REMOVAL OF AN INDEPENDENT DIRECTOR FOR NOT ATTENDING BOARD MEETING IN THE LAST 12 MONTHS BY A LISTED COMPANY NAMELY GTT DATA SOLUTIONS LIMITED UNDER SECTION 167(1)(B) OF THE COMPANIES ACT, 2013

 REMOVAL OF AN INDEPENDENT DIRECTOR FOR NOT ATTENDING BOARD MEETING IN THE LAST 12 MONTHS BY A LISTED COMPANY NAMELY GTT DATA SOLUTIONS LIMITED UNDER SECTION 167(1)(B) OF THE COMPANIES ACT, 2013

FACTS OF THE CASE

Mr. Samarjeetsinh Vikramsinh Ghatge (Independent Director) of GTT Data Solutions Limited was removed under Section 167(1)(b) of the Companies Act, 2013 because he failed to attend any board meetings for 12 consecutive months. His office was vacated automatically on 14 August 2025, and the company later disclosed this to the stock exchange in June 2026.

LEGAL BASIS FOR REMOVAL

SECTION 167(1)(B), COMPANIES ACT, 2013:

A director automatically vacates office if they are absent from all board meetings held during a continuous period of 12 months, regardless of whether leave of absence was sought.

This provision ensures that directors remain actively engaged in governance and prevents inactive directors from continuing in office.

DISCLOSURE DELAY:

 The company identified the lapse only after receiving its Annual Secretarial Compliance Report (ASCR) on 30 May 2026.

REGULATORY COMPLIANCE:

Disclosure was filed with BSE Limited on 2 June 2026 under Regulation 30 of SEBI (LODR) Regulations, 2015

KEY CONSIDERATIONS FOR LISTED COMPANIES

AUTOMATIC VACATION VS. REMOVAL:

Vacation under Section 167(1)(b) is automatic and does not require shareholder approval.

Removal under Section 169 requires a shareholder resolution.

COMPLIANCE OBLIGATIONS:

Listed companies must promptly disclose director cessations to stock exchanges under SEBI (LODR) Regulations.

RISK OF MISUSE:

 Courts have cautioned that improper notice of board meetings can make such vacation invalid. Companies must ensure proper documentation of meeting notices and attendance

BUT ROC MAY NOT APPROVE THE FORM DIR-12 AND ASK YOU TO RESUBMIT WITH THE FOLLOWING DOCUMENTS

·      Minutes of all Board Meetings during the relevant period

·      Board Meeting Attendance Register

     AFFIDAVIT CONFIRMING:

• The director had not attended meetings for 12 months

• Meeting notices were properly issued

• No litigation existed regarding the cessation

• The company was regular in MCA filings

COMPLIANCE WITH SECTIONS 167 AND 164

·      The ROC also gave the concerned director an opportunity to submit objections.

·      If no response was received, the DIR-12 was eventually approved.

CASE LAWS ON THE SUBJECT

Union of India v. R. Gandhi (Madras High Court, 2015)	The court emphasized that vacation of office under Section 167 is automatic and does not require a board resolution.
M.K. Srinivasan v. Registrar of Companies (NCLT, 2017)	The NCLT held that once a director fails to attend all meetings for 12 months, the company must file DIR‑12 with the ROC. •      The tribunal rejected arguments that leave of absence could protect the director, affirming that leave is irrelevant under Section 167(1)(b).

 

KEY LESSON LEARNED

Even though the law provides automatic vacation of office, the ROC may require strong documentary proof before approving DIR-12.

Proper corporate records are therefore critical.

RISKS & GOVERNANCE IMPLICATIONS

Delayed disclosure can attract regulatory scrutiny and penalties.

BOARD EFFECTIVENESS:

 Prolonged absence of directors undermines governance and decision-making.

