HC restrains ICRA from downgrading the rating of ECL Finance till May 4

On Monday, the court has recorded the statement from both the parties.

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The rating review committee of ICRA will meet on 4 May to decide rating rationale to be given to Edelweiss Financial.
MUMBAI: The Mumbai High Court has restrained credit ratings agency ICRA from downgrading the credit rating of ECL Finance till May 4 and ordered the Mumbai-based finance company of Edelweiss group not to raise any capital on the basis of its current rating until the matter is heard by ICRA’s rating review committee.

The order came on a writ petition filed by ECL Finance seeking to restrain ICRA from proceeding with the ratings review as it was unable to approach the rating review committee because of the Covid-induced lockdown.

ECL Finance also sought more time for submitting the information asked for by the ratings agency. ICRA’s rating review committee is due to meet on May 4.


“It is in these circumstances, it is directed that the petitioners (ECL Finance) shall file their necessary application before the rating review committee on or before 1 May, 2020 and shall appear before the said committee on 4 May,” Justice B P Colabawalla said in his order.

“It is directed that in the meanwhile, namely till 4 May, respondent No.1 (ICRA) shall not downgrade the rating of the petitioners. It is also clarified that the petitioners shall not be allowed to raise any capital on the basis of its current rating and until the matter is heard by the rating review committee on 4 May, or any date thereafter,” the order said.

ECL Finance refused to comment as the matter is sub judice.
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When contacted, ICRA spokesperson said that had taken into consideration ECL Finance Limited’s request for a rating review and provided additional time – till April 21 – for them to respond with the data sought for the purpose. However, ECL moved the honourable High Court seeking an extension of three months for review or publication of ICRA rating, according to ICRA spokesperson.

“The honourable High Court instead asked the petitioner to undergo the review process which will be held on May 4. In accordance with our policies, we will publish our rating action on ECL Finance Limited once the rating review process is completed”.

The court also observed that if the decision of the said committee is adverse to ECL Finance, it will have an independent cause of action for challenging the same.

According to sources, the ratings agency sought several data points and information from ECL Finance based on its December quarter financials in the first week of April amid the lockdown.
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The financial firm is learnt to have sought at least three weeks time from lifting of the lockdown to provide the details after considering the relief and relaxation measures announced by the government and the Reserve Bank of India.

However, ICRA decided to go ahead with the ratings review based on its apprehension about the impact of lockdown over the businesses of ECL and proposed to downgrade the ratings, according to sources.
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Senior counsel Janak Dwarkadas and Vikram Trivedi, managing partner of law firm Manilal Kher Ambalal & Co, represented ECL Finance. Advocate H S Chandoke represented the ratings agency.
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