Rating agency Moody’s Indian arm ICRA on Thursday terminated its managing director and group chief executive officer Naresh Takkar’s employment. The rating agency has attributed the unprecedented move to protect interests of the company and its shareholders.
Takkar had been on indefinite leave since July pending an inquiry by the Securities and Exchange Board of India (Sebi) after a whistle-blower alleged interference by top executives of the rating agency in issuing good ratings to Infrastructure Leasing & Financial Services (IL&FS) and its subsidiaries.
Without disclosing reasons, ICRA informed the stock exchanges on Thursday, 'The board, after due consideration and taking into account the best interests of the company and its various stakeholders, has decided to terminate the employment of Takkar with immediate effect.'
According to the company, 'ICRA remains committed to ensuring independence and integrity of its ratings process and sound corporate governance.'
Takkar said, “I am shocked. I feel aggrieved that natural justice has been denied by the company where I have worked with utmost sincerity for the last 27 years.”
The ICRA board said it would commence a search for Takkar’s replacement, adding that Vipul Agarwal, who was named interim chief operating officer on July 1, 2019, remains responsible for the day-to-day operations of the firm until a CEO is appointed.
Global rating agency Moody’s owns 51.87 per cent in ICRA.
According to sources, the decision of Takkar’s termination follows the findings of an internal inquiry, which was initiated by the agency in May.
“An external agency was appointed after the board received some serious charges against Takkar. Though the inquiry is under way, some of the outcomes indicated certain irregularities in the rating process in some firms which has compelled the board to take this step,” said a person privy to the development.
According to ICRA’s code of conduct, all reports of suspected violations would be promptly investigated and treated confidentially.
“The firm intends to use every reasonable effort to prevent the occurrence of conduct not in compliance with this code and to halt any such conduct that may occur as soon as reasonably possible after its discovery. Subject to applicable law and agreements, company personnel who violate this code and other company policies may be subject to disciplinary action, up to and including termination,” it stated.
Sebi is also probing the case and has launched adjudication proceedings against ICRA, CARE Ratings and India Ratings in the ratings assigned to IL&FS and its group firms after the whistle-blower’s complaint.
In May, ICRA appointed external experts to look into the anonymous representation, forwarded by Sebi, and sent Takkar on leave in July. After ICRA, CARE Ratings, too, had sent its MD and CEO Rajesh Mokashi on indefinite leave.
The Sebi has been of the view that rating agencies should be able to pick up early signs of a crisis and issue a rating watch, followed by rating action.
Sebi is probing whether the agencies acted in an appropriate manner in issuing ratings to IL&FS group firms.
The Enforcement Directorate, which is probing the money laundering angle in the IL&FS case, had also indicated possible collusion and concealment among the rating agencies, including ICRA with the IL&FS former management.