Case Law Details
Mahasemam Trust Vs Union Of India (Madras High Court)
The issue under consideration is whether the writ petition filed against credit rating agency by stating that they are not authorised to discharge ‘Public Functions’ as it is not characterised as ‘State ‘ will be sustain in law?
In the instant case, the writ petitioner is a registered public trust. Its activities include micro-financing women Self Help Groups. It is a Non-Banking Finance Company (NBFC). The petitioner is a client of the third respondent which is a credit rating agency. The rating agency has downgraded the petitioner’s bank loans’ rating to ‘IND BB+’ from ‘IND BBB-‘. The petitioner has been availing term loans from various banks and has fixed ambitious targets for the coming year. The petitioner’s track record of repayment is claimed to be very good. Following Covid-19 pandemic outbreak, the Reserve Bank of India has announced moratorium for the period upto 31st May, 2020 vide Circular dated 27.03.2020. Pursuant thereto, the petitioner has also granted the benefit of moratorium to all the joint liability Self Help Groups, in order to enable them to tide over the economic fallout arising out of the pandemic disruption. Further, Securities and Exchange Board of India (SEBI) has also issued policy Circular dated 30.03.2020 setting out relaxation norms. According to the petitioner, the third respondent has downgraded the petitioner’s rating disregarding the said Circular. Since this will have direct bearing on the capacity of the petitioner to raise loans from the banking institutions, this writ petition came to be filed.
High Court held that a) the third respondent is a private body and not a “State” within the meaning of Article 12 of the Constitution b) by rating its clients, the respondent is not discharging any public function c) the subject matter involves analysis by financial experts d) and the petitioner is having effective alternative remedies, I dismiss this writ petition as not maintainable. HC make it clear that they have not gone into the merits of the matter. The petitioner is at liberty to avail the in-house remedy available to them or move Securities and Exchange Board of India (SEBI) directly by filing a complaint against the third respondent. Whatever remedy that the petitioner may avail, the same shall be attended to with utmost expedition. All the other contentions and remedies of the petitioner are left open.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
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