Case: Securities &amp; Exch.Board Of India Vs. M/S Informetics Valuation &amp; Rating P.Ltd

On 11th June, 2009, the respondent submitted an application to SEBI under Regulation 3 of the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999seeking registration as a CRA. The respondent company was incorporated on 23rd June, 1986. The promoters of the respondent are stated to be:(a) M/s. Coment (Mauritius) Limited through M/s. ACE Step Management Ltd.(b) M/s. V. Malik & Associates, Chartered Accountants – Consortium Member for all the Accounting and Management backup.(c) Infomerics India Foundation – Consortium Member as Policy Making Board.4. The appellant (SEBI) is a Statutory Board established under the SEBI Act to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto. Under Section 11 of the SEBI Act, the appellant is duty bound to protect the interest of investors in securities and promote the development of, and to regulate, the securities market, by such measures as it thinks fit. Section 11(2) specifically enables SEBI to take the necessary measures to provide for inter alia registration and regulating the working of the depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification specify in this behalf.5. Pursuant to the aforesaid power, in July, 1999, SEBI issued a notification to bring CRAs under its regulatory ambit, in exercise of powers conferred under Section 30 read with Section 11 of the SEBI Act.6. The CRA Regulations, 1999 empowers the appellant to regulate CRAs operating in India. Under the CRA Regulations, 1999, a CRA had been defined as a body corporate, which is engaged or proposes to be engaged in the business of rating of securities offered by way of public or rights issue. SEBI has also prescribed a Code of Conduct to be followed by the CRAs in the aforesaid regulations. The CRA Regulations, 1999 inter alia, contain:A. Regulations pertaining to the registration of credit rating agencies, application for grant of initial and permanent certificate, eligibility criteria for promoter(s) of the credit rating agency, furnishing of information, clarification and personal representation by the promoter(s), grant of certificate by SEBI, its conditions, and procedure for refusal of certificate and its effect.B. General obligations of Credit Rating Agencies, Code of Conduct, Agreement with client(s), Monitoring and process of rating and the Procedure for review of rating, Appointment of Compliance Officer, maintenance of proper books of Accounts and records, etc.C. Restrictions on rating of securities issued by promoter(s) or by certain other person(s)D. Procedure for inspection and investigationE. Procedure for action in case of default7. On 11th June, 2009, the respondent submitted an application to SEBI under Regulation 3 of the CRA Regulations, 1999. The office of the respondent was duly visited and inspected by the appellant. All information that was required by the appellant was supplied by the respondent. Further undertakings and confirmations as required by the appellant were also provided. By letter dated 20th August, 2009, the appellant required the respondent to furnish complete details of his promoters, confirm the status of their eligibility under Regulation 4(e) of the CRA Regulations, 1999, offer comments on a discrepancy noted in thenet worth certificate etc. In the aforesaid letter, it was pointed out that under Regulation 4(e) of the CRA Regulations, 1999, the applicant is required to show that its promoters have a continuous net worth of minimum Rs.100 crores as per its Audited Annual Accounts for the previous five years prior to filing of the application with the Board for grant of certificate under the CRA Regulations, 1999. It is pointed out that although M/s. ACE Step Management Ltd., as a promoter of the respondent, has the continuous net worth of minimum Rs.100 crores as per its Audited Annual Accounts for the previous five years prior to the filing of the application, yet the net worth certificate dated 29th May, 2009, certified by the accountants in this regard pertains to M/s. Coment (Mauritius) Limited. Therefore, the respondent was advised to offer comments on the aforesaid discrepancy and submit the requisite net worth certificate in compliance with the relevant provisions of the CRA Regulations, 1999.8. The respondent through its letter dated 21st August, 2009 submitted the reply to the aforesaid discrepancy pointed out by the appellant. The respondent stated that M/s. Coment (Mauritius) Limited has invested in the appellant company through its associate company M/s. ACE Step Management Ltd., which was holding 3,65,000 (Three Lac Sixty Five Thousand) 10.84% equity shares in their company, which is within the parameters of Regulation 4(e) of the CRA Regulations, 1999. The respondent also confirmed that M/s. Coment (Mauritius) Limited is a promoter of the respondent company having a continuing net worth of minimum Rs.100 crores as per its Audited Annual Accounts for the previous five years prior to the filing of the application with the Board. Therefore, it was stated that there is no discrepancy and the net worth certificate submitted by the respondent is in compliance with the provisions of the CRA Regulations, 1999. Still not satisfied, the appellant through an e-mail dated 1st September, 2009 (5.36 PM) directed the respondent to furnish the Audited Annual Accounts of the promoters of