New Delhi, August 19: The Delhi High court has dismissed a suit filed by Jindal Power Limited against the downgrading of its rating by ICRA Limited.

The order was passed on 18 August.

“Considering the fact that opinion of ICRA is rendered after taking into account all positive or negative factors and that it is an opinion rendered by experts in the field, this Court will not, unless the said opinion is perverse, arbitrary and mala fide, interfere in the same as a mathematical calculation of a credit rating is not possible,” the order passed by Justice Mukta Gupta reads, Livemint reported.

“…Court finds that the rating rationales depend from industry to industry and that ICRA has taken into account the relevant rating rationales, both positive and negative and based thereon rendered the opinion which is plausible on the facts and the said opinion being neither perverse nor arbitrary nor mala fide, this Court will not interfere therein by passing a decree declaring the same to be null and void,” it added.

The court said that the challenged Credit Ratings are surveillance ratings even if JPL objects to the same, “no mandatory injunction can be granted to the defendant to remove the Grade Rating Rationales from the physical as well as electronic record of the defendant on the worldwide web, much less permanent injunction.”

Jindal Power Limited had filed the suit against ICRA Limited praying for a decree of for declaring certain Credit Rating Rationales passed by ICRA Limited or any other similar credit rating rationale downgrading the plaintiff’s credit rating from BBB+ (stable outlook) to BBB (negative outlook) as null, void, unenforceable and ineffective.

It had also sought decree of mandatory injunction directing the defendant to withdraw the said credit rating rationales from the physical as well as electronic records of the defendant including on the world wide web.

JPL’s counsel submitted that ICRA has perversely and irrationally utilised the negative effect of the previous ratings and has added COVID-19 as a reason to downgrade the credit rating for this year ignoring the improvements and the positive aspects of JPL’s situation such as even during the national lock down when no industry was functional JPL’s industry was fully functional and that the financial exposure of JPL in the previous year has come down drastically for this year. While arriving at a subjective satisfaction of JPL’s rating, ICRA has not adopted an objective criteria nor was ICRA’s action transparent.

JPL said that while carrying out the ratings, ICRA assumed the role of a forensic auditor, which it is not vested with.

The counsel for ICRA submitted that on a plain reading of the rating agreement, in conjunction with CRA regime as also the RBI circular, the only unambiguous conclusion that can be arrived at is that the publication of the rating under surveillance is not subject to the acceptance of JPL.

“Contingent on the circumstances and consideration of the factors which involve annulment of prognosis, ICRA has a right to change the ratings and consequentially bound to publish irrespective of JPL‟s non-acceptance.” It was added by him.

ICRA further contended that “only in the first/initial rating, no publication will follow subsequent to the objection of the issuer, however, once the rating is published, then, the issuer would have no say in the subsequent ratings as the same affects the rights of the beneficiaries who have invested pursuant to the credit ratings initially assigned by ICRA.”

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