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2013 (3) TMI 431 - SC - Companies LawEligibility Criteria for Seeking registration as a Credit Rating Agency ("CRA") - rejection of application as to produce Audited Annual Accounts of the respondent's promoters for the two years ending December, 2010 - appellant submitted that the certificate of the Chartered Accountant submitted by him is evidence of the required net worth of the promoter, in strict conformity with Regulation 4(e) of the SEBI (Credit Rating Agencies) Regulations, 1999 - whether the Board was within its power to ask for the Audited Accounts of the applicant for the 5 years preceding the date of the application - SAT has remanded the matter back to the appellant to consider the application of the respondent seeking registration - Held that:- The certificate of Chartered Accountant did not conform to the provisions contained in the regulations which requires that the certificate should be in confirmation of the Audited Accounts of the promoters/applicant for the five years preceding the date of the application. Unable to approve the observations made by SAT that "neither the regulations nor the eligibility criteria in Form A requires the applicant to produce the annual accounts of the promoter." Also unable to approve the observations of SAT that "it is doubtful whether the Board could have asked for this information without doubting the veracity or the correctness of the certificate of the Chartered Accountant that accompanied the application." The certificate of the Chartered Accountant is evidence of the required net worth of the promoter. Therefore, it has to be in strict conformity with Regulation 4(e). Since the certificate issued by the Chartered Accountants did not categorically state that it is based on the audited accounts for the 5 years preceding the date of application, the Board certainly had the power to direct the respondent to produce the audited accounts. That being so, under Regulation 6, it was the duty of the Board to have rejected the application of the respondent. Surprisingly, however, the Board continued to grant further time to the respondent to remove the objections even beyond the maximum sixty days permissible under the proviso to Regulation 6. It appears that the enquiries continued from 20th August, 2009 till March 1, 2011 when the show cause notice was issued to the respondent. The application of the respondent is not rejected till 21st July, 2011. The delay in the rejection of the application of the respondent was wholly unwarranted. It allowed the respondent a latitude not permissible under the regulations who taking advantage of this latitude has provided the Audited Accounts for the five years preceding the date of application. Not only this, by now the respondent has even produced before this Court in a sealed cover the Audited Accounts of M/s. Coment (Mauritius) Limited for the subsequent two years upto 31st December, 2010 also. Since the Board had extended the time to the respondent, even though not permissible in law, we are not inclined to modify the directions issued by the SAT. Especially in view of the submission of Mr. Suri that respondent is willing at this stage to produce the Audited Accounts of the promoter even for the subsequent two years.
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