INVESTOR CONFIDENCE:

 Transparency in reporting director cessations is critical for maintaining trust in listed companies.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

LACK OF “SIGNIFICANT ACCOUNTING TRANSACTIONS” FOR 3 YEARS IN A ROW WILL BE A NEW GROUND FOR DEACTIVATION OF COMPANIES BY MCA

 LACK OF “SIGNIFICANT ACCOUNTING TRANSACTIONS” FOR 3 YEARS IN A ROW WILL BE A NEW GROUND FOR DEACTIVATION OF COMPANIES BY MCA

MCA IS SET TO WIDEN THE GROUNDS ON WHICH A COMPANY COULD BE STRICKEN OFF FROM THE OFFICIAL REGISTER THROUGH THE CORPORATE LAWS (AMENDMENT) BILL, 2026.

INACTIVE COMPANIES- NEW DEFINITION

The proposed rules would consider a company inactive if it doesn't undertake meaningful commercial or financial activity beyond just fulfilling basic compliance obligations.

SHELL COMPANIES

Indian corporates may soon find it more difficult to float shell companies or maintain existing incorporated structures that serve little purpose other than tax evasion, money laundering or hiding ownership.

NEW STRIKE-OFF GROUND:

If a company has no significant accounting transactions for 3 years in a row, it can be struck off by the Registrar of Companies (ROC).

This is aimed at curbing “shell companies” that exist only on paper without genuine business activity.

The proposal in the Bill that seeks to amend Section 248(1)(c) of the Companies Act, 2013 could bring inactive and shell entities under greater scrutiny.

It seems that the concern of the government is to make sure that such inactive companies should not be used to create proxy ownership structures, avoid taxes, or conceal beneficial ownership

THE CORPORATE LAWS (AMENDMENT) BILL, 2026

The Corporate Laws (Amendment) Bill, 2026 would inter alia seek to empower the Registrar of Companies to dissolve a company if it hasn’t conducted any “significant accounting transactions” for three years.

DEFINITION OF SIGNIFICANT ACCOUNTING TRANSACTION:

·       Includes transactions like payment of statutory dues, allotment of shares, or business-related financial activity.

·       Routine compliance filings alone may not qualify as “significant.”

MANDATORY DORMANT STATUS:

Inactive companies may be required to shift to dormant status before eventual strike-off, ensuring transparency in records.

OTHER MAJOR AMENDMENTS IN THE CORPORATE LAWS (AMENDMENT) BILL, 2026

DIRECTOR IDENTIFICATION NUMBER (DIN) DEACTIVATION:

MCA can deactivate DINs if directors fail to verify their particulars, automatically vacating their positions across all companies.

“FIT AND PROPER” CRITERIA:

 Expanded disqualification rules for directors, auditors, and insolvency professionals.

DECRIMINALIZATION OF MINOR OFFENCES:

 Over 20 offences shifted to monetary penalties instead of criminal liability.

RESTORATION POWERS:

Transferred from NCLT to Regional Directors to speed up reinstatement of struck-off companies.

IMPLICATIONS FOR COMPANIES

·       Companies must ensure at least one significant transaction annually to avoid being flagged as inactive.

·       Startups in incubation or firms waiting for funding may need to maintain minimal activity to avoid strike-off.

SUMMARY:

The MCA’s 2026 Bill is tightening rules to eliminate inactive or shell companies. Companies with no significant transactions for three years will face risk being struck off, making proactive compliance and minimal activity essential for survival.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

SEBI SUMMONED ANAND DAS, COMPANY SECRETARY OF INDUSIND BANK, IN MAY 2026 FOR SEBI PIT VIOLATION, MISSING SDD ENTRIES, UPSI RECORD TAMPERING -HEAVY PENALTY LIKELY TO BE IMPOSED

 SEBI SUMMONED ANAND DAS, COMPANY SECRETARY OF INDUSIND BANK, IN MAY 2026 FOR SEBI PIT VIOLATION, MISSING SDD ENTRIES, UPSI RECORD TAMPERING -HEAVY PENALTY LIKELY TO BE IMPOSED

BACKGROUND

ANAND DAS, COMPANY SECRETARY OF INDUSIND BANK,has recently been summoned and investigated by SEBI for alleged violations under the Prohibition of Insider Trading (PIT) Regulations, including missing entries in the Structured Digital Database (SDD), tampering of unpublished price-sensitive information (UPSI) records, and facing heavy penalties.

