Corporate Governance

CORPORATE GOVERNANCE

A STUDY ON THE EVALUATION OF CORPORATE

GOVERNANCE STANDARDS & PRACTICES

Done for

Project report submitted in partial fulfillment of the requirement of Jaro Education for the award of

the degree of

MASTER OF BUSINESS ADMINISTRATION

In project management

Submitted By

VIJAY SHAKAR TIWARI

ULSU/MBA/I/APR’13/15199


CERTIFICATE

This is to certify that this project entitled “A STUDY ON THE EVALUATION OF

CORPORATE GOVERNANCE STANDARDS & PRACTICES.” done for ADITYA

BIRLA CHEMICALS (INDIA) LIMITED Rehla, Jharkhand is submitted by VIJAY

SHAKAR TIWARI to the ULYANOVSK STATE UNIVERSITY in partial fulfillment of

the degree requirement for the award of degree Master of Business Administration and is

certified to be an original and bonafide work.

NAME: VIJAY SHAKAR TIWARI

Roll No.: ULSU/MBA/I/APR’13/15199


DECLARATION

I, VIJAY SHAKAR TIWARI, Student of Ulyanovsk State University, hereby declare that

this project report titled “A STUDY ON THE EVALUATION OF CORPORATE

GOVERNANCE STANDARDS & PRACTICES OF ADITYA BIRLA CHEMICALS

(INDIA) LIMITED” is an original work done by me and submitted to the ULYANOVSK

STATE UNIVERSITY, for the award of Degree of Master of Business Administration. I

further declare that any part this project itself has not been submitted elsewhere for award of

any degree.




ACKNOWLEDGEMENT

I am indebted to the all powerful Almighty God for all the blessings he showered on me and

for being with me throughout the study. It is not possible to prepare a project report without

the assistance & encouragement of other people. This one is certainly no exception.

I place on record my sincere gratitude and appreciation to internal guide Dr. B.

CHARUMATHI, Associate Guide, Department of Management Studies, for meticulously

reviewing my work, making corrections and offering suggestions without which the project

would have been incomplete.

I express my sincere thanks to Dr. R. P. RAYA, HOD, who provided me an opportunity to

do this project.

I express my deep sense of gratitude to (CA)Brijesh Kumar AGM (ACCOUNTS&

FINANCE), and my Project coordinator Astt. Manager (CA)Rajesh Rathi of ADITYA

BIRLA CHEMICALS (INDIA) LTD for offering me this project and for taking the role as

my external guide and guiding and supporting continuously in shaping my project,

correcting errors, clearing doubts throughout the project. I would also like to thank entire

ADITYA BIRLA CHEMICALS(INDIA) LIMITED,REHLA Team for their constant

guidance and support.

I take this opportunity to dedicate this project to my parents who were a constant source of

motivation and I express my deep gratitude for their never ending support and encouragement

during this project.

Finally I thank each and everyone who helped me to complete this project.




EXECUTIVE SUMMARY

Rules and norms of corporate governance are important components of the framework for

successful market economies. Although corporate governance can be defined in a variety of

ways, generally it involves the mechanisms by which a business enterprise, organised in a

limited liability corporate form, is directed and controlled. It usually concerns mechanisms by

which corporate managers are held accountable for corporate conduct and performance. Poor

corporate governance is widely viewed as one of the structural weaknesses that were

responsible for the outbreak of the 1997 Asian crisis. In companies controlled by family

owners, these owners could pursue their private interests relatively easily and often at the

expense of minority shareholders and firms' profits.Aditya birla chemicals (India) limited one

of the premier company for the chlor-alkali.Study on Corporate Disclosure of Aditya Birla

chemicals(India) Ltd. with reference of mandatory disclosure described by SEBI for Indian

listed companies.

The objective of the project is to analyze corporate governance practice of Aditya Birla

chemicals(India) Ltd. with reference of mandatory disclosure described by SEBI for Indian

companies. The corporate governance report of the company pertaining to 5 years, viz.,

2005-06 to 2009-10 were analysed to know whether the company has followed the

regulations relating to mandatory disclosures of SEBI’s clause 49 listing agreement. It is

found that the company has followed the mandatory disclosures but yet to do voluntary

disclosures. This project would help Aditya Birla chemicals(India) Ltd. to reach good

corporate governance prescribed by SEBI.


CONTENT

Chapter Description Page no. LETTER FROM THE ORGANIZATION

CERTIFICATE

DECLARATION

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

LIST OF TABLES

1

INTRODUCTION 1.1 INTRODUCTION TO THE TOPIC

1.2 NEED FOR THE STUDY

1.3 STATEMENT OF THE PROBLEM

1.4 OBJECTIVES OF THE STUDY

1.5 RESEARCH METHODOLOGY

1.6 LIMITATIONS OF THE STUDY

1.7 CHAPTERIZATION

01-03

2 PROFILE OF THE INDUSTRY

2.1 ORGANIZATIONAL OVERVIEW

2.2 ADITYA BIRLA CHEMICALS (INDIA) LIMITED

04-09

3 CORPORATE GOVERNANCE IN & REGULATORY

FRAMEWORK IN INDIA

11-28

4 ANALYSIS AND INTERPRETATION 29-53

5 SUMMARY OF FINDINGS, SUGGESTIONS AND

CONCLUSION

54-56

BIBILOGRAPHY 57


LIST OF TABLES

TABLE

NO. TITLE PAGE NO.

4.1 Board of Directors 30

4.2 Board meetings 31

4.3 Audit committee 33

4.4 Shareholders’ Grievance Committee 34

4.5 Remuneration Committee 34

4.6 Non Executive Directors & fees 35

4.7 salary and perquisites paid 35

4.8 number of requests / complaints 36

4.9 number of requests/complaint for 2005-06 to 2009-

10 37

4.10 General Shareholder Information 38

4.11 Market Price Data 39

4.12 Investors – Shareholding patterns 40

4.13 Annual general meeting 41

4.14 Disclosures 42

4.15 Dematerialisation of equity shares 47

4.16 Investors-financials 48

4.17 Evaluation of status of CG during 2005-06 to 2009-

10 50


CHAPTER 1

INTRODUCTION


1.1 INTRODUCTION

Corporate governance is the set of processes, customs, policies, laws, and institutions

affecting the way a corporation (or company) is directed, administered or controlled.