the appellant company for the previous five years prior to the filing of the application with SEBI. The respondent through a letter dated 1st September, 2009 again informed the appellant that their promoter M/s. Coment (Mauritius) Limited had the continuous net worth of Rs. 100 crores as per the Annual Accounts for the previous five years. Their accounts are audited and they have provided the appellant with a certificate of their bankers ING Asia Private Bank Ltd., Dubai, to that effect. The certificate was enclosed with the aforesaid letter. The certificate issued by the ING Bank was asBANKINGDate: 21 May 2009TO WHOMSOEVER IT MAY CONCERNThis is to confirm that M/s. Coment (Mauritius) Limited, Les Cascade Building, Edith Cavell Street, Port Louris, Republic of Mauritius, part of the Kataria Group has had a continued net worth of over Rs.100 crores as per its accounts for the previous five years.We further confirm that M/s. ACE Step Management Ltd. is promoted by M/s. Coment (Mauritius) Limited.The above information is given in strictest confidence at the request of our client and is without responsibility or engagement on the part of the Bank and/or any of its officers or employees for its content or any reliance made upon it. The letter does not constitute any guidance on the part of the bank.Yours faithfully,Sd/-NitinBhatnagarDirector & Head South AsiaThe letter further pointed out thatthe Coment (Mauritius) Ltd. Balance sheet is not a public document though in terms of holding in our company it is 10.84 % but in their terms it is a small investment made they may not like to share balance sheet with us. However, their bankers have confirmed that as per certificate it is within the compliance of SEBIIn view of the confirmation given by the bankers of M/s. Coment (Mauritius) Ltd. Promoter Company, the respondent requested the appellant to rely on the bankers certificate.10. It is further pointed out that in any event the respondent had submitted the annual accounts for the last 5 years. However, inspite of aforesaid, the appellant vide its letter dated 15th September, 2009 directed the respondent to furnish an undertaking as to whether the promoter of respondent or any associate of the respondent are registered with any regulatory agency abroad and also directed the respondent to have Audited Annual Accounts of the promoters for the 5 years prior to filing of the application.11. The respondent by a letter dated 21st September, 2009 stated that it would furnish the Balance Sheet for five years period as soon as they were received by the respondent. The appellant by his letter dated 21st October, 2009 further directed the respondent to furnish the Audited Annual Accounts and detailed profile of the promoters of the respondent. On 26th November, 2009, respondent furnished the detailed profiles of its promoters and specific details about the promoters such as their activities in detail, the composition of the Board of Directors and the summary of their financial results for the last five years. However, the Balance Sheet for the five years period was not furnished. Having furnished all the information, the respondent by its letter dated 11th January, 2010 requested for approval of its pending application dated 11th June, 2009, for being registered as a CRA. However, in spite of repeated requests, the necessary registration was not granted. In fact, the appellant by letter dated 28th July, 2010 once again advised the respondent to furnish Audited Annual Accounts of its promoters - M/s. Coment (Mauritius) Limited for the period 2006 to 2009. It appears that till 1st March, 2011, the appellant was not satisfied with the efforts made by the respondent to supply the necessary Audited Accounts and issued Show Cause Notice as to why the application for registration should not be rejected in terms of Regulation 11(1) of the CRA Regulations, 1999.12. We may notice here that in the Show Cause Notice, it is specifically mentioned that the respondent has failed to produce the Audited Annual Accounts of the promoter M/s. Coment (Mauritius) Limited for the previous five years prior to the filing of the application with the Board for registration as a CRA. It was pointed out that the respondent has not fulfilled the requirement under Regulation 4(e) read with Regulation 7(1) of the CRA Regulations, 1999. Therefore, SEBI was prima facie of the view that the appellant was unable to furnish the information sought by the Board during the course of processing of the application for registration in accordance with the provisions of the CRA Regulations, 1999. The respondent pointed out in its reply to the Show Cause Notice dated 4th March, 2011 that the appellant had enquired about the status of M/s. Coment (Mauritius) Limited directly from the Mauritius Regulatory Authority and collected all the details to cross check their credentials. In spite of the aforesaid, the appellant was still insisting upon the same information which in fact is not a precondition for registration under the SEBI law or regulations. It is pointed out that even though the information was not required to be provided under the regulations, the investor company and the applicant still agree to furnish the Balance Sheet only to enhance their credibility and as a mark of their respect to SEBI. The respondent in fact protested that it was not being given equal treatment under law as others had