Read Time: 04 minutes

The Supreme Court has today dismissed a plea filed by the Securities Exchange Board of India challenging the order of the Securities Appellate Tribunal reducing the penalty levied on CARE Ratings Ltd by SEBI.

A bench comprising Justice Indira Banerjee and Justice JK Maheshwari noted that SAT has not taken a decision against you, whereas, it has reduced the penalty.

SEBI had imposed a penalty of Rs. 1 crore for allegedly not reducing the ratings of Non-Convertable debentures which were issued by Reliance Communications in violation of Regulation 15(1) and Clause (3) and (8) of the Code of Conduct.

Senior Advocate Chander Uday appearing for SEBI said that it is a Credit Rating Agency, whereas, the penalty has been reduced from effective to nothing.

SAT while reducing the penalty said, "that the maximum penalty of Rs. 1 crore is highly excessive, harsh and arbitrary and does not commensurate with the violations. Section 15HB of SEBI Act provides that whoever fails to comply with any provisions of the Act or CRA Regulations for which no separate penalty has been provided shall be liable to a penalty which shall not be less than Rs. 1 lakh and which may extend to Rs 1 crore."

The order had further observed, "The mere fact that the client of the appellant is a corporate giant in the telecom industry does not mean that the maximum penalty has to be imposed on this ground...this cannot be a factor for consideration of the quantum of the penalty. The charge is one of lack of due diligence and it is not a case where ratings were not downgraded. The ratings were downgraded by the appellants but not in a timely manner. There could be a case of carelessness or sluggishness or laxity in the manner in which the downgrading was done by the appellant but it is not a case of oversight."

However, the Apex Court clarified that the penalty recused on the facts and circumstances of the case cannot be taken as a precedent in all the cases 

Case Title: Securities Exchange Board of India Through Its Chairman Vs. CARE Ratings Ltd through Director