Corporate governance also includes the relationships among the many stakeholders involved

and the goals for which the corporation is governed. In simpler terms it means the extent to

which companies are run in an open & honest manner.

1.2 NEED FOR THE STUDY

The corporate governance practices concentrates on stakeholders protection specially

investors protection.Good corporate governance citizenship evidents through good corporate

governance practices.Good corporate governance enhances the financial position of the

company through ethical means knowing the corporate governance issues in chemical

companies is need of ours.

1.3 STATEMENT OF THE PROBLEM

In view of corporate scandals witnessed during the recent past,the implementation of

corporate governance in listed companies as become significant.Hence the present study has

been taken upto evaluate whether Aditya Birla Chemicals(India) Limited has followed the

corporate governance standards prescribed by SEBI’s clause-49 of listing agreement.

1.4 OBJECTIVES OF THE STUDY

1. To analyze corporate governance practice of Aditya Birla chemicals(India) Ltd. with

reference of mandatory disclosure described by SEBI for Indian companies.

2. To offer suggestions based on the findings.

1.5 RESEARCH METHODOLOGY

This is an discriptive research study.It has taken Aditya Birla Chemicals (India) Limited

as a case study. It used only Primary & Secondary Data. The primary data were

collected from secreterial department of Compny by interview. The secondary data


were collected from company’s annual report,website.The data are analysed discriptive

by using cross tabulation and percentage analysis.

1.6 PERIOD OF STUDY

It includes 2005-06 to 2009-10

1.6 LIMITATIONS OF THE STUDY

Non availability of certain data with the department, like statutory compliance and

shareholders compliances.

1.7 CHAPTERIZATION

Following is the plan of present study:

Chapter I deals with the meaning introduction to the topic, need for the study,

statement of problem, objective of the study, period of study, research

methodology,limitations of the study.

Chapter II presents the profile of the industry

Chapter III presents the conceptual framework of the topic

Chapter IV analyses and interprets the collected secondary data.

Chapter V concludes the findings derived from the present study and the suggestions

based on the findings were presented.


CHAPTER 2

PROFILE OF THE INDUSTRY


2.1 ORGANIZATIONAL OVERVIEW

Aditya Birla Chemicals (India) Ltd, is a unit of Aditya Birla Group and one of the leading

Chlor Alkali Company in India. The plant has been commissioned in 1984 and located at

Garhwa Road, Distt. PALAMAU, State JHARKHAND, India. Company’s detail product

range & Installed Capacity:

Caustic Soda lye 109,500 TPA

Liquid Chlorine 91,250 TPA

Hydrochloric Acid 45,625 TPA

Sodium Hypo Chlorite 1,460 TPA

Aluminium Chloride 11,680 TPA

Stable Bleaching Powder 17,520 TPA

The manufacturing process of the plant is the latest energy efficient and environment friendly

state-of-art Membrane Cell Technology. To meet the requirement of uninterrupted power

supply, company has a state-of-art 30 MW Captive Power Plant. Company has implemented

SAP R/3 and People Soft System.

To meet the heterogeneous business challenges, company has adopted WCM (World Class

Management) work culture. Further organization has adopted 40 villages under community

development to improve the quality of life in nearby vicinity of the factory.

International Applauds

ISO 9001:2000 : For quality management System

ISO 14001:2004 : For environment management System

SA 8000:2001 : For social Accountability

OHSAS 18001:1999 : For Occupational Health & Safety Assessment

Management

National Applauds

IMC Ramkrishna Bajaj National Quality Certificate of merit

Best Responsible care Committed Company Award


RC logo

FICCI award

Planet Award 2005-06

Greentech Environment Excellent Gold Award

Membership of IONAL Associates

Alkali Manufacturers Association Of India (AMAI)

Indian Chemical Council(ICC)

American Chemistry Council

2.2 ADITYA BIRLA CHEMICALS (INDIA) LIMITED

Aditya Birla Chemicals (India) Limited (formerly Bihar Caustic and Chemicals Limited) was

incorporated as a joint venture of the Aditya Birla Group and the Bihar State Industrial

Development Corporation. The unit was set up with the objective of catering to the caustic

soda requirements of Hindalco Industries Limited, and to contribute towards the economic

development of the backward region of Palamau district in Jharkhand.

Commissioned in 1984 with an initial caustic soda capacity of 33,000tpa, the company has

since grown to become the leading caustic soda producer in the eastern region of the country.

The company had commissioned a 30mw captive power plant in the year 2000 and

simultaneously, the caustic plant capacity was enhanced to 51,048tpa. In the year 2006, the

capacity was increased to 78,750tpa by converting the mercury cell technology to the more

environment-friendly membrane cell technology supplied by world-renowned technology

supplier UHDENORA, Germany. Presently, the installed capacity stands at 105,000tpa.

For value addition and effective utilization of chlorine, the company has commissioned a

12,000tpa aluminium chloride plant in the year 2007 and a 17,500tpa stable bleaching

powder (SBP) plant in 2008. SBP is marketed under the brand name Shaktiman. Aluminium

chloride is the principal catalyst used in the Friedel Craft reaction and widely used in

pharmaceuticals, chemical intermediates, agrochemicals, dyestuffs and pigments,

hydrocarbon resins, flavours and fragrances. SBP is used in textile mills for bleaching,

sanitation, sewage systems, tanning process, organic synthesis and other applications.