been granted registrations without submission of any Annual Accounts of investor companies. Thereafter, the respondent by its letters dated 15th March, 2011 and 18th March, 2011 submitted the Audited Annual Accounts of M/s. Coment (Mauritius) Limited for the periods ending 31st December, 2003 to 31st December, 2007. On its request, the respondent was also granted a personal hearing by the Whole Time Member of SEBI on 10th June, 2011. However, even during the personal hearing, the respondent was advised to file the Audited Accounts of M/s. Coment (Mauritius) Limited for the years 2009 and 2010. Again on 24th June, 2011, the Whole Time Member of the appellant directed the respondent to indicate as to which entity is its promoter(s) along with the basis of considering the entity as such and to submit Audited Annual Accounts of the promoter(s) for the last five years along with computation of net worth as per the SEBI prescribed formula latest by 15th July, 2011, failing which the application of the respondent would be deemed to be rejected. The Whole Time Member also directed the appellant to take a decision on the basis of the details provided by the respondent in pursuance of the order, latest by 15th August, 2011, in accordance with law. The respondent on 5th July, 2011 sought review/reconsideration of the aforesaid order. Ultimately, on 21st July, 2011, the appellant rejected the application of the respondent.13. Aggrieved by the rejection, the respondent preferred an appeal being Appeal No. 155 of 2011 on 30th August, 2011 before the SAT. Against the communication dated 21st July, 2011 of the appellant and the order dated 24th June, 2011 passed by the Whole Time Member of the appellant. The SAT by its judgment and final order dated 9th November, 2011 allowed the appeal and set aside the impugned order dated 24th June, 2011 and 21st July, 2011 and remitted the matter to the appellant to consider the application of the appellant without requiring it to produce the accounts for the two years ending December, 2010. Being aggrieved by the impugned order of SAT, SEBI is in appeal before this Court under Section 15Z of the SEBI Act.On 11th June, 2009, the respondent submitted an application to SEBI under Regulation 3 of the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999seeking registration as a CRA. The respondent company was incorporated on 23rd June, 1986. The promoters of the respondent are stated to be:(a) M/s. Coment (Mauritius) Limited through M/s. ACE Step Management Ltd.(b) M/s. V. Malik & Associates, Chartered Accountants – Consortium Member for all the Accounting and Management backup.(c) Infomerics India Foundation – Consortium Member as Policy Making Board.4. The appellant (SEBI) is a Statutory Board established under the SEBI Act to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto. Under Section 11 of the SEBI Act, the appellant is duty bound to protect the interest of investors in securities and promote the development of, and to regulate, the securities market, by such measures as it thinks fit. Section 11(2) specifically enables SEBI to take the necessary measures to provide for inter alia registration and regulating the working of the depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification specify in this behalf.5. Pursuant to the aforesaid power, in July, 1999, SEBI issued a notification to bring CRAs under its regulatory ambit, in exercise of powers conferred under Section 30 read with Section 11 of the SEBI Act.6. The CRA Regulations, 1999 empowers the appellant to regulate CRAs operating in India. Under the CRA Regulations, 1999, a CRA had been defined as a body corporate, which is engaged or proposes to be engaged in the business of rating of securities offered by way of public or rights issue. SEBI has also prescribed a Code of Conduct to be followed by the CRAs in the aforesaid regulations. The CRA Regulations, 1999 inter alia, contain:A. Regulations pertaining to the registration of credit rating agencies, application for grant of initial and permanent certificate, eligibility criteria for promoter(s) of the credit rating agency, furnishing of information, clarification and personal representation by the promoter(s), grant of certificate by SEBI, its conditions, and procedure for refusal of certificate and its effect.B. General obligations of Credit Rating Agencies, Code of Conduct, Agreement with client(s), Monitoring and process of rating and the Procedure for review of rating, Appointment of Compliance Officer, maintenance of proper books of Accounts and records, etc.C. Restrictions on rating of securities issued by promoter(s) or by certain other person(s)D. Procedure for inspection and investigationE. Procedure for action in case of default7. On 11th June, 2009, the respondent submitted an application to SEBI under Regulation 3 of the CRA Regulations, 1999. The office of the respondent was duly visited and inspected by the appellant. All information that was required by the appellant was supplied by the respondent. Further undertakings and confirmations as required by the appellant were also provided. By letter dated 20th August, 2009, the appellant required the respondent to furnish complete details of his promoters, confirm the status of their eligibility under Regulation 4(e) of the CRA Regulations, 1999, offer comments on a discrepancy noted in thenet worth certificate etc. In the