Judgment :-

Surinder Singh Nijjar, J.

1. The present appeal under Section 15Z of the Securities and Exchange Board of India Act, 1992 (“the SEBI Act”) is directed against the impugned judgment and final order dated 9th November, 2011 passed by the Securities Appellate Tribunal, Mumbai (“the SAT”), in Appeal No. 155 of 2011, by which the appeal filed by M/s Informetics Valuation and Rating Pvt. Ltd., (the respondent herein) was allowed, and the order dated 24th June, 2011 passed by the Whole Time Member of SEBI and communication dated 21st July, 2011 of the Securities and Exchange Board of India (”the SEBI”) was set aside. By the impugned order, the SAT has remanded the matter back to the appellant to consider the application of the respondent seeking registration as a Credit Rating Agency (“CRA”) without requiring the respondent to produce Audited Annual Accounts of the respondent’s promoters for the two years ending December, 2010.

2. We may notice here the skeletal facts which are necessary for the determination of the limited legal issue involved in this appeal.

3. On 11th June, 2009, the respondent submitted an application to SEBI under Regulation 3 of the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 (“the CRA Regulations, 1999”) seeking registration as a CRA. The respondent company was incorporated on 23rd June, 1986. The promoters of the respondent are stated to be:

(a) M/s. Coment (Mauritius) Limited through M/s. ACE Step Management Ltd.

(b) M/s. V. Malik & Associates, Chartered Accountants – Consortium Member for all the Accounting and Management backup.

(c) Infomerics India Foundation – Consortium Member as Policy Making Board.

4. The appellant (SEBI) is a Statutory Board established under the SEBI Act to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto. Under Section 11 of the SEBI Act, the appellant is duty bound to protect the interest of investors in securities and promote the development of, and to regulate, the securities market, by such measures as it thinks fit. Section 11(2) specifically enables SEBI to take the necessary measures to provide for inter alia registration and regulating the working of the depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification specify in this behalf.

5. Pursuant to the aforesaid power, in July, 1999, SEBI issued a notification to bring CRAs under its regulatory ambit, in exercise of powers conferred under Section 30 read with Section 11 of the SEBI Act.

6. The CRA Regulations, 1999 empowers the appellant to regulate CRAs operating in India. Under the CRA Regulations, 1999, a CRA had been defined as a body corporate, which is engaged or proposes to be engaged in the business of rating of securities offered by way of public or rights issue. SEBI has also prescribed a Code of Conduct to be followed by the CRAs in the aforesaid regulations. The CRA Regulations, 1999 inter alia, contain:

A. Regulations pertaining to the registration of credit rating agencies, application for grant of initial and permanent certificate, eligibility criteria for promoter(s) of the credit rating agency, furnishing of information, clarification and personal representation by the promoter(s), grant of certificate by SEBI, its conditions, and procedure for refusal of certificate and its effect.

B. General obligations of Credit Rating Agencies, Code of Conduct, Agreement with client(s), Monitoring and process of rating and the Procedure for review of rating, Appointment of Compliance Officer, maintenance of proper books of Accounts and records, etc.

C. Restrictions on rating of securities issued by promoter(s) or by certain other person(s)

D. Procedure for inspection and investigation

E. Procedure for action in case of default

7. On 11th June,