 This highlights SEBI’s increasing crackdown on compliance failures in corporate governance.

REASONS FOR SEBI’S ACTION

MISSING SDD ENTRIES

Under Regulation 3(5) & 3(6) of PIT Regulations, companies must maintain a Structured Digital Database (SDD) capturing all UPSI events with date, time, and audit trails.

Failure to record even a single UPSI event is treated as a serious compliance lapse.

UPSI RECORD TAMPERING

SEBI requires the database to be non-tamperable and preserved for at least 8 years.

Any manipulation or deletion of UPSI records is considered evidence of misconduct.

HEAVY PENALTIES

SEBI can impose monetary fines, market bans, and even criminal prosecution under Section 15G of the SEBI Act.

 

In past cases, senior officials have been barred from the securities market for insider trading violations.

INDUSIND BANK CASE

SEBI summoned Anand Das, Company Secretary of IndusInd Bank, in May 2026.

Allegations: A zonal head traded shares of client companies while in possession of UPSI.

SEBI investigated how the secretarial and compliance departments handled whistleblower complaints and UPSI records.

COMPLIANCE REQUIREMENTS FOR COMPANY SECRETARIES

·       Maintain SDD with strict access controls.

·       Capture all UPSI events (nature, date, time).

·       Ensure audit trails are intact and tamper-proof.

·       Certify quarterly compliance to SEBI.

RISKS & PENALTIES

VIOLATION	POSSIBLE SEBI ACTION
MISSING SDD ENTRIES	Monetary penalty, compliance warning
UPSI TAMPERING	Criminal liability, market ban
INSIDER TRADING	Prosecution, imprisonment, fines
NON-COOPERATION IN PROBE	Suspension of company secretary license

ACTIONABLE TAKEAWAYS

FOR COMPANIES:

·       Conduct regular internal audits of SDD.

·       Train compliance staff on PIT regulations.

·       Implement whistleblower mechanisms to detect violations early.

FOR COMPANY SECRETARIES:

·       Ensure personal accountability in certifying compliance.

·       Avoid shortcuts in UPSI documentation.

·       Cooperate fully with SEBI investigations to mitigate penalties.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

THE ENFORCEMENT DIRECTORATE (ED) RAIDED VEDANTA LIMITED FOR THE BRAND FEE REFUND VIOLATION UNDER FEMA AS IT AMOUNT TO PROFIT SHIFTING AS BRAND FEES AND DIVIDENDS FROM VEDANTA INDIA COULD COVER $800 MILLION–$1 BILLION OF THE PARENT’S DEBT BETWEEN FY26–FY29.

 THE ENFORCEMENT DIRECTORATE (ED) RAIDED VEDANTA LIMITED FOR THE BRAND FEE REFUND VIOLATION UNDER FEMA AS IT AMOUNT TO PROFIT SHIFTING AS BRAND FEES AND DIVIDENDS FROM VEDANTA INDIA COULD COVER $800 MILLION–$1 BILLION OF THE PARENT’S DEBT BETWEEN FY26–FY29.

FACTS OF TRE CASE

The Enforcement Directorate (ED) recently raided four offices of Vedanta Limited in Delhi, Mumbai, and Udaipur over alleged violations of the Foreign Exchange Management Act (FEMA), focusing on brand fee and royalty payments to its UK-based parent company, Vedanta Resources. The probe includes scrutiny of a 2023 brand fee refund transaction and whether such payments amount to profit shifting. Alleged FEMA violations linked to brand fee and royalty payments made by Vedanta Ltd. to Vedanta Resources (UK).

WHAT IS BRAND FEE REFUND VIOLATIONS UNDER FEMA ?