Our Key People


Mr. Kumar Mangalam Birla Chairman, Aditya Birla Group

Mrs. Rajshree Birla Chairperson, Aditya Birla Centre for community

Initiatives and Rural Development

Mr. Ajay Srinivasan Financial Services

Mr. Askaran Agarwal Birla Group Trusts & Special Community

Projects

Dr. Bharat Singh Business Review Council(Services Business)

Mr. D.D. Rathi Business Review Council (Services Business)

Mr. Debu Bhattacharya Metals

Mr. K.K. Maheswari Pulp and fibre

Mr. Pranab Barua Textiles and Apparels

Mr. Rajiv Dube Group Corporate Services

Mr. Rakesh Jain Aditya Birla Nuvo

Mr. Ravi Kastia Trading, Port and power projects

Mr. Himanshu Kapania Telecom

Dr. Santrupt B. Misra Carbon Black Business and Group HR

Mr. Shailendra jain Chairman, Business Review Council

Mr. Thomas Varghese Retail

Mr. Lalit Naik Chemicals

Mr. Tuhin Mukherjee Mining and Mineral Resources Development

Mr. O.P. Puranmalka Cement

Mr. Vikram Rao Acrylic Fibre and Overseas Spinning Business

Some global facts about Aditya Birla Group

It is the world’s largest aluminium rolling company.

It is the world leader in viscose staple fibre.

It is one of the three biggest producers of primary aluminium in Asia.

It is one of the leading cement producers in India and eighth largest globally.

It is the fourth largest producer of carbon black in the world.

It is the fourth largest producer of insulators in the world.


It is the fifth largest producer of acrylic fibre in the world.

Some Indian facts

It is the largest premium branded apparel company.

It is the second largest producer of viscose filament yarn.

It is the second largest in the chlor-alkali sector.

It is among the top five cellular operators.

It is among the top 10 Indian BPO companies by revenue size.

It is among the top 5 asset management and private sector life insurance companies.

2.4 VISION, MISSION & VALUES

Our Vision To be a premium global conglomerate with a clear focus on each business.

Our Mission To deliver superior value to our customers, shareholders, employees and society at large. Our Values

Integrity

Commitment

Passion

Seamlessness

Speed

2.5 Our Valued Customers


2.6 Our Products

1. Caustic Soda

It is also known as lye and Sodium Hydroxide (NaOH), which is a caustic metallic base. It is

used in many industries, mostly as a strong chemical base in the manufacture of pulp and

paper, textile, drinking water, soap, and detergents and as a drain cleaner.

2. Liquid Chlorine

Chlorine is used in the purification of drinking water, as bleaching agent in pulp, paper and

textile industries.

It is also used as raw material / intermediate chemical in the manufacture of PVC plastics,

paraffin waxes, synthetic rubbers, pesticides / insecticides, inorganic / organic chemicals,

pharmaceuticals etc.

3. Hydrochloric Acid

Hydrochloric acid is a solution of hydrogen chloride (HCl) in water that is a

highly corrosive, strong mineral acid with many industrial uses. It is found naturally in gastric

acid.

4. Sodium Hypochlorite

Sodium hypochlorite is a chemical compound with the formula NaClO. Sodium hypochlorite

solution, commonly known as bleach, is frequently used as disinfectant or a bleaching agent


4.Aluminium Chloride

Aluminium chloride (AlCl3) is the main compound of aluminium and chlorine. It is white, but

samples are often contaminated with iron trichloride, giving it a yellow color. The solid has a

low melting and boiling point. It is mainly produced and consumed in the production of

aluminium metal, but large amounts are also used in other areas of chemical industry. The

compound is often cited as a Lewis acid. It is an example of an inorganic compound that

"cracks" at mild temperature, reversibly changing from a polymer to a molecule.

5. Stable Bleaching Powder

Calcium hypochlorite is a chemical compound with formula Ca(ClO)2. It is widely used

for water treatment and as a bleaching agent (bleaching powder).Calcium hypochlorite is

used for the disinfection of drinking water or swimming pool water. It is used as a sanitizer in

outdoor swimming pools in combination with a cyanuric acid stabilizer, which reduces the

loss of chlorine due to ultraviolet radiation. The calcium content hardens the water and tends

to clog up some filters; hence, some products containing calcium hypochlorite also

contain anti-scaling agents. Calcium hypochlorite is also an ingredient in bleaching powder,

used for bleaching cotton and linen. It is also used in bathroom cleaners, household

disinfectant sprays, moss and algae removers, and weed killers.


CHAPTER 3

CORPORATE GOVERNANCE &

REGULATORY FRMEWORK IN INDIA


3.1 INTRODUCTION

Corporate governance is the set of processes, customs, policies, laws, and institutions

affecting the way a corporation (or company) is directed, administered or controlled.

Corporate governance also includes the relationships among the many stakeholders involved

and the goals for which the corporation is governed. In simpler terms it means the extent to

which companies are run in an open & honest manner.

Corporate governance has three key constituents namely: the Shareholders, the Board

of Directors & the Management. Other stakeholders include employees, customers, creditors,

suppliers, regulators, and the community at large. The concept of corporate governance

identifies their roles & responsibilities as well as their rights in the context of the company. It

emphasises accountability, transparency & fairness in the management of a company by its

Board, so as to achieve sustained prosperity for all the stakeholders.

Corporate governance is a synonym for sound management, transparency &

disclosure. Transparency refers to creation of an environment whereby decisions & actions of

the corporate are made visible, accessible & understandable. Disclosure refers to the process

of providing information as well as its timely dissemination.

In A Board Culture of Corporate Governance, business author Gabrielle O'Donovan

defines corporate governance as “An internal system encompassing policies, processes and

people, which serves the needs of shareholders and other stakeholders, by directing and

controlling management activities with good business savvy, objectivity, accountability and

integrity”. Sound corporate governance is reliant on external marketplace commitment and

legislation, plus a healthy board culture which safeguards policies and processes.

