INDEPENDENT DIRECTOR CONTINUING TO ACT EVEN AFTER EXPIRY OF HIS TERM IN NESCO LIMITED WHICH RESULTED IN PAYMENT OF PENALTY OF ₹21.45 LAKH TO SEBI.

 

 INDEPENDENT DIRECTOR  CONTINUING 

TO ACT EVEN AFTER EXPIRY OF HIS TERM

 IN NESCO LIMITED WHICH RESULTED IN

 OF PENALTY OF  ₹21.45 LAKH TOSEBI.

There have been instances where an independent director (ID) continued to act beyond the expiry of their term at Nesco Limited.

A notable case involves Manu M. Parpia, who served as an independent director until May 9, 2022.

However, it was alleged that he continued to function in this capacity for over a year after his tenure had ended, violating the provisions of the SEBI  LODR.

Moreover, he was found to have provided a deceptive declaration regarding his independence and eligibility at the time of his appointment.

For continuing Shri Parpia as an independent director on NESCO’s Board after expiry of his tenure, NESCO  violated Regulation 25(2) of the LODR Regulations read with Section 149(10) of the Companies Act, 2013.

COOKUPS MADE BY NESCO TO SAVE ITS NON-COMPLIANCE

1.NESCO has submitted that owing to a clerical oversight, the Company omitted to note the expiry of tenure of Shri Parpia and therefore, the Company, in compliance with Regulation 27(2) of the LODR Regulations, filed CGRs in the standard format provided by SEBI, for the quarters ending June 2022, September 2022, December 2022 and March 2023, representing that Shri Parpia’s was a non-executive ID in the Company.

2. The Board of the Company  approved a resolution in their meeting dated May 24, 2023 THAT THE ATTENDANCE OF SHRI PARPIA DURING THIS INTERVENING PERIOD WILL BE CONSIDERED IN THE CAPACITY OF “SPECIAL INVITEE”.

3. Further, it was resolved by the Board in the said meeting dated May 24, 2023 THAT THE SITTING FEES PAID TO SHRI PARPIA FOR ALL THE MEETINGS ATTENDED BY HIM AS A SPECIAL INVITEE SHALL BE CONSIDERED AS FEES PAID TO PROFESSIONALS. NESCO VIOLATION OF REGULATION 17(1C) OF THE LODR REGULATIONS

4.NESCO failed to include IDs appointments in the annual general meeting (AGM) agenda scheduled. Instead, shareholder approval was sought through a postal ballot issued on the same date.

This process violated Regulation 17(1C) of the LODR Regulations, which mandates shareholder approval in the next general meeting or within three months of board approval, whichever is earlier.

5.DISCLOSURE OF POSTAL BALLOT RESULTS TO STOCK EXCHANGES

NESCO delayed the disclosure of the postal ballot notice. Although approved by the Board on 4 August 2023, the notice was disclosed to the stock exchanges only on 6 September 2023, far beyond the mandated 12-hour window.

PENALTY ON INDEPENDENT DIRECTOR

 In response to these allegations, Parpia filed a settlement application with SEBI and paid a settlement amount of ₹21.45 lakh.

PENALTY ON THE COMPANY

Penalty on company Rs 5 lakhs and the Director filed  the Settlement Application and the proceedings was disposed of on Jan 1 2025.

POINTS TO PONDER

1.How a listed company like NESCO has not observed the expiry of tenure of an Independent Director and allowed him to function even after his expiry of his term.

2. How Statutory Auditor and Secretarial Auditor of NESCO have not reported this lapse in their reports.

R V Seckar FCS , LLB 79047 19295