A brand fee paid by an Indian entity to an overseas holding company is typically classified as Royalty for the use of intellectual property (IP), trademarks, or brand names. Such remittances can be made through the automatic route without prior ⁠Reserve Bank of India clearance, provided the payment is at arm's length and complies with ⁠Foreign Exchange Management Act (FEMA) regulations.

WHY "PROFIT SHIFTING" IS BEING DEBATED ?

In transfer-pricing and foreign-exchange compliance discussions, regulators often examine whether:

Excessive brand fees, royalties, or management fees were paid to an overseas parent company.

Such payments reduced taxable profits in India.

Funds were effectively transferred abroad without adequate commercial justification.

If a regulator concludes that a royalty or brand fee was significantly higher than an arm's-length amount, it may view the arrangement as a form of profit shifting. However, as of now, the ED has not publicly established that Vedanta engaged in illegal profit shifting; the matter remains under investigation.

FINANCIAL CONTEXT

Vedanta Resources (UK parent) holds ₹53,400 crore debt and relies heavily on dividends and royalties from Vedanta India for servicing this debt.

Rating agencies estimate that brand fees and dividends from Vedanta India could cover $800 million–$1 billion of the parent’s debt between FY26–FY29.

Regulators suspect excessive royalty payments may amount to profit shifting and potential tax evasion.

MARKET IMPACT

Vedanta’s shares fell over 4% to ₹313.50 following news of the raids.

The company is also in the middle of a major demerger, planning to split into four listed entities:

RISKS & IMPLICATIONS

REGULATORY RISK:

If ED finds violations, Vedanta could face financial penalties or restrictions on overseas remittances.

INVESTOR SENTIMENT:

Stock volatility may continue until clarity emerges.

CORPORATE GOVERNANCE:

The case highlights scrutiny of intra-group financial arrangements and cross-border brand fee structures.

CONCLUDING REMARKS

The ED raids on Vedanta Limited are part of a FEMA probe into brand fee and royalty transactions with its UK parent. While no penalties have been imposed yet, the investigation raises concern about profit shifting and compliance with foreign exchange rules. Investors should watch for regulatory updates and the impact on Vedanta’s ongoing demerger.

However, it would be premature to state as a confirmed fact that Vedanta committed profit shifting or violated FEMA until the investigation reaches a formal conclusion.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

MCA PROPOSES MANY NEW AMENDMENTS TO THE COMPANIES ACT 2013, PUNISHING COMPANIES THAT FAILED TO SPEND 2% CSR AND “FIT AND PROPER” CRITERIA FOR DEBARRING DIRECTORS FROM HOLDING BOARD POSITION.

 MCA PROPOSES MANY NEW AMENDMENTS TO THE COMPANIES ACT 2013, PUNISHING COMPANIES THAT FAILED TO SPEND 2% CSR AND “FIT AND PROPER” CRITERIA FOR DEBARRING DIRECTORS FROM HOLDING BOARD POSITION.

BAN ON HOLDING BOARD POSITIONS

The move is a fallout of the IL&FS scandal, where the government was forced to supersede the board and take control but realised that it can do little to bar the disqualified directors, including some top names of the corporate sector, from holding board positions as the new Companies Act did not provide for such as action.

APPLICATION TO NCLT TO BAR DIRECTORS FOR 5 YEARS

As a result, it has decided to go back to the Companies Act 1956, which allowed the Centre to not just seek the removal of persons concerned with the management of a company and suspected of “fraud, misfeasance, persistent negligence or default in carrying out his obligations under the law or breach of trust” but also barred them from being appointed board members for five years from the date of removal. Under the new law the government will have to move an application before the NCLT.

LEVY OF PENALTY THAT DO NOT SPEND 2% TOWARDS CSR

MCA proposes to levy penalty on companies that do not meet the mandated 2% spending requirement towards corporate social responsibility (CSR).