aforesaid letter, it was pointed out that under Regulation 4(e) of the CRA Regulations, 1999, the applicant is required to show that its promoters have a continuous net worth of minimum Rs.100 crores as per its Audited Annual Accounts for the previous five years prior to filing of the application with the Board for grant of certificate under the CRA Regulations, 1999. It is pointed out that although M/s. ACE Step Management Ltd., as a promoter of the respondent, has the continuous net worth of minimum Rs.100 crores as per its Audited Annual Accounts for the previous five years prior to the filing of the application, yet the net worth certificate dated 29th May, 2009, certified by the accountants in this regard pertains to M/s. Coment (Mauritius) Limited. Therefore, the respondent was advised to offer comments on the aforesaid discrepancy and submit the requisite net worth certificate in compliance with the relevant provisions of the CRA Regulations, 1999.8. The respondent through its letter dated 21st August, 2009 submitted the reply to the aforesaid discrepancy pointed out by the appellant. The respondent stated that M/s. Coment (Mauritius) Limited has invested in the appellant company through its associate company M/s. ACE Step Management Ltd., which was holding 3,65,000 (Three Lac Sixty Five Thousand) 10.84% equity shares in their company, which is within the parameters of Regulation 4(e) of the CRA Regulations, 1999. The respondent also confirmed that M/s. Coment (Mauritius) Limited is a promoter of the respondent company having a continuing net worth of minimum Rs.100 crores as per its Audited Annual Accounts for the previous five years prior to the filing of the application with the Board. Therefore, it was stated that there is no discrepancy and the net worth certificate submitted by the respondent is in compliance with the provisions of the CRA Regulations, 1999. Still not satisfied, the appellant through an e-mail dated 1st September, 2009 (5.36 PM) directed the respondent to furnish the Audited Annual Accounts of the promoters of the appellant company for the previous five years prior to the filing of the application with SEBI. The respondent through a letter dated 1st September, 2009 again informed the appellant that their promoter M/s. Coment (Mauritius) Limited had the continuous net worth of Rs. 100 crores as per the Annual Accounts for the previous five years. Their accounts are audited and they have provided the appellant with a certificate of their bankers ING Asia Private Bank Ltd., Dubai, to that effect. The certificate was enclosed with the aforesaid letter. The certificate issued by the ING Bank was as: 21 May 2009TO WHOMSOEVER IT MAY CONCERNThis is to confirm that M/s. Coment (Mauritius) Limited, Les Cascade Building, Edith Cavell Street, Port Louris, Republic of Mauritius, part of the Kataria Group has had a continued net worth of over Rs.100 crores as per its accounts for the previous five years.We further confirm that M/s. ACE Step Management Ltd. is promoted by M/s. Coment (Mauritius) Limited.The above information is given in strictest confidence at the request of our client and is without responsibility or engagement on the part of the Bank and/or any of its officers or employees for its content or any reliance made upon it. The letter does not constitute any guidance on the part of the bank.Yours faithfully,Sd/-NitinBhatnagarDirector & Head South AsiaThe letter further pointed out thate Coment (Mauritius) Ltd. Balance sheet is not a public document though in terms of holding in our company it is 10.84 % but in their terms it is a small investment made they may not like to share balance sheet with us. However, their bankers have confirmed that as per certificate it is within the compliance of SEBIIn view of the confirmation given by the bankers of M/s. Coment (Mauritius) Ltd. Promoter Company, the respondent requested the appellant to rely on the bankers certificate.10. It is further pointed out that in any event the respondent had submitted the annual accounts for the last 5 years. However, inspite of aforesaid, the appellant vide its letter dated 15th September, 2009 directed the respondent to furnish an undertaking as to whether the promoter of respondent or any associate of the respondent are registered with any regulatory agency abroad and also directed the respondent to have Audited Annual Accounts of the promoters for the 5 years prior to filing of the application.11. The respondent by a letter dated 21st September, 2009 stated that it would furnish the Balance Sheet for five years period as soon as they were received by the respondent. The appellant by his letter dated 21st October, 2009 further directed the respondent to furnish the Audited Annual Accounts and detailed profile of the promoters of the respondent. On 26th November, 2009, respondent furnished the detailed profiles of its promoters and specific details about the promoters such as their activities in detail, the composition of the Board of Directors and the summary of their financial results for the last five years. However, the Balance Sheet for the five years period was not furnished. Having furnished all the information, the respondent by its letter dated 11th January, 2010 requested for approval of its pending application dated 11th June, 2009, for being registered as a CRA. However, in spite of repeated requests, the necessary registration