BSE, NSE impose Rs 10 lakh fine on HPCL, GAIL for failure to appoint Independent Directors

New Delhi: The stock exchanges, BSE and NSE, have imposed a fine of Rs 10,85,600 on state-run Hindustan Petroleum Corporation Ltd (HPCL) and GAIL (India) Ltd for their failure to appoint Independent Directors. In a regulatory filing to the stock exchanges, HPCL said, “We write to inform that the Company has received Notices from BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) for non-compliance of provisions of Regulation 17 (1) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR) for not having the required number of Independent Directors on the Board for the quarter ended September 2023 and the consequent levy of fine (of Rs 5,42,800 each from BSE & NSE).”

In a separate regulatory filing, GAIL said that the same penalty has been imposed on the PSU for “non compliance with the requirements pertaining to Composition of Board of directors (non-appointment of requisite no. of Independent Directors) for the quarter ended 30.09.2023.”

GAIL, HPCL clarify appointment of Independent Directors within Govt’s purview

Responding to the imposition of penalty by the stock exchanges, GAIL and HPCL said that the appointment of Independent Directors falls within the purview of the Central government. “GAIL (India) Limited is a ‘Government Company’ under the administrative control of the Ministry of Petroleum and Natural Gas (MoP&NG), Government of India. All the Directors on the Board of GAIL (including Independent Directors) are nominated/ appointed by the Government of India. As such, appointments are outside the purview/ control of the GAIL's management. The Company is regularly following up the Government of India for the appointment of the requisite number of Independent Directors on its Board,” said GAIL. It added, “It may be noted that in the past also similar letters have been received and waiver requests were considered favourably by the Exchanges.”

According to the Department of Public Enterprises’ (DPE) guidelines on the Composition of Board of Directors of Public Sector Undertakings (PSUs), the number of independent directors mandated to be appointed on the board depends on whether the Chairman is executive or non-executive. In case of a non-executive chairman, at least one-third of board should comprise of independent directors and in case of an executive chairman, at least half of board should comprise of independent directors.

Independent Directors are supposed to help in bringing an independent/objective view on the Board’s deliberations, especially on issues of strategy, performance, risk management, resources, key appointments and standards of conduct, scrutinise the performance of management in meeting agreed goals, satisfy themselves on the integrity of financial information and safeguard the interests of all stakeholders.

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