Firm, rating agency penalised for deficiency in service

The State Consumer Disputes Redressal Commission, Chandigarh, has directed Catalyst Trusteeship Ltd to pay an amount of Rs 2,04,880, along with interest at the rate of 9% per annum, to a city resident after holding it guilty for deficiency in services.

The commission has also directed rating agencies Credit Analysis and Research Ltd and Brick Works Ratings India Pvt Ltd to pay an amount of Rs 1 lakh each to the complainant.

The order was passed on a complaint filed by Jyoti Khemka, wife of Dr Ashok Khemka, seeking setting side order dated March 6, 2023 vide which, her complaint was dismissed by the District Consumer Disputes Redressal Commission.

In the complaint, she said on July 26, 2016, Piramal Capital Housing Finance Ltd (earlier Dewan Housing Finance Corporation Limited), issued a Public Prospectus approved by SEBI for the public issue of secured Redeemable Non-convertible Debentures, each having a face value of Rs 1,000 and a tenure of three years.

Catalyst Trusteeship Ltd, Pune, was the Debenture Trustee for the issue and the public issue was given ‘AAA’ credit rating i.e. the highest degree of safety by Credit Analysis and Research and Brick Works Ratings India.

Jyoti Khemka purchased 342 secured Non-convertible Debentures in the retail category on August 16, 2016 and made net investment of Rs 3,42,000. The debentures were to mature on August 16, 2019, and were to yield interest amounting to Rs 31,464 on an annual basis.

In the early 2018, there was speculation that DHFL might be heading towards financial crises. However, the credit agencies continued to rate the debentures at ‘AAA’ rating.

She said the trustee in its communication on August 5, 2019, informed that the agencies had downgraded the credit rating of the debentures from ‘AAA’ to ‘D’ i.e. the lowest possible score overnight in February 2019.

The debentures that were marked at the highest score were downgraded to the lowest score, all in a night’s time after DHFL had allegedly siphoned thousands of crores of public money in subsequent tranches of its public issue. She alleged that on August 16, 2019, the date of maturity, DHFL defaulted to redeem the debenture principal and interest amount of Rs 3,73,464. She alleged the act of opposite parties’ deficiency in service and unfair trade practice on their part.

On the other hand, Catalyst Trusteeship denied allegations. Credit Analysis and Research and Brick Works Ratings India stated that it had discharged all its responsibilities and duties as a credit rating agency with due care, diligence and in accordance with the applicable provision of law.

Piramal Capital Housing Finance Limited, formerly Dewan Housing Finance Corporation Ltd, stated that the complainant had invested money for the purpose of making a profit based on her own understanding of the situation. It vehemently denied that there is any deficiency on its part.

After hearing of the arguments, the commission comprising president Raj Shekhar Attri and member Rajesh K Arya directed Catalyst Trusteeship to pay the complainant an amount of Rs 2,04,880 (Rs 3,73,464 minus Rs 1,68,584) within 30 days from the date of receipt of certified copy of the order. The commission also directed rating agencies Credit Analysis and Research and Brick Works Ratings India to pay an amount of Rs 1 lakh each after holding them guilty for deficiency of service and unfair trade practice.

They have also been directed pay an amount of Rs 33,000 to the complainant towards costs of litigation.