Chandigarh

DF-I

CC/604/2022

Rupshikha Singhania - Complainant(s)

Versus

Managing Director/CEO Care Ratinghs Limited (Care) - Opp.Party(s)

In Person

20 Mar 2024

ORDER

DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION-I,

U.T. CHANDIGARH

 

                    

Consumer Complaint No.	:	CC/604/2022
Date of Institution	:	17.6.2022
Date of Decision	:	20/03/2024

 

1.   Rupshikha Singhania 3029, Ajanta Enclave, 2nd floor Sector-51D, Chandigarh-160 047

2. Purushottam Ram Singhania 3029, Ajanta Enclave, 2nd floor Sector-51D, Chandigarh-160 047.

Complainants

 

1.   Managing Director/CEO CARE Ratings Limited (CARE) 4th Floor, Godrej Coliseum, Somaiya Hospital Road Off Eastern Express Highway Sion East, Mumbai - 400 022

2. Managing Director / CEO Brickwork Ratings India Pvt. Limited (BWR) 3rd Floor, Raj Alkaa Park, 29/3 & 32/2, Kalena Agrahara Bannerghatta Main Rd, Bengaluru - 560076 (Karnataka)

3. Mr. Kapil Wadhawan, Erstwhile Promoter & Managing Director of Dewan Housing Finance Corporation Ltd. (DHFL)

C/o Taloja Central Prison, Inampuri, Taloja, Kharghar Navi Mumbai- 410 208 (Maharashtra).

4.  Securities and Exchange Board of India (SEBI) Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, (Maharashtra (Through Authorized Officer)

Opposite Parties

CORAM :	PAWANJIT SINGH	PRESIDENT
	SURJEET KAUR SURESH KUMAR SARDANA	MEMBER MEMBER

                       

ARGUED BY	:	Sh. Purushottam Ram Singhania complainant No.2 in person as authorized representative of complainant No.1
	:	Sh. Ravi Bharuka, Advocate for OP no.1
	:	Sh. Rajinder Rana, Advocate for OP No.2 (through VC)
	:	OP No.3 exparte
	:	OP No.4 exparte.

Per SURESH KUMAR SARDANA, Member

     Briefly state the complainant No. 1 deposited her hard earned money amounting to Rs. 13,42,000/- (maturity value: Rs. 16,25,342) in two public issue of secured Non-convertible Redeemable Debentures (in short, NCD) and fixed Deposit of Rs. 40,000/- maturity value: Rs. 51,588) jointly with complainant No. 2 (details given in Para-7 below), invited by OP No.3 in the name of Dewan Housing Finance Corporation Ltd (in short, DHFL). The complainant made the said investment to earn interest and her livelihood by relying and believing on 'AAA' credit rating assigned by the OP No.1 and 2, as "AAA" credit rating is highest grade of credit rating which means strong financial position of the issuer and highest safety of money with timely repayment of both interest and principal on maturity date. The complainant made the said investment only because of "AAA" credit rating; otherwise there was no question of making any investment. The promise and assurance of timely payment under "AAA" credit Rating granted by the OP No.1 and OP No.2 was proved utterly false, as the OP No.1 and 2 abruptly downgraded the credit rating from "AAA" to "D" (Default) on 05.06.2019 within a short period of one year from the date of issue of NCD & Fixed Deposit and within 4 months of massive financial scam to the tune of Rs.31000 crores exposed on 29.01.2019 by an investigative media, namely, "THE COBRAPOST" (Annexure: C- 4/1 to 4/3). "Default" credit rating means very weak financial position and very decimal chance of getting the money back. In fact, both the OP No.1 and 2 were already aware of weak financial position of DHFL, caused by huge diversion of funds by the OP No.3. Even then, OP No.1 and 2 continuously granted fake "AAA" credit rating to NCD and Fixed Deposit Scheme floated by OP No.3 in the name of DHFL to induce investors to deposit / invest in the scheme. The OP No.3 garnered huge sums of money of Rs.29000 Cr from NCDs and approx Rs.9000 Cr from Fixed Deposits from the retail and other investors on the strength of "AAA" credit rating and siphoned off more than the said amount. The OP No.1 and 2 have thus unquestionably compromised with the code of conduct as per SEBI Regulations in nexus with OP No.3 for personal gain, which is highly unethical and unfair trade practice and deficiency in service. Due to huge diversion of funds by the OP No.3, DHFL was finally declared bankrupt by National Company Law Tribunal, Mumbai (NCLT) vide order dated 03.12.2019. Administrator of DHFL made approx.38% against NCD and hardly 20% against Fixed Deposit as per Resolution Plan approved by NCLT, Mumbai vide order dated 07.06.2021 under the provisions of Insolvency and Bankruptcy Code, 2016. The complainant has thus suffered huge financial loss of Rs.12,12,182/- including interest till 31.05.2022 as per calculation shown in para-26 of the present complaint due to highly unethical and unfair trade practice adopted by OP No.1, 2 and 3 in nexus with each other and gross deficiency of service on their part. This has caused acute physical and mental harassment and agony as well as health problems to the complainants and they are still suffering because of the said financial loss. The OP No.3 is personally liable to compensate the loss to the complainant along with OP No.1 and 2, jointly and severally, as the OP No.3 has siphoned away massive funds for his personal gains and wealth creation and cannot escape his liability behind the curtain of the corporate veil of DHFL. When the grievance of the complainants was not redressed the complainant served legal notice on OP No.1, 2 and 3 for redressal of grievances, but of no avail. Alleging the aforesaid act of Opposite Parties deficiency in service and unfair trade practice on their part, this complaint has been filed.

