Back
IN THE HIGH COURT OF JUDICATURE AT MADRAS
C.V. KARTHIKEYAN, J.
Oren Hydrocarbons Pvt. Limited - Appellants
Vs.
India Ratings & Research Pvt. Ltd. - Respondent
O.A. No. 761 of 2017 and Appln. No. 4457 of 2017 in C.S. No. 615 of 2017
Decided On : 20-10-2017
Code of Civil Procedure,1908 - Section 9 - Order 39 - Rule 3(a) - SEBI Act, 1992 – Section 20 A ,32, 15-Y and 20-A - SEBI (Credit Rating Agency) Regulation, 1999 - Regulation 33 , 34 , 27 , 29 and 14 – Agreement – Bank loan - Tax earned - Credit value - Plaintiff and defendant entered into an agreement for purpose of bank loan rating of term loan facility and non-funded facility availed by plaintiff - Plaintiff had furnished details required for rating for the year - Plaintiff also furnished further details by letter dated - However, on plaintiff received a mail from defendant attaching a Draft Rating Action Commentary downgrading credit value of plaintiff from BBB+ to D - Defendant stated that review for factual accuracy and non-public information must be done by 3.00 p.m., on and that it would be published by 4.00 p.m., on same day - Plaintiff sent a reply on protesting downgrading - Defendant reverted back stating that rating action is based on management certificate and bankers confirmation that there were instances of delay in debt servicing by plaintiff over past six months - However documents were not referred - It had been further stated in plaint that local manager of defendant informed managing director of plaintiff that they would send an intermediary, vice-president of Fin Men Advisors to discuss better rating –Held, plaintiff has complained that Draft Commentary contained blanks and columns were left unfilled - Plaintiff has complained that no opportunity was afforded to present their case before appellate authority - Plaintiff has also complained that an intermediary, claiming to have authority to increase credit rating had approached them with demand for payment of Rs. 15 lakhs - This has been denied by defendant, and naturally, evidence will have to let in on that aspect - Similarly, plaintiff has stated that there were no default with respect to loan advanced by IDBI, which fact is denied by defendant, which again implies that evidence has to be adduced - Plaintiff has further stated that defendant has relied on default on a non-banking financial institution, and circumstances surrounding the same will have to be examined in detail - Role of Finmin requires detailed examination - All this requires adjudication on analysis of legally admissible and relevant evidence - Loss suffered by plaintiff far outweighs damage caused to defendant by not publishing the rating of the plaintiff - Publication of a wrong rating would cause severe loss and damage to plaintiff - Defendant can always revise its ratings and publish them when permitted by the Court - In the result, O.A. No. and Appln. No. are allowed.
C.V. Karthikeyan, J.
1. C.S. No. 615 of 2017 has been filed by Oren Hydrocarbons Pvt. Ltd., a Private Limited Company, incorporated under the Companies Act, 1956 and engaged in the business of oil and chemicals drilling catering to multinational operations in the oil field. The defendant, India Ratings & Research Pvt. Ltd., is a credit rating agency for rating of fund based bank borrowings/non-fund based term loan facilities. It is governed by the guidelines issued by the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI).
2. The plaintiff and the defendant entered into an agreement on 18.03.2013 for the purpose of bank loan rating of term loan facility and non-funded facility availed by the plaintiff.
3. The plaintiff had availed Term Loan of Rs.35.00 crores from IDBI Bank and Rs. 50 crores from State Bank of India. The plaintiff had given the details of the profit after tax earned by it for three successive financial years from 2013-2014 onwards.
4. The plaintiff had furnished the details required for rating for the year 2017. The plaintiff also furnished further details by letter dated 14.06.2017. However, on 18.07.2017, the plaintiff received a mail from the defendant attaching a Draft Rating Action Commentary downgrading the credit value of the plaintiff from 'BBB+' to 'D'. The defendant stated that review for factual accuracy and non-public information must be done by 3.00 p.m., on 20.07.2017 and that it would be published by 4.00 p.m., on the same day.
5. The plaintiff stated that the Draft Action Commentary had been prepared on 18.05.2017 itself, and requesting details on 30.05.2017 was a farce.
6. The plaintiff sent a reply on 19.07.2017 protesting downgrading. The defendant reverted back stating that the rating action is based on the management certificate and banker's confirmation that there were instances of delay in debt servicing by the plaintiff over the past six months. However documents were not referred.
7. The plaintiff again sent a mail on 20.07.2017 that they did not agree to the draft and was not granting consent to disclose the rating on the website of the defendant. The defendant replied stating that as per RBI and SEBI regulations, issuer consent was not required.
8. It had been further stated in the plaint that the local manager of the defendant informed the managing director of the plaintiff that they would send an intermediary, Nobby A Pushpakaran, vice-president of Fin Men Advisors, to discuss better rating. The said intermediary gave a letter dated 22.07.2017 assuring a minimum rating of 'BB' on payment of Rs. 15 lakhs.
9. The plaintiff termed the said demand as a bribe and refused to pay the amount.
10. The defendant downgraded the bank rating of the plaintiff from 'BBB' to 'D'.
11. The plaintiff claimed that IDBI Bank had sent a letter dated 24.07.2017 that repayment of term loan had commenced and interest/instalment had been paid up to date by the plaintiff.
12. The defendant sent a mail on 25.07.2017 stating that the Appeal Review Panel had dismissed the appeal as the information provided was found to be not material.
13. The plaintiff sent a reply dated 25.07.2017, again registering its protest.
14. The plaintiff had instituted the suit on the ground that the defendant had downgraded the rating of the plaintiff disregarding the letter of IDBI. It had been stated that the defendant suppressed the letter in gross violation of RBI and SEBI guidelines for bank loan rating and credit rating processes. The defendant had not given the details of the documents relied on for downgrading the rating of the plaintiff. It had been stated that the defendant had violated the guidelines of RBI and SEBI.
15. The plaintiff filed the suit seeking a declaration that the downgrading of the plaintiff's bank loan rating from 'BBB' to 'IND D' by the defendant was void and for a permanent injunction restraining the defendant from rating bank loan facilities of the plaintiff in contravention of the
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