was not granted. In fact, the appellant by letter dated 28th July, 2010 once again advised the respondent to furnish Audited Annual Accounts of its promoters - M/s. Coment (Mauritius) Limited for the period 2006 to 2009. It appears that till 1st March, 2011, the appellant was not satisfied with the efforts made by the respondent to supply the necessary Audited Accounts and issued Show Cause Notice as to why the application for registration should not be rejected in terms of Regulation 11(1) of the CRA Regulations, 1999.12. We may notice here that in the Show Cause Notice, it is specifically mentioned that the respondent has failed to produce the Audited Annual Accounts of the promoter M/s. Coment (Mauritius) Limited for the previous five years prior to the filing of the application with the Board for registration as a CRA. It was pointed out that the respondent has not fulfilled the requirement under Regulation 4(e) read with Regulation 7(1) of the CRA Regulations, 1999. Therefore, SEBI was prima facie of the view that the appellant was unable to furnish the information sought by the Board during the course of processing of the application for registration in accordance with the provisions of the CRA Regulations, 1999. The respondent pointed out in its reply to the Show Cause Notice dated 4th March, 2011 that the appellant had enquired about the status of M/s. Coment (Mauritius) Limited directly from the Mauritius Regulatory Authority and collected all the details to cross check their credentials. In spite of the aforesaid, the appellant was still insisting upon the same information which in fact is not a precondition for registration under the SEBI law or regulations. It is pointed out that even though the information was not required to be provided under the regulations, the investor company and the applicant still agree to furnish the Balance Sheet only to enhance their credibility and as a mark of their respect to SEBI. The respondent in fact protested that it was not being given equal treatment under law as others had been granted registrations without submission of any Annual Accounts of investor companies. Thereafter, the respondent by its letters dated 15th March, 2011 and 18th March, 2011 submitted the Audited Annual Accounts of M/s. Coment (Mauritius) Limited for the periods ending 31st December, 2003 to 31st December, 2007. On its request, the respondent was also granted a personal hearing by the Whole Time Member of SEBI on 10th June, 2011. However, even during the personal hearing, the respondent was advised to file the Audited Accounts of M/s. Coment (Mauritius) Limited for the years 2009 and 2010. Again on 24th June, 2011, the Whole Time Member of the appellant directed the respondent to indicate as to which entity is its promoter(s) along with the basis of considering the entity as such and to submit Audited Annual Accounts of the promoter(s) for the last five years along with computation of net worth as per the SEBI prescribed formula latest by 15th July, 2011, failing which the application of the respondent would be deemed to be rejected. The Whole Time Member also directed the appellant to take a decision on the basis of the details provided by the respondent in pursuance of the order, latest by 15th August, 2011, in accordance with law. The respondent on 5th July, 2011 sought review/reconsideration of the aforesaid order. Ultimately, on 21st July, 2011, the appellant rejected the application of the respondent.13. Aggrieved by the rejection, the respondent preferred an appeal being Appeal No. 155 of 2011 on 30th August, 2011 before the SAT. Against the communication dated 21st July, 2011 of the appellant and the order dated 24th June, 2011 passed by the Whole Time Member of the appellant. The SAT by its judgment and final order dated 9th November, 2011 allowed the appeal and set aside the impugned order dated 24th June, 2011 and 21st July, 2011 and remitted the matter to the appellant to consider the application of the appellant without requiring it to produce the accounts for the two years ending December, 2010. Being aggrieved by the impugned order of SAT, SEBI is in appeal before this Court under Section 15Z of the SEBI Act.Whilst allowing the appeal, the SAT interpreted Regulation 4(e), Regulation 7 and Form A contained in the First Schedule of the Regulations. It has been observed thatapplication was filed on June 11, 2009 and it is the requirement of regulation 4(e) that the net worth of one of the promoters of the applicant should be rupees one hundred crores as per the audited annual accounts for the previous five years prior to the filing of the application. As already mentioned above, Form A prescribes that the applicant should produce a certificate from a Chartered Accountant to substantiate the fact regarding the net worth of its promoter which was done and the Board has at no stage questioned its veracity. Without doing so it (the Board) could not have asked for the annual accounts of the promoter.It is further observed that an application for the grant of a certificate is to be made in Form A as prescribed in the First Schedule to the Regulations. According to the eligibility criteria prescribed therein, the applicant is required to enclose a Charteredcertificate, certifying the continues net worth to be of Rs. 100 crores for five years in the case of promoter referred to Regulation 4(e). With regard