Issues involving corporate governance principles include:

Internal controls and internal auditors

The independence of the entity's external auditors and the quality of their audits

Oversight of the preparation of the entity's financial statements

Review of the compensation arrangements for the chief executive officer and other

senior executives

CORPORATE GOVERNANCE 3.2 BACKGROUND

As mentioned earlier, the term ‘corporate governance’ is related to the extent to which the

companies are transparent & accountable about their business. Corporate governance today

has become a major issue of interest in most of the corporate boardrooms, academic circles &

even governments around the globe.

In the 19th century, state corporation laws enhanced the rights of corporate boards to

govern without unanimous consent of shareholders in exchange for statutory benefits like

appraisal rights, to make corporate governance more efficient. Since that time and because

most large publicly traded corporations in the US are incorporated under corporate

administration-friendly Delaware law and because the US's wealth has been increasingly

securitized into various corporate entities and institutions, the rights of individual owners and

shareholders have become increasingly derivative and dissipated. The concerns of

shareholders over administration pay and stock losses periodically has led to more frequent

calls for corporate governance reforms.

In the 20th century, in the immediate aftermath of the Wall Street Crash of 1929, legal

scholars such as Adolf Augustus Berle, Edwin Dodd, and Gardiner C. Means pondered on the

changing role of the modern corporation in society. From the Chicago school of economics,

Ronald Coase's "The Nature of the Firm" (1937) introduced the notion of transaction costs

into the understanding of why firms are founded and how they continue to behave. Fifty years

later, Eugene Fama and Michael Jensen's "The Separation of Ownership and Control" (1983,

Journal of Law and Economics) firmly established agency theory as a way of understanding

corporate governance: the firm is seen as a series of contracts. Agency theory's dominance

was highlighted in a 1989 article by Kathleen Eisenhardt ("Agency theory: an assessment and

review", Academy of Management Review).

The expansion of US after World War II through the emergence of multinational

corporations saw the establishment of the managerial class. Accordingly, the following

Harvard Business School management professors published influential monographs studying

their prominence: Myles Mace (entrepreneurship), Alfred D. Chandler, Jr. (business history),

Jay Lorsch (organizational behavior) and Elizabeth MacIver (organizational behaviour).

According to Lorsch and MacIver "Many large corporations have dominant control over

business affairs without sufficient accountability or monitoring by their board of directors."

CORPORATE GOVERNANCE Since the late 1970’s, corporate governance has been the subject of significant debate

in the U.S. and around the globe. Bold, broad efforts to reform corporate governance have

been driven, in part, by the needs and desires of shareowners to exercise their rights of

corporate ownership and to increase the value of their shares and, therefore, wealth. Over the

past three decades, corporate directors’ duties have expanded greatly beyond their traditional

legal responsibility of duty of loyalty to the corporation and its shareowners.

In the first half of the 1990s, the issue of corporate governance in the U.S. received

considerable press attention due to the wave of CEO dismissals (e.g.: IBM, Kodak,

Honeywell) by their boards. The California Public Employees' Retirement System (CalPERS)

led a wave of institutional shareholder activism (something only very rarely seen before), as a

way of ensuring that corporate value would not be destroyed by the now traditionally cozy

relationships between the CEO and the board of directors (e.g., by the unrestrained issuance

of stock options, not infrequently back dated).

In 1997, the East Asian Financial Crisis saw the economies of Thailand, Indonesia,

South Korea, Malaysia and The Philippines severely affected by the exit of foreign capital

after property assets collapsed. The lack of corporate governance mechanisms in these

countries highlighted the weaknesses of the institutions in their economies.

In the early 2000s, the massive bankruptcies (and criminal malfeasance) of Enron and

WorldCom, as well as lesser corporate debacles, such as Adelphia Communications, AOL,

Qwest, Arthur Andersen, Global Crossing, Tyco, etc. led to increased shareholder and

governmental interest in corporate governance. Because these triggered some of the largest

insolvencies, the public confidence in the corporate sector was sapped. The popular

perception was that corporate leadership was fraught with greed & excess. Inadequacies &

failure of the existing systems, brought to the fore, the need for norms & codes to remedy

them. This resulted in the passage of the Sarbanes-Oxley Act of 2002, (popularly known as

Sox) by the United States.

In India however, only when the Securities Exchange Board of India (SEBI),

introduced Clause 49 in the Listing Agreement, for the first time in the financial year 2000-

2001, that the listed companies started embracing the concept of corporate governance. This

clause was based on the Kumara Mangalam Birla Committee constituted by SEBI. After

these recommendations were in place for about four years, SEBI, in order to evaluate &


improve the existing practices, set up a committee under the Chairmanship of Mr. N.R.

Narayana Murthy during 2002-2003.At the same time, the Ministry of Corporate Affairs set

up a committee under the Chairmanship of Shri. Naresh Chandra to examine the various

corporate governance issues. The recommendations of the committee however, faced

widespread protests & representations from the industry, forcing SEBI to revise them.

Finally, on the 29th October, 2004, SEBI announced the revised Clause 49, which was

implemented by the end of the financial year 2004-2005. Apart from Clause 49 of the Listing

Agreement, corporate governance is also regulated through the provisions of the Companies

Act, 1956. The respective provisions have been introduced in the Companies Act by

Companies Amendment Act, 2000.

3.3 SCOPE & IMPORTANCE OF CORPORATE GOVERNANCE Corporate governance is all about ethics in business. It is about transparency, openness & fair

play in all aspects of business operations. The key aspects to corporate governance include:

1. Accountability of Board of Directors & their constituent responsibilities to the

ultimate owners- the shareholders.

2. Transparency, i.e. right to information, timeliness & integrity of the information

produced.

3. Clarity in responsibilities to enhance accountability.

4. Quality & competence of Directors and their track record.

5. Checks & balances in the process of governance.

6. Adherence to the rules, laws & spirit of codes.

An active & involved board consisting of professional & truly independent directors

plays an important role in creating trust between a company & its’ investors and is the

best guarantor of good corporate governance.

Good corporate governance is integral to the very existence of a company. It is

important for the following reasons:

1. Corporate governance ensures that a properly structured Board, capable of taking

independent & objective decisions is at the helm of affairs of the company. This lays

down the framework for creating long-term trust between the company & external

providers of capital.


