In a scathing indictment of market regulator Securities and Exchange Board of India (SEBI), the securities appellate tribunal (SAT) has quashed the regulator’s order against Rajesh Mokashi, former managing director and chief executive officer (MD&CEO) of CARE Ratings Ltd, calling SEBI’s conduct a 'misadventure' that caused 'colossal loss of judicial time and resources' and inflicted 'miserable trauma' and 'irreparable damage' to Mr Mokashi’s reputation.
Delivering its judgement on 27 June 2025, SAT set aside
SEBI’s April 2023 order that had barred Mr Mokashi from associating with any SEBI-registered intermediary for two years. SAT also imposed a cost of Rs5 lakh on SEBI, to be paid to Mr Mokashi for the damages caused. Madhabi Puri Buch was the SEBI chairman when the market regulator passed the order against Mr Mokashi in April 2023.
In the order, the SAT bench of justice PS Dinesh Kumar (presiding officer) and Dr Dheeraj Bhatnagar, (technical member) says, "This is an unfortunate case in which the SEBI had directed CARE Ratings to send Mr Mokashi on leave till completion of the forensic audit. On receipt of E&Y’s report, SEBI advised to initiate a full-fledged enquiry and Mr Mokashi tendered his resignation in December 20199. Though justice BN Srikrishna report had returned a categorical finding that there was no evidence to suggest that Mr Mokashi had interfered with or influenced the rating decision, SEBI embarked upon another misadventure to conduct one more proceeding through its WTM. The entire exercise has caused a colossal loss of judicial time and resources and above all a miserable trauma of irreparable damage to Mr Mokashi’s reputation besides financial loss and loss of further opportunity to him."
The case stemmed from allegations that Mr Mokashi and SB Mainak, former chairman of CARE Rating interfered in credit ratings, particularly for Dewan Housing Finance Corporation Ltd (DHFL), to favour clients who paid higher fees. However, a detailed inquiry conducted by justice Srikrishna, former judge of the Supreme Court had categorically found no evidence of any interference or wrongdoing on Mr Mokashi’s part.
Justice Srikrishna, whose credentials were also acknowledged by SEBI in other contexts, had concluded: “There is no evidence that he (Mr Mokashi) interfered with the process of rating and influenced the outcome of the rating committee’s decision… There is no substance in the charges levelled.”
Despite this, SEBI proceeded with a separate internal inquiry and passed an order penalising Mr Mokashi — a move SAT has now unequivocally condemned.
SAT found that Ashwani Bhatia, SEBI’s whole-time member (WTM) had misinterpreted and misrepresented justice Srikrishna’s findings to justify penal action. In paragraph 24 of the order, SAT notes: “We are constrained to note with pain that in para 107(a) of the impugned order, the WTM has recorded distorted version of the report.”
It held that SEBI wrongly claimed that justice Srikrishna had only examined the impact of alleged interference on the final rating decision, while SAT made clear that the report had dealt with the core issue — whether any interference happened at all — and had found none.
Moreover, SAT highlighted that key witnesses whose testimonies SEBI relied on had, under cross-examination, refuted the idea that Mr Mokashi exerted pressure or influenced ratings.
In unusually strong language, the tribunal called SEBI’s conduct in this case as 'reprehensible'.
The tribunal noted that Mr Mokashi had already resigned from his position in December 2019 after SEBI pushed CARE Ratings to send him on leave during the forensic audit. Despite being exonerated by justice Srikrishna’s independent probe, SEBI 'embarked upon another misadventure', SAT says.
The order concludes a years-long legal battle that raises serious questions about the fairness and accountability of regulatory enforcement by SEBI.
The case not only highlights the potential for reputational harm when regulatory powers are exercised without due care, but also underscores the need for adherence to principles of natural justice and respect for expert findings.
With SAT’s sharp rebuke and financial penalty, the judgement sets a precedent on the consequences of regulatory overreach and may trigger broader calls for reform in enforcement practices within SEBI.
In 2019, SEBI received a complaint from a whistle-blower alleging management interference in the ratings of companies, including Infrastructure Leasing & Financial Services (IL&FS). The forensic audit, prepared by 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 Corporation of India (LIC), followed suit and, in February 2020, resigned as chairman of CARE Ratings.
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