Why are PSU’s not appointing/nominating independent directors?
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Article published as on Sunday, 31st December, at 11:00 p.m.
Powergrid
Exchange filing of 25th August
In an exchange filing dated 25th August, PSU Powergrid corporation has said it had received notice from the exchange dated 21st August, 2023 for non-compliance with the provision. That is not having requisite number of independent directors (including women directors) on the board for the quarter ended 30th June, 2023. And both BSE and NSE imposed a fine of ₹5,36,900 each for the non-compliance.
And here is the response given by the company to the exchange for the given notices.
In response to the aforesaid notices, POWERGRID vide letter dt. 22.08.2023 has requested NSE & BSE to grant waiver of the fine w.r.t. non-compliance of Regulation 17(1) of the SEBI (LODR), Regulations, 2015. POWERGRID, being a Government Company within the meaning of Section 2(45) of the Companies Act, 2013, the power to appoint functional/ Official Part-time Directors/ non-Official Part-time Directors (Independent Directors) vests with the President of India. The said non-compliance of Regulation 17(1) of the SEBI (LODR), Regulations, 2015 for the quarter ended 30th June, 2023 was not a lapse on the part of the Company. The matter has been regularly taken up with Administrative Ministry i.e. Ministry of Power for filling up the vacant posts of Independent Directors (including one woman Independent Director)
Exchange filing of 24th November
Again an exchange filing was filled on 24th November, wherein they received letter dated 21.11.2023 regarding non-compliance for the same issue. With a fine of 5,42,800 from NSE and BSE each.
Other Companies
Not only Powergrid but several other PSU’s like IOCL, ONGS, OIL, BPCL, HPCL, Engineers India, IRCTC and many other non-PSU’s like Spicejet and Adani green energy have also been fined for non-compliance relating to requirement of Woman and independent directors.
My understanding and Analysis
As per their reply, Powergrid being a Government company, the power the appoint directors (including independent directors) vests with the president of India.
This is true not only for the PSU, but all the companies, if we view President of India as a shareholder.
In every company, the directors are nominated for appointment, and shareholders can cast their vote to appoint them on the board.
Same
in the case of PSU’s the Board of Director should have strived to nominate and
find candidature for independent director (which obviously it hasn’t) and then
let president (the shareholder) decide if the Director is to be appointed or
not.
The
law here has been mis-interpreted and not is not being followed in true spirit.
As the saying goes, laws are meant to be broken if not obviously then deceitfully.
However we really cannot blame only the current management, because they are the agents appointed by Government itself.
Based on the example of Power-grid since no new independent directors were appointed till 31st December, and after the sad demise of existing independent director Korachara Nagappar We could expect another letter notice demanding a fine of ₹5,42,800 (at ₹5,900 for 92 days of non-compliance)
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