2. It improves strategic thinking at the top by inducting independent directors who bring

a wealth of experience & a host of new ideas.

3. It rationalizes the management & monitoring of risk that a corporation faces globally.

4. Corporate governance emphasises the adoption of transparent procedures & practices

by the Board, thereby ensuring integrity in financial reports.

5. It limits the liability of top management & directors, by carefully articulating the

decision making process.

6. It inspires & strengthens investors’ confidence by ensuring that there are adequate

number of non-executive & independent directors on the Board, to look after the

interests & well-being of all the stakeholders.

7. Corporate governance helps provide a degree of confidence that is necessary for the

proper functioning of a market economy, as it contemplates adherence to ethical

business standards.

8. Finally, globalization of the market place has ushered in an era wherein the quality of

corporate governance has become a crucial determinant of survival of corporate.

Compatibility of corporate governance practices with global standards has also

become an important constituent of corporate success. Thus, good corporate

governance is a necessary pre-requisite for the success of Indian corporate.

3.4 CLAUSE 49 – MANDATORY REQUIREMENTS

I. BOARD OF DIRECTORS A. Composition of Board:

1. The Board of directors of the company shall have an optimum combination of executive and non-executive directors with not less than fifty percent of the board of directors comprising of non- executive directors .

2. Where the Chairman of the Board is non- executive directors, at least one third of the Board should comprise of independent directors and in case he is an executive directors, at least half of the Board should comprise of independent directors.

3. For the purpose of sub – clause (ii) the expression ‘independent director’ shall mean a non executive director of the company who: a. Apart from receiving director’s remuneration , does not have any material

pecuniary relationships or transactions with the company, its promoters, its directors its senior management or its holding company, its subsidiaries and associated which many affects independence of the director.

b. Is not related to promoters or persons occupying managements positions at the board level or at one level below the board;


c. It not been executive or was not partner or an executive during the preceding three years, of any of the following:

d. Is not a partner or an executive or was not partner or an executive during the preceding three years, of any of the following: i. The statutory audit firm or the internal audit firm that is associated

with the company, and ; ii. The legal firm(s) and consulting firm(s) that have a material

association with the company e. Is not a material supplier, service provider or customer or a lessor or lessee

of the company, which may affect independence of the directors; and f. is not a substantial shareholder of the company i.e. owning two percent or

more of the block of voting shares. 4. Nominee directors appointed by an institution which has invested in or lent to

the company shall be deemed to be independent directors. However if the Dr. J.J. irani Committee recommendations on the proposed new company law are accepted, then directors, nominated by financial institutions and the government will not be considered independent.

B. Non executive directors compensation and disclosures: all fees/ compensation and disclosures: all fees/ compensation , if any paid to non executive directors, including independent directors, shall be fixed by the Board of Directors and shall require previous approval of shareholders in general meeting. The shareholders’ resolution shall specify the limits for the maximum number of stock options that can be granted to non- executive directors, including independent directors, in any financial year and aggregate. However as per SEBI amendment made vide circular SEBI/ CFD/DIL/CG dated 12/1/06 sitting fees paid to non-executive directors as authorized by the Companies Act 1956, would not require the previous approval of shareholders.

C. Other provisions as to Board and Committees: 1. The board shall meet at least four times a year, with a maximum time gap of

three months between any two meetings. However SEBI has amended the clause 40 of the listing agreement vide circular SEBI/CFD/DIL/CG dated 12-1-06 as per which the maximum gap between two board meetings has been increased again to 4 months.

2. A director shall not be a member in more than 10 Audit and / or Shareholders grievance Committee or act as chairman of more than five Audit Shareholders Grievance committee across all companies in which he is a director. Furthermore it should e mandatory annual requirement for every director to inform the company about the committee positions he occupies in other companies and notify changes as and when they take place.

D. Code of conduct: 1. The Board shall lay down a code of conduct for all Board members and senior

management of the company. The code of conduct shall be posted the website of the company,


2. All Board members and senior management personnel shall affirm compliance with the code on an annual basis. The Annual report of the company shall contain declaration to this effect signed by CEO.

II. AUDIT COMMITTEE. A. Qualified and Independent Audit Committee: A qualified and independent audit

committee shall be set up, giving the terms of reference subject to the following: 1. The audit committee shall have minimum three directors as members.

Two thirds of the members of audit committee shall be independent directors.

2. All members of audit committee shall be financially literate an at least one member shall have accounting or related financial management expertise.

3. The chairman of the Audit Committee shall be an independent director. 4. The chairman of the Audit Committee shall be present at annual General

Meeting to answer shareholder queries; 5. The audit committee may invite such of the executives, as it considers

appropriate (and particularly the head of the finance function) to the present at the meetings of the committee. The finance director, head of internal audit and representative of the statutory auditor may be present as invitees for the meeting of the audit committee;

6. The Company Secretary shall act as the secretary to the committee.

B. Meeting of Audit Committee: the audit committee should meet at least four times in a year and not more than four months shall elapse between two meetings. The quorum shall be either tow members or one third of the members of the audit committee whichever is greater, but there should be minimum of two independent members present.

C. Powers of Audit Committee: the audit committee shall have powers: 1. To investigate any activity within the terms of reference; 2. To seek information from any employee; 3. To obtain outside legal or other professional advice; 4. To secure attendance of outsiders with relevant experts, if any.

D. Role of audit committee: the role for the audit committee shall include the

following: 1. Oversight of the company’s financial reporting process and the disclosure of

its financial information to ensure that the financial statement is correct, sufficient and credible.

2. Recommending to the Board, the appointment reappointment and if required the replacement or removal of the statutory auditor and the fixation of audit fees.


3. Approval of payment too statutory auditors for any other services rendered by the statutory auditors.

4. Reviewing, with the management the quarterly and annual financial statements before submission to the board for approval with reference to Director’s Responsibility statement under section 217 (2AA)k, significant adjustments made in financial statements, compliance with listing requirements, disclosure of any related pending transaction etc.

