CARE Ratings: Justice Srikrishna Gives Clean Chit to Former MD & CEO Rajesh Mokashi and Chairman SB Mainak
Moneylife Digital Team 16 April 2022
CARE Ratings Ltd says the justice BN Srikrishna (retd) panel has given a clean chit to its erstwhile managing director (MD) and chief executive officer (CEO) Rajesh Mokashi and former chairman SB Mainak in a case related to influencing ratings. In February 2020, the Securities and Exchange Board of India (SEBI) had directed the rating agency to conduct an inquiry into any potential misconduct by the erstwhile chairman and the erstwhile MD & CEO in the credit rating process over the past three years.
 
In a regulatory filing, CARE Ratings says, "Justice Srikrishna has issued the final reports, concluding that the charge against Mr Mokashi (erstwhile MD and CEO) and Mr Mainak (erstwhile chairman) of interference with the rating process and influencing the ratings are not established."
 
In 2019, SEBI received a complaint from a whistle-blower alleging management interference in the ratings of companies, including IL&FS (Infrastructure Leasing & Financial Services). The forensic audit, prepared by Ernst & Young (EY), reportedly found the involvement of Mr Mainak and Mr Mokashi.
 
On 18 July 2019, Mr Mokashi was sent on forced leave by CARE Ratings. In December, he resigned. Mr Mokashi has been associated with CARE Ratings since 1993, and, in August 2009, he was appointed to the company board.
 
Mr Mainak, the former MD of Life Insurance Corp of India (LIC), followed suit and, in February 2020, resigned as chairman of CARE Ratings. 
 
In September 2018, IL&FS, which was rated highly by credit rating agencies (CRAs), collapsed after failing to meet its debt payment obligations, sparking a liquidity crisis in the financial services market.
 
Almost all rating agencies had given high ratings to IL&FS when the ground reality of the company was different. The rating agencies have been accused of not reporting the deteriorating financials of IL&FS. This prompted SEBI in December 2018 to initiate adjudication against credit rating agencies.
 
IL&FS and a group company were shareholders in CARE Ratings between 2007 and 2013, during which time the agency rated the commercial papers of the same companies.
 
In July 2019, Grant Thornton India LLP, appointed to conduct a forensic audit on CRAs by IL&FS, revealed a nexus between key employees of the scam-hit group and top executives of rating agencies. 
 
IL&FS and its key employees provided favours or gifts to representatives of the credit rating agencies, says Grant Thornton, adding, "During our email review, we identified various instances where benefits in the form of favours such as, Ramesh Bawa facilitated villa purchased for Ambreesh Srivastava (India Ratings), Arun Saha arranged football tickets for D Ravishankar (Brickwork Ratings) relating to the matches in Real Madrid, and IL&FS group donated to the Sameeksha Trust Rs25 lakh where the managing trustee of the Trust, DN Ghosh is also the chairman of ICRA. Further, our email review indicates that the various key officials of rating agencies were provided gifts such as smartwatches, shirts, and coasters." (Read: IL&FS Mess: Grant Thornton Forensic Audit Exposes Manipulative Nexus Between Key Employees and Credit Rating Agencies)
 
CARE Ratings, ICRA, India Ratings and Brickwork had been the leading rating agencies for IL&FS Transportation Networks Ltd (ITNL), IL&FS Financial Services Ltd (IFIN) and IL&FS during the period reviewed by Grant Thornton.
Comments
Ramesh Popat
2 months ago
Serious matter to dust bin !
Few more such rating fiasco
took place subsequently !
david.rasquinha
3 months ago
No one killed Jessica Lal!! What a farce. After all the evidence in the public domain, the "Hon'ble" Justice Srikrishna gives a clean chit! Pathetic and disgusting that we have such executives and such "Justices".
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