The move to introduce a penalty on companies not meeting the CSR obligation was inserted as over 40% of the entities were not complying with the requirement, with close to a fifth not spending any money. “Companies have been given five years now. It is high time they start complying with the rules.

DISCLOSURE ON SBO

Companies now have to disclose the details of significant beneficial ownership, an obligation that was so far cast on shareholders. The government saw it as a loophole and has sought to plug it. The rules mandate that details of all shareholders with interest of 10% or more in a company, either direct or indirect, have to be disclosed.

MANDATORY DEMATERILISATION OF SHARES FOR ALL CATEGORY OF COMPANIES

The government has sought powers to mandate dematerialization of shares for all category of companies, a move that was recently extended to public unlisted companies. The step is seen to be crucial to identify the real owners of unlisted companies, which often remain hidden or can be benami holdings.

SPEEDING UP THE PROCESS FOR LISTING FOR COMPANIES

The government has proposed amendments to company law to strengthen the regulatory framework relating to the SFIO and NFRA, while simultaneously introducing measures to accelerate the listing process for companies.

NEW CSR IMPLEMENTATION OPTIONS

·      MCA has also amended Schedule VII to allow CSR spending via Zero Coupon Zero Principal (ZCZP) instruments issued by registered Not-for-Profit Organizations on Social Stock Exchanges.

·      Companies can allocate up to 10% of their CSR expenditure through these instruments.

·      This aims to ease compliance and provide transparent funding channels for NGOs.

BROADER AMENDMENTS IN THE BILL

DECRIMINALISATION OF OFFENCES:

Several violations will now attract civil penalties instead of imprisonment.

SIMPLIFIED COMPLIANCE:

·      Electronic service of documents permitted.

·      AGMs can be held virtually, but at least one physical meeting every 3 years is mandatory.

Certain companies may be exempted from appointing auditors.

·      Small company definition expanded: Paid-up capital limit raised to ₹20 crore; turnover limit raised to ₹200 crore.

Merger/amalgamation approvals: Threshold reduced from 90% to 75% shareholder/creditor approval.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

LIC STAKE IN RAJESH EXPORTS SPARKS SCRUTINY AFTER SEBI FRAUD PROBE

 LIC STAKE IN RAJESH EXPORTS SPARKS SCRUTINY AFTER SEBI FRAUD PROBE

REGULATOR'S MASSIVE ALLEGATION:

SEBI claims Rajesh Exports inflated 97-99% of its revenue between FY21 and FY25, totaling ₹15.15 lakh crore, and obstructed investigations.

LIC'S INVESTMENT QUESTIONED:

LIC’s 10.8% stake has drawn political criticism, with opposition parties asking if the purchase was influenced by the ruling establishment.

SEBI'S UNPRECEDENTED ₹15.15 LAKH CRORE CHARGE

SEBI’s interim order alleges Rajesh Exports misrepresented almost its entire consolidated revenue between FY21 and FY25, largely through overseas subsidiaries like Valcambi SA. The regulator cited missing records, unverified foreign transactions, and non-cooperation from both the company and its auditors, who failed to provide promised working papers. It has barred Chairman Rajesh Mehta from the securities market, ordered a new forensic audit, and referred audit lapses to the NFRA.

FROM SHAREHOLDER TIP-OFF TO REGULATORY CRACKDOWN

The probe began after a March 2024 shareholder complaint flagged unusually large trade receivables outstanding for over two years. SEBI’s preliminary review led to a formal investigation spanning April 2020 to March 2024, with BDO India appointed as forensic auditor. The findings, described as “egregious and unheard of,” have since wiped out significant shareholder value and triggered a collapse in Rajesh Exports’ share price.

GOVERNANCE CONCERNS GROW:

 Experts say the episode exposes gaps in LIC’s due diligence and highlights systemic risks in institutional investment governance.