5. Reviewing with the management performance of statutory and internal auditor and adequacy of the internal control systems.

6. Discussion with internal auditors regarding any significant findings including suspected frauds or irregularities and follow up thereon.

7. Reviewing the findings of any internal investigation by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control system of a material nature and reporting the matter to the board.

8. Discussion with statutory auditors before the audit commence, about the nature and scope of audit as well as post- audit discussion to ascertain any area of concern.

9. To look into the reason of substantial defaults in the payments to the depositors, debenture holders, shareholders (in case of nonpayment of declared dividends) and creditors.

10. To review the functioning of the Whistle Blower mechanism, in case the same is existing.

11. Carrying out any other function as it mentioned in the terms of reference of the Audit Committee.

III. SUBSIDIARY COMPANIES 1. At least one independent director on the Board of Director of the holding

company shall be a director on the Board of Directors of a material non listed Indian subsidiary company.

2. The audit committee of the listed holding company shall also review the financial statements, in particular, the investment made by the unlisted subsidiary company.

3. The minutes of the Board meeting of the unlisted subsidiary company shall be placed at the Board meeting of the listed holding company, the management should periodically bring to the attention of the Board of Directors of the listed holding company, a statement of all significant transaction and arrangements entered into by the unlisted subsidiary company.

IV. DISCLOSURES A. Basis of related party transactions:

1. A statement in summary form of transactions with related parties shall be

placed periodically before the audit committee.


2. Details of material individual transactions with related parties which are not in the normal course of business shall be placed before the audit committee.

B. Disclosure of Accounting Treatment: where in the preparation of financial statements, a treatment different from that prescribed in an Accounting Standard has been followed, the fact shall be disclosed in the financial statements, together with the management’s explanation as to why it believes such alternative treatment is more representative of the true and fair view of the underlying business transaction in the Corporate Governance Report.

C. Board Disclosure- Risk Management: the company shall lay down procedures to inform Board members about the risk assessment and minimization procedures.

D. Proceeds from public issues, rights issues , preferential issues etc. : When money

is raised through an issue (public issues rights issues, preferential issues etc.), it shall disclose to the Audit committee, the uses/ applications of funds by major category (capital expenditure,, sales and marketing, working capital, etc.), on a quarterly and annual basis.

E. Remuneration of Directors :

1. All pecuniary relationship or transactions of the non- executive directors vis-à-vis the company shall be disclosed in the Annual Report.

2. Further, certain prescribed disclosures on the remuneration of directors shall be made in the section on the corporation governance of the Annual Report;

3. The company shall disclose the number of shares and convertible instruments held by non-executive directors in the annual report.

4. Non executive directors shall be required to disclose their shareholding (both own or held by/ for other persons on a (beneficial basis) in the listed company in which they proposed to be appointed as directors, prior to their appointment. These details should be disclosed in the notice to the general meeting called for appointment of such directors.

F. Management: As part of the directors’ report or as an addition there to a Management Discussion and Analysis report, the following should form part of the Annual Report to the shareholders. This includes discussion on: 1. industry structure and developments. 2. Opportunities and threats. 3. Segment wise or product wise performance 4. Outlook 5. Risks and concerns. 6. Internal control systems and their adequacy 7. Discussion on financial performance with respect to operational performance.


8. Material developments in Human resources/ industrial Relations front including number of people employed.

G. Shareholders: 1. In case of the appointment of a new directors or reappointment of a director

the shareholders must be provided with the following information: a. A brief resume of the director b. Nature of his expertise in specific functional areas; c. Names of companies in which the persons also holds directorship and the

membership Committees of the Board; and d. Shareholding of non – executive directors.

2. A board committee under the chairmanship of a non- executive director shall

be formed to specifically look into the redressal of shareholder and investor complaints like transfer of shares, non receipt of declared dividends etc. this committee shall be designated as ‘Shareholders/Investors Grievance Committee’.

3. To expedite the process of share transfer, Board of the company shall delegate the power of share transfer to an officer or a committee or to the registrar and share transfer agents. There delegated authority shall attend to share transfer formalities and least once in a fortnight.

V. CEO/CFO CERTIFICATION Through the amendment made by SEBI vide circular SEBI /CFD/DIL CG DATED 12-1-06, in Clause 49 of the Listing Agreement, certification of internal controls and internal control system CFO/CEO would be for the purpose of financial reporting. Thus the CEO, i.e. the Managing Director or Manager appointed in terms of the Companies Act, 1956 and the CFO i.e. the whole – time Finance Director or any other Person heading the finance function discharging that function shall certify to the Board that: 1. They have reviewed financial statements and the cash flow statement for the year

and that to the best of their knowledge and belief: i. These statements do not contain any materially untrue statement or omit

any material fact or contain statements that might be misleading; ii. These statements together present a true and fair view of the company’s

affairs and are in compliance within existing accounting standards, applicable laws and regulations.

2. There are, to the best of their knowledge and belief, no transactions entered into by the company during the year which fraudulent, illegal or volatile of the company’s code of conduct.

CORPORATE GOVERNANCE 3. They accept responsibility for establishing and maintaining internal controls and

they have evaluated the effectiveness of the internal control system of the company pertaining to financial reporting and they have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if an, of which they are aware and the steps they have taken or propose to take to rectify these deficiencies

4. They have indicated to the auditors and the Audit Committee significant changes

in internal control over financial reporting during the year, significant fraud of which they have become aware and the involvement there in if any, of the management or an employee having a significant role in the company’s internal control system over financial reporting.

VI. REPORT ON CORPORATE GOVERNANACE

1. There shall be separate section on Corporate Governance in Annual Reports of

Company with a detailed compliance report on Corporate Governance. Non compliance of any mandatory requirement of this clause with reason there of and the extent to which the non- mandatory requirements have been adopted should be specifically highlighted.