to the directions issued by the appellant to the respondent to produce the Annual Accounts of one of its promoters for the five years preceding the date of application, the SATis pertinent to mention here that neither the regulations nor the eligibility criteria in Form A requires the applicant to produce the annual accounts of theits earlier view, the SAT furtheris doubtful whether the Board could have asked for this information without doubting the veracity or correctness of the certificate of the Chartered Accountant that accompanied thealready mentioned above, Form A prescribes that the applicant should produce a certificate from a Chartered Accountant to substantiate the fact regarding the net worth of its promoter which was done and the Board has at no stage questioned its veracity, without doing so it (the Board) could not have asked for the annual accounts of thefrom the above, it is also noticed by the SAT that accounts for five years preceding the application were duly produced by the respondent. However, the Board then directed the respondent to produce accounts for another two years for the period ending December, 2010. Since the respondent failed to produce the accounts for the two years, the application of the respondent for registration as a CRA has been rejected. It has been held that the direction for producing twoaccounts after the date of application could not be justified under Regulation 7. It has been held that such further information as referred to Regulation 7 would mean any information in addition to the information already furnished by the applicant alongwith the application. The relevant observations of SAT arethe Board was not asking for any further information. It was only seeking the basic material on the basis of which the Chartered Accountant had furnished a certificate certifying that one of the promoters of the appellant had a net worth of rupees one hundred crores for the previous five years. This information could be asked for if the Board at any stage had doubted the correctness or veracity of the certificate of the Chartered Accountant.In coming to the aforesaid conclusion it is observed by the SAT that wherever the regulations wanted the applicant to produce the Annual Accounts, a specific provision in that regard had been made in the regulations. On the other hand, for the purpose of substantiating the fact that the promoter of the applicant had a net worth of Rs. 100 crores for the previous five years, regulations do not require the Annual Accounts of the promoter to be produced. The regulations read with Form A prescribed that a certificate from the Chartered Accountant should be filed for this purpose. Therefore, it is held that the information sought by the appellant with regard to the additional two years was beyond the scope of the regulations and Form A, hence without jurisdiction.

Reasoning: 27. We are satisfied that the aforesaid certificate did not conform to the provisions contained in the regulations which requires that the certificate of the Chartered Accountant should be in confirmation of the Audited Accounts of the promoters/applicant for the five years preceding the date of the application. We are unable to approve the observations made by SAT thatthe regulations nor the eligibility criteria in Form A requires the applicant to produce the annual accounts of theWe are also unable to approve the observations of SAT thatis doubtful whether the Board could have asked for this information without doubting the veracity or the correctness of the certificate of the Chartered Accountant that accompanied theThe certificate of the Chartered Accountant is evidence of the required net worth of the promoter. Therefore, it has to be in strict conformity with Regulation 4(e). Since the certificate issued by the Chartered Accountants did not categorically state that it is based on the audited accounts for the 5 years preceding the date of application, the Board certainly had the power to direct the respondent to produce the audited accounts. That being so, under Regulation 6, it was the duty of the Board to have rejected the application of the respondent.28. Surprisingly, however, the Board continued to grant further time to the respondent to remove the objections even beyond the maximum sixty days permissible under the proviso to Regulation 6. It appears that the enquiries continued from 20th August, 2009 till March 1, 2011 when the show cause notice was issued to the respondent. The application of the respondent is not rejected till 21st July, 2011. The delay in the rejection of the application of the respondent was wholly unwarranted. It allowed the respondent a latitude not permissible under the regulations. Taking advantage of this latitude, the respondent has provided the Audited Accounts for the five years preceding the date of application. Not only this, we are informed that by now the respondent has even produced before this Court in a sealed cover the Audited Accounts of M/s. Coment (Mauritius) Limited for the subsequent two years upto 31st December, 2010 also.29. Since the Board had extended the time to the respondent, even though not permissible in law, we are not inclined to modify the directions issued by the SAT. Especially in view of the submission of Mr. Suri that respondent is willing at this stage to produce the Audited Accounts of the promoter even for the subsequent two years.