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Unit 10: Credit Rating and Consumer Finance

Substituted by the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing penalty) Notes
Regulations, 2002.w.e.f.27-9-2002. Prior to its substitution it read as follows:

Liability for Action in Case of Default

1. A credit rating agency which:
(a) fails to comply with any condition subject to which a certificate has been granted; or

(b) contravenes any of the provisions of the Act or these regulations or any other
regulations made under the Act; shall be dealt with in the manner provided under
the Securities and Exchange Board of India (Procedure for holding Enquiry by Enquiry
officer and Imposing penalty) Regulations, 2002 and shall be liable to either of the
penalties specified as under.
2. The penalties referred to in the above sub-regulation are:
(a) suspension of registration; or
(b) cancellation of registration.

Manner of Making Order of Suspension and Cancellation

No order of suspension or of cancellation of the certificate of registration, is passed by the Board,
except after holding an enquiry in accordance with the procedure specified.
The holding of such an enquiry shall not be necessary in cases where:
1. the credit rating agency is declared insolvent or is wound up;

2. the credit rating agency fails to pay to the Board registration fees or renewal fee as per
these regulations; or
3. an opportunity of hearing shall be given before any action against the credit rating agency
is taken.

Manner of Holding Enquiry before Suspension or Cancellation

1. For the purpose of holding an enquiry, the Board may appoint one or more enquiry
officers.

2. The enquiry officer issues to the credit rating agency a notice at the registered office or the
principal place of business of the credit rating agency, setting out the grounds on which
action is proposed to be taken against it and calling upon it to show cause against such
action within a period of fourteen days from the date of receipt of such notice.
3. The credit rating agency, may, within fourteen days from the date of receipt of such notice,
furnish to the enquiry officer a written reply, together with copies of documentary or
other evidence relied on by it or sought by the Board from the credit rating agency.

4. The enquiry officer has to give a reasonable opportunity of hearing to the credit rating
agency, to enable it to make its submission in support of its reply.
5. Before the enquiry officer, the credit rating agency may either appear in person or through
any person duly authorised on this behalf.
No lawyer or advocate is permitted to represent the credit rating agency at the enquiry. However,
where a lawyer or an advocate has been appointed by the board as a presenting officer, it is
lawful for the credit rating agency to present his case through a lawyer or advocate.

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