2. The Opposite Parties NO.1  in its reply stated that the Ratings provided by O.P. No.1 are its opinion on credit risk of the issuer of securities (such as NCDs and FDs) or borrowers based on assessment of best available information with O.P. No.1 about the issuer company. Such rating is not a recommendation/advise to buy, sell or hold securities or investments or take investment decisions thus O.P. No.1 does not comment on suitability of an investment to the individual investor's risk/return profile nor does it recommend investment in any securities to investors. The investors are required to undertake their own due diligence prior to any type of investment. If the investor chooses to do so they, do it at their own profits and risks on the said investment. Thus, O.P. No. 1 is not liable for the losses caused to the Complainants due to defaults of the O.P. No. 3 and accordingly O.P. No.1 is not liable to compensate/indemnify the Complainants for the losses as wrongly claimed by them. Thus the allegations of the Complainant under the Complaint against O.P. No.1 is wholly misconceived, groundless and unsustainable in law.  All other allegations made in the complaint has been  denied being wrong.
3. Opposite Party No.2 in its reply stated that it is  a SEBI registered credit rating agency, and as a part of regulatory requirement as well as for the purpose of benefit of public/investors/prospective investors/ issuers, it is clearly specifies that rating assigned by the answering respondent is not a recommendation or advise to any person to buy or sell any securities. It is pertinent to mention here that it must be noted that there is no privity of contract between an investor or a lender and a rating agency and the investor is free to accept or reject the opinion of the agency. A credit rating is not an advice to buy, sell or hold securities or investments and investors are expected to take their investment decisions after considering all relevant factors and their own policies and priorities. A credit rating is not a guarantee against future losses. Credit ratings do not take into account many aspects which influence investment decisions. Therefore, the Complainants’ ground that the have taken its investment decision into the debentures issued by the OP No.3 is erroneous as they have wrongly presumed that credit rating is a prediction of whether the issuer will honour its repayment obligations under the debenture issue, and hence, it cannot be taken into consideration as the same is contrary to the established regulatory principles which form the very basis and core of credit rating services.  Hence there is no deficiency on the part of the answering OP and the complaint is liable to be dismissed.
4. OPs No. 3&4 did not turn up despite due service, hence they were proceeded against exparte vide orders dated 7.2.2023 and 30.11.2022 respectively.  
5. No rejoinder filed.
6. Contesting parties led evidence by way of affidavits and documents.
7. We have heard the learned counsel for the contesting parties and gone through the record of the case.
8. The main grievance of the complainants is that they invested in the debentures of OP No.3 based on the various ratings of OP No. 1&2 and  wherein after the  investment, the OP No.3 did not reimburse the full amount  on maturity.
9. On perusal of the complaint it is observed that neither the complainant have paid any consideration to towards the said goods and services to the OPs No.1&2 nor the OPs No.1&2 have provided any goods and services to any of the complainants. Therefore,  the complainants are not consumer qua OPs No.1&2 as per Consumer Protection Act. 
10. On perusal of documents annexed by the contesting OPs it is observed that OP No.1 and 2 are SEBI registered credit ratings agencies and specify only ratings based on the existing market repo of the company and have clearly specified that ratings assigned by them are not recommendations to any person to buy or sell any securities. The said understandings have been specified on the website of the OP No.1 and 2 with adequate clarity.
11.  In view of the above discussion, we are of the concerted view that OP No.1 &2 are independent ratings agencies working within the financial sector and have their own basis for calculation and provide ratings based on various parameters. When the financial stress in the OP No.3 company was observed the OPs No. 1 &2 carried out all their responsibilities and duties as a credit ratings agencies with due care and in accordance with applicable provisions of law. Moreover, the complainants themselves mentioned in para 24  at page 19 of the complaint that as per the order of NCLT dated 7.6.2021, M/s Piramal Enterprises Ltd. took over DHFL and the complainants themselves  have not made M/s Piramal Enterprises Ltd. a party to the instant complaint  being a necessary party for the adjudication of the matter.
12. From the foregoing discussion,  we do not find any merit in the instant complaint as the complainants have utterly failed to prove their case.
13.  In view of the aforesaid discussion, the present consumer complaint, being devoid of any merit, is hereby dismissed leaving the parties to bear their own costs.
14. Pending miscellaneous application(s), if any, also stands disposed off.
15.      Certified copies of this order be sent to the parties free of charge. The file be consigned.

			sd/- [Pawanjit Singh]
			President
			Sd/-
			[Surjeet Kaur] Member   sd/-
20/03/2024			[Suresh Kumar Sardana]
mp			Member