The Legal Implications of Perverse, Arbitrary, and Mala Fide as Explicit Grounds for Challenging Credit Ratings in India

Abstract

Recently, the Delhi High Court delineates and circumscribes the scope of liability of Credit Ratings Agencies in the case of Jindal Power Limited v. ICRA Limited. The HC remarkably enumerated the grounds on which companies can challenge ratings issued by CRAs. The Court reasoned that CRAs provide expert opinions, with which the Court cannot interfere unless they are proved to be ‘perverse, arbitrary and mala fide’. Additionally, the case clarifies that CRAs are bound to observe the obligations as mentioned in the regulations and the same cannot be done away with by agreements concluded between the client and the CRA. This means that the court enumerates other grounds for suing a Credit Rating Agency before the court in India. Hence, the parameter for the court to interfere and entertain the disputes arising out of rating are based on those three grounds. Henceforth, the purpose of this Article analyzes the significance and potential implications of providing ‘perverse, arbitrary and mala fide’ as explicit grounds for challenging the ratings before the Court and its effects in India. Keywords: Perverse, Arbitrary, Mala fide, Credit Rating Agencies, Grounds for challenging ratings, CRAs Liability, Evolutions of CRAs, Court jurisdictions