The Securities Appellate Tribunal (SAT) has held that market regulator Securities and Exchange Board of India (Sebi) has powers to issue second set of show-cause notices to rating agencies in the IL&FS matter.

Some rating agencies moved the tribunal seeking a stay on the second show-cause notices issued by Sebi in January 2020.

"Having heard the learned counsel for the parties at some length, we are prima facie of the opinion that Sebi has the power to initiate proceedings under Section 15-I(3) of the Sebi Act," SAT said in an order dated July 1 in an appeal filed by India Ratings.

SAT will further hear the matter after Sebi and India Ratings submit their replies.

In December 2019, Sebi had imposed a penalty of Rs 25 lakh on India Ratings and two other credit raters for violating the code of conduct while rating IL&FS for the financial year 2018-19.

Later in January 2020, Sebi issued second set of show cause notices seeking an explanation as to why the penalty should not be enhanced. "We further direct that the proceedings in pursuance to the second show cause notice dated January 28, 2020 will continue and Sebi will pass appropriate orders after giving an opportunity of hearing to the appellant (India Ratings) either through physical hearing or through video conferencing," SAT said.

The tribunal, however, said the fresh orders passed by Sebi will not take effect till the pendency of this appeal.