POLITICAL AND MARKET FALLOUT FOR LIC

LIC’s 10.8% holding in Rajesh Exports has prompted Congress to question whether the investment was politically influenced, given the scale of alleged fraud. LIC shares fell over 1% following the SEBI order, while Rajesh Exports dropped 5%. The controversy has intensified scrutiny of LIC’s investment decisions, especially its role as a custodian of policyholders’ funds

GOVERNANCE RED FLAGS AND SYSTEMIC LESSONS

Governance experts argue LIC failed to act on red flags and needs stronger due diligence and forensic reviews for investee companies. The case underscores broader concerns about corporate governance, auditor oversight, and institutional investor accountability in India. Analysts warn that other LIC portfolio companies may face similar undiscovered risks if oversight mechanisms are not strengthened.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

ATANU CHAKRABORTY, INDEPENDENT DIRECTOR OF HDFC QUIT ON MARCH 18, 2026, CITING PRACTICES “NOT IN CONGRUENCE” WITH HIS VALUES- WHAT ARE THE PRACTICES NOT IN CONGRUENCE” WITH ATANU’S VALUES PERSUED BY HDFC BANK?

 ATANU CHAKRABORTY, INDEPENDENT DIRECTOR OF HDFC QUIT ON MARCH 18, 2026, CITING PRACTICES “NOT IN CONGRUENCE” WITH HIS VALUES- 

WHAT ARE THE PRACTICES NOT IN CONGRUENCE” WITH ATANU’S VALUES PERSUED BY HDFC BANK?

WHAT HDFC BANK’S INTERNAL VIGILANCE PROBE FOUND?

HDFC Bank’s internal vigilance probe (March–April 2026) confirmed that ₹45 crore in “differential interest” payments to Maharashtra State Road Development Corporation (MSRDC) were disguised as marketing spend via fake road safety sponsorships. The scandal coincided with Chairman Atanu Chakraborty’s resignation citing ethics, raising serious governance concerns.

KEY FINDINGS FROM THE PROBE

AMOUNT INVOLVED:

₹45 crore in extra interest payments to MSRDC deposits.

MECHANISM:

 Instead of crediting MSRDC directly, the money was routed through HDFC Bank’s marketing department and booked as “road safety campaign sponsorships” via four local vendors.

AUDIT TRIGGER:

An internal audit (FY2024–25) flagged the marketing department’s performance as “unsatisfactory,” prompting the Audit Committee to order a formal vigilance investigation on March 12, 2026.

LEADERSHIP INVOLVEMENT:

Internal records suggest HDFC BANK’S MD & CEO Sashidhar Jagdishan, CFO Srinivasan Vaidyanathan, and CMO Ravi Santhanam were aware of discussions on compensating MSRDC. Santhanam admitted the department acted as a “facilitator to camouflage” the payments.

CHAIRMAN’S RESIGNATION:

Atanu Chakraborty resignation on March 18, 2026, citing practices “not in congruence” with his values. His exit preceded public disclosure of the probe.

MARKET & REGULATORY IMPACT

STOCK REACTION:

HDFC Bank shares fell 2–2.5% on May 27, 2026, after reports surfaced.

REGULATORY ANGLE:

The arrangement potentially violated RBI rules on deposit interest rates and HDFC Bank’s own anti-bribery/governance policies.

REGULATORY BREACHES:

 1. RBI Master Directions violated

 2. Anti-bribery policy breached

 3. Vendor invoices inflated

WHY THIS MATTERS

GOVERNANCE BREACH:

Routing interest payments through marketing spend undermines transparency and raises questions about internal controls.

ETHICS VS. COMPLIANCE:

The chairman’s resignation highlights a clash between personal ethics and institutional practices.

INVESTOR CONFIDENCE:

Even relatively small sums (₹45 crore vs. HDFC’s scale) can trigger sharp stock declines due to governance fears.

                           RECOMMENDATION

RBI Should issue additional master circular to prevent this type of frauds in the Indian banking system to instill the investor’s confidence on the Indian banking system.

Will the SEBI take an action against HDFC Bank as it has ordered in the Suzlon’s Energy accounting fraud?

 

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,