2. The companies shall submit a quarterly compliance report to the stock exchange within 15 days from the close of quarter as per the format given in

3. Annexure IB. the report shall be signed either by the Compliance Officer or the Chief Executive Officer of the company.

VII. COMPLIANCE 1. The company shall obtain a certificate from either the auditor or practicing

company secretaries regarding compliance of conditions of corporate governance as stipulated in this clause and annex the certificate with the directors’ report, which is sent annually to all the shareholders of the company. The same certificate shall also be sent to the Stock Exchanges along with the annual report filed by the company.

The non- mandatory requirements may be implemented as per the discretion of the

company. However, the disclosures of the compliance with mandatory requirements

and adoption / non- adoption of the non mandatory requirements shall be made in the

section on corporate governance of the Annual Report.

3.5 Indian model of governance

Indian corporate is governed by the Company’s Act 1956 which follows more or less the UK

model. The pattern of private companies is mostly that of closely held or dominated by a


founder, his family and associates. India has adopted the key tenets of Anglo-American

external and internal control mechanisms after economic liberalization.

Obligation to society at large

A corporation is a creation of law as an association of persons forming part of a society in

which it operates. Its activities are bound to impact the society as the society’s value would

have an impact on the corporation. Therefore, they have mutual rights and obligations to

discharge for the benefit of each other.

National interest: A company (and its management) should ne committed in all its

actions to benefit the economic development of the countries in which it operates and

should not engage in any activity that would militate against such an objective.

Political non-alignment: A company should be committed to and support a

functioning democratic constitution and system with a transparent and fair electoral

system and should not support directly or indirectly any specific political party or

candidate for political office.

Legal compliances: The management of a company should comply with all

applicable government laws, rules and regulations. Legal compliance will also mean

that corporations should abide by the tax laws of the nations in which they operate

and these should be paid on time and as per the required amount.

Rule of law: Good governance requires fair, legal frameworks that are enforced

impartially. It also requires full protection of rights, particularly those of minority

shareholders. Impartial enforcement of laws requires an independent judiciary and

regulatory authorities.

Honest and ethical conduct: Every officer of the company including its directors,

executives and non executive directors, managing director, CEO, CFO and CCO

should deal on behalf of the company with professionalism, honesty, commitment and

sincerity as well as high moral and ethical standards.

Corporate citizenship: A corporate should be committed to be a good corporate

citizen not only in compliance with all relevant laws and regulations but also by

actively assisting in the improvement of the quality of life of the people in the

CORPORATE GOVERNANCE communities in which it operates with the objective of making them self reliant and

enjoy a better quality of life.

Ethical behaviour: Corporations have a responsibility to set exemplary standards of

ethical behaviour, both internally within the organizations, as well as in their external

relationships.

Social concern: The Company should have concerns towards the society. It can help

the needy people & show its concern by not polluting the water, air & land. The waste

disposal should not affect any human or other living creatures.

Healthy and safe working environment: A company should be able to provide a

safe and healthy working environment and comply with the conduct of its business

affairs with all regulations regarding the preservations of environment of the territory

it operates in.

Competition: A company should market its products & services on its own merits &

should not resort to unethical advertisements or include unfair & misleading

pronouncements on competitors’ products & services.

Timely responsiveness: Good governance requires that institutions & processes try to

serve all stakeholders within a reasonable time frame.

Obligation to investors

The investors as shareholders and providers of capital are of paramount importance to a

corporation. A company has following obligations to investors:

Towards shareholders:

Measures promoting transparency and informed shareholder participation:

Financial reporting and records:

Obligation to employees

In the context of enhanced awareness of better governance practices, managements should

realize that they have their obligations towards their workers too.

Fair employment practices

Equal opportunities

Humane treatment

Participation

Empowermen

Equity and inclusiveness


Participative and collaborative environment

Obligation to customers

A company’s existence cannot be justified without its catering to he needs of its customers.

The companies have an obligation to its employees, without whose assistance they cannot

realize their objectives.

1.Quality of products and services:

2. Products at affordable prices:

3. Unwavering commitment to customer satisfaction:

Managerial obligations

Protecting company’s assets:

Behaviour toward government agencies:

Control:

Gifts and donations:

3.6 Landmarks in emergence of corporate governance

OECD Principles

The Organization for Economic Co-operation and Development (OECD) was one of the

earliest non-governmental organizations to work on and spell out principles and practices that

should govern corporate in their goal to attain long-term shareholder value. The OECD

Principles were oft-quoted and have won universal acclaim, especially of the authorities on

the subject of corporate governance. Because of the ubiquitous approval, the OECD

Principles are as much trendsetters as the Codes of Best Practices associated to the Cadbury

Report. A useful first step in creating or reforming the corporate governance system is to look

at the principles laid out by the OECD and adopted by its member governments. They include

the following elements:

The rights of shareholders: The rights of shareholders include a set of rights to

secure ownership of their shares, the right to full disclosure of information, voting

rights, participation in decisions on sales or modification of corporate assets, merger

and new share issues. The guidelines go on to specify a host of other issues connected

to the basic concern of protecting the value of the corporation.

Equitable treatment of shareholders: The OECD is concerned with protecting

minority shareholders’ rights by setting up systems that keep insiders, including

CORPORATE GOVERNANCE managers and directors, from taking advantage of their roles. Insider trading, for

example, is explicitly prohibited and directors should disclose any material interest

regarding transactions.

The role of stakeholders in corporate governance: the OECD recognizes that there

are other stakeholders in companies’ ion addition to shareholders. Banks, bondholders

and workers, for example, are important stakeholders in the way in which companies

perform and make decision. The OECD guidelines lay out several general provisions

for protecting stake holder’s interests.

Disclosure and transparency; The OECD lays down a number of provisions for the

disclosure and communication of key facts about the company ranging from financial

details to governance structures including the board of directors and their

remuneration. The guidelines also specify that independent auditors in accordance

with high quality standards should perform annual audits.

