a consensus basis, so while members can have different views they have to deliberate and arrive at a consensus.
Q.20. Have you ever recorded a dissent in a Rating Committee Meeting?
Ans: In my capacity as a Rating Committee Member, No.
Q.21. Has anybody in any rating committee meeting that you have attended recorded dissent?
20 32. Although, Mr. Budhbhatti has stated that the
recommendations were influenced by discussions
with Mr. Mokashi, he has admitted in his cross
examination that neither he nor any other member of
rating committee had recorded 'dissent'. A careful
evaluation of the evidence on record does not support
SEBI's case that the appellant had influenced the
33. A conjoint reading of pleadings on record,
the oral evidence and the written submissions leads to
an irresistible inference that the WTM has grossly
erred in recording a distorted finding from Justice
B.N. Srikrishna report, which has resulted in the
impugned order. When the appellant has challenged
the same in this appeal, SEBI has sought to justify
the impugned order contending that Justice B.N.
Srikrishna did not have the benefit of the cross 21
examination. Respondent's stand, in the least, is
34. This is an unfortunate case in which the SEBI
had directed8 CARE to send appellant on leave till
completion of the forensic audit. On receipt of
E&Y's report, SEBI advised to initiate a full-fledged
enquiry and the appellant tendered his resignation in
December, 20199. Though Justice B.N. 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.
The entire exercise has caused a colossal loss of
judicial time and resources and above all a miserable
trauma of irreparable damage to appellant's
reputation besides financial loss and loss of further
8 Vide SEBI's letter dated 12.07.2019 (Exhibit. B) 9 Exhibit G 22
35. In the light of above discussion, the
a. Appeal is allowed with costs of Rs.5 Lakhs
payable by SEBI to the appellant;
b. Order dated April 20, 2023 is quashed.
c. Pending interlocutory application(s), if any
Justice P.S. Dinesh Kumar Presiding Officer
Dr. Dheeraj Bhatnagar Technical Member
27.06.2025 MRS Digitally signed by MRS PRAMILA PRAMILA Date: 2025.07.01 10:42:59 +05'30'
