HC restrains ICRA from downgrading the rating of ECL Finance till May 4
On Monday, the court has recorded the statement from both the parties.
MUMBAI: The Mumbai High Court has restrained credit rating agency, ICRA from downgrading the credit rating of ECL Finance till May 4 and ordered the Mumbai based finance company of Edelweiss group not to raise any capital on the basis of its current rating until the matter is heard by the ICRA Rating Review Committee on 4 May, 2020.
ECL Finance has filed a writ petition before the Mumbai High Court to restrain rating agency from proceeding with downgrade ratings as they were unable to approach the Rating Review Committee because of the current Covid-19 pandemic lock down. Also, ECL Finance has sought more time for submitting information sought by the rating agency citing the lockdown.
On Monday, the court has recorded the statement from both the parties. The rating review committee of ICRA will meet on 4 May to decide rating rationale to be given to Edelweiss Financial.
“It is in these circumstances, it is directed that the Petitioners (ECL Finance) shall file their necessary application before the Rating Review Committee on or before 1 May, 2020 and shall appear before the said Committee on 4 May, 2020” said an order by Justice B P Colabawalla.
“It is directed that in the meanwhile, namely till 4 May, 2020, Respondent No.1 (ICRA) shall not downgrade the rating of the Petitioners (ECL Finance). It is also clarified that the Petitioners (ECL Finance) shall not be allowed to raise any capital on the basis of its current rating and until the matter is heard by the Rating Review Committee on 4 May, 2020 or any date thereafter” the order said.
The court also observed that, if the decision of the said committee is adverse to the petitioners, the ECL Finance shall have an independent cause of action for challenging the same.
According to sources, the rating agency sought several data points and information based on the December quarter financials in the first week of April amid lockdown. The financial firm learnt to have sought atleast three weeks from lifting of lockdown to provide the necessary requisite details after considering the relief and relaxation measure announced by the government and central bank.
However, ICRA instead of giving more time to ECL Finance, decided to go ahead with the ratings review based on their apprehension about the impact of lockdown over the businesses of ECL and proposed to downgrade the ratings, according to sources.
ECL Finance was represented by senior counsel Janak Dwarkadas along with Vikram Trivedi, managing partner of law firm Manilal Kher Ambalal & Co while advocate H S Chandoke was representing the rating agency in the case.
ECL Finance declined to comment on the subject citing the matter is subjudice while ICRA did not respond to an email query till the time of going to press.
Earlier this month, the Delhi High Court restrained ICRA from making the Indiabulls Housing Finance credit public until April 6. The direction came in on Indiabulls’s plea alleging that ICRA was threatening to start the credit review following a 30 March Sebi guideline easing conformity with certain regulatory norms. Indiabulls argued that if its ratings downgraded, it would have a significant negative effect on its financial condition and there was a possibility that debenture holders might ask for immediate debenture redemption.
Later on April 6, Indiabulls Housing Finance withdrew its writ petition against ICRA after rating agency reaffirmed long-term and short-term rating of the company.
ECL Finance has filed a writ petition before the Mumbai High Court to restrain rating agency from proceeding with downgrade ratings as they were unable to approach the Rating Review Committee because of the current Covid-19 pandemic lock down. Also, ECL Finance has sought more time for submitting information sought by the rating agency citing the lockdown.
On Monday, the court has recorded the statement from both the parties. The rating review committee of ICRA will meet on 4 May to decide rating rationale to be given to Edelweiss Financial.
“It is in these circumstances, it is directed that the Petitioners (ECL Finance) shall file their necessary application before the Rating Review Committee on or before 1 May, 2020 and shall appear before the said Committee on 4 May, 2020” said an order by Justice B P Colabawalla.
“It is directed that in the meanwhile, namely till 4 May, 2020, Respondent No.1 (ICRA) shall not downgrade the rating of the Petitioners (ECL Finance). It is also clarified that the Petitioners (ECL Finance) shall not be allowed to raise any capital on the basis of its current rating and until the matter is heard by the Rating Review Committee on 4 May, 2020 or any date thereafter” the order said.
The court also observed that, if the decision of the said committee is adverse to the petitioners, the ECL Finance shall have an independent cause of action for challenging the same.
According to sources, the rating agency sought several data points and information based on the December quarter financials in the first week of April amid lockdown. The financial firm learnt to have sought atleast three weeks from lifting of lockdown to provide the necessary requisite details after considering the relief and relaxation measure announced by the government and central bank.
However, ICRA instead of giving more time to ECL Finance, decided to go ahead with the ratings review based on their apprehension about the impact of lockdown over the businesses of ECL and proposed to downgrade the ratings, according to sources.
ECL Finance was represented by senior counsel Janak Dwarkadas along with Vikram Trivedi, managing partner of law firm Manilal Kher Ambalal & Co while advocate H S Chandoke was representing the rating agency in the case.
ECL Finance declined to comment on the subject citing the matter is subjudice while ICRA did not respond to an email query till the time of going to press.
Earlier this month, the Delhi High Court restrained ICRA from making the Indiabulls Housing Finance credit public until April 6. The direction came in on Indiabulls’s plea alleging that ICRA was threatening to start the credit review following a 30 March Sebi guideline easing conformity with certain regulatory norms. Indiabulls argued that if its ratings downgraded, it would have a significant negative effect on its financial condition and there was a possibility that debenture holders might ask for immediate debenture redemption.
Later on April 6, Indiabulls Housing Finance withdrew its writ petition against ICRA after rating agency reaffirmed long-term and short-term rating of the company.