The responsibilities of the board: The OECD guideline provides a great deal of

details about the functions of the board in protecting the company and its

shareholders. These include concerns about corporate strategy, risk, executive

compensation and performance as well as accounting and reporting systems.

3.7 Corporate governance: The Indian scenario

In India the real history of corporate governance dates back to the year 1992, following

efforts made in many countries of the world to put in place a system suggested by the

Cadbury Committee. The Confederation of Indian Industry framed a voluntary code of

corporate governance for listed companies in 1998. This was followed by the

recommendations of the Kumar Mangalam Birla Committee set up in 1999 by SEBI

culminating in the introduction of Clause 49 of the standard Listing Agreement to be

complied with all the listed companies in stipulated phases. The Kumar Mangalam Birla

committee divided its recommendations into mandatory and non-mandatory. Mandatory

recommendations included such issues as the composition of board, appointment and

structure of audit committees, remuneration of directors, board procedures, and additional

information regarding management, discussion and analysis as a part of annual report. Its

non-mandatory recommendations included issues concerning the chairman of the board,

setting up of remuneration committee, half yearly information to shareholders and

appointment of nominee directors.

Efforts to initiate corporate governance in country


The Companies Amendment Act, 2000

Many provisions relating to corporate governance such as additional ground of

disqualification of directors in certain cases, setting up of audit committees, directors’

responsibility statement in directors’ reports, etc. were introduced by the Companies

(Amendment) Act, 2000. Corporate governance was also introspected in 2001 by the

advisory group constituted by the standing committee of International Finance Standards and

Codes of the Reserve Bank of India under chairmanship of Dr. Y.V. Reddy, the then deputy

governor.

Naresh Chandra Committee, 2002

In the year 2002, the committee was asked to examine various corporate governance issues

and to recommend changes in diverse areas such as:

the statutory auditor company relationship so as to further strengthen the professional

nature of the interface

the need for rotation of statutory audit firms or partners

the procedure for appointment of auditors and determination of audit fees

restrictions, if any, on non-audit functions

independence of auditing functions

the need to consider measures such as certification of accounts and financial

statements by managements and directors

the necessity of having transparent system of random scrutiny of audited accounts

Narayan Murthy Committee, 2003

The Company Law Amendment Bill, 2003 envisaged many amendments on the basis of

reports of the Naresh Chandra Committee and the subsequently appointed N R Narayan

Murthy committee. Both the committees have done an excellent job to promote corporate

governance practice in India.

Implementation of the recommendations of Birla Committee Report

Clause 49

Clause 49 of the Listing Agreement to the Indian stock exchange comes into effect from

31 December 2005. It has been formulated for the improvement of corporate governance

in all listed companies.


In corporate hierarchy two types of managements are envisaged: i) companies managed by

[board of directors]; and ii) those by a [managing director], whole-time director or manager

subject to the control and guidance of the board of directors.

As per Clause 49, for a company with an Executive Chairman, at least 50 per cent of the

board should comprise independent directors. In the case of a company with a non-executive

Chairman, at least one-third of the board should be independent directors.

It would be necessary for chief executives and chief financial officers to establish and

maintain internal controls and implement remediation and risk mitigation towards

deficiencies in internal controls, among others.

Clause VI (ii) of Clause 49 requires all companies to submit a quarterly compliance report to

stock exchange in the prescribed form. The clause also requires that there be a separate

section on corporate governance in the annual report with a detailed compliance report.

A company is also required to obtain a certificate either from auditors or practicing company

secretaries regarding compliance of conditions as stipulated, and annex the same to the

director's report.

The clause mandates composition of an audit committee; one of the directors is required to be

"financially literate". It is mandatory for all listed companies to comply with the clause by

December 31, 2005.

Clause 49, when it was first added, was intended to introduce some basic corporate governance practices in Indian companies and brought in a number of key changes in governance and disclosures (many of which we take for granted today). It specified the minimum number of independent directors required on the board of a company. The setting up of an Audit committee, and a Shareholders’ Grievance committee, among others, were made mandatory as were the Management’s Discussion and Analysis (MD&A) section and the Report on Corporate Governance in the Annual Report, and disclosures of fees paid to non-executive directors. A limit was placed on the number of committees that a director could serve on.

In late 2002, SEBI constituted the Narayana Murthy Committee to assess the adequacy of

current corporate governance practices and to suggest improvements. Based on the

recommendations of this committee, SEBI issued a modified Clause 49 on October 29, 2004

(the ‘revised Clause 49’) which came into operation on January 1, 2006.


The revised Clause 49 has suitably pushed forward the original intent of protecting the

interests of investors through enhanced governance practices and disclosures. Five broad

themes predominate. The independence criteria for directors have been clarified. The roles

and responsibilities of the board have been enhanced. The quality and quantity of disclosures

have improved. The roles and responsibilities of the audit committee in all matters relating to

internal controls and financial reporting have been consolidated, and the accountability of top

management—specifically the CEO and CFO—has been enhanced. Within each of these

areas, the revised Clause 49 moves further into the realm of global best practices (and

sometimes, even beyond.


CHAPTER 4

ANALYSIS AND INTERPRETATION


4.1 Company’s Philosophy on Corporate Governance

The companies believes that sound Corporate Governance is critical to enhance and retain

investor’s trust. The company seeks to attain its performance with integrity and fairness. It’s

philosophy based on Accountability, Ethical conduct, Compliance with status, Interest of all

stakeholders, Transparency & Timely disclosure. The objective is to instutionalize Corporate

Governance practices that go beyond adherence to that extant of regulatory framework.

4.2 Board of Directors

As on 31st march 2010,comprises Eight directors out of which Seven are non executives

Directors. Since the company does not have a Chairman, Directors present in the meeting

elect one of them to take the chair and non-executive Director is appointed as chairman of the

meeting.The composition of the board as on 31st March 2010,attendance at board meetings

held during the financial year under review and at the last Annual General Meeting And no.

of Directorship and Membership/Chairmanship in public companies held by directors as on

31st March 2010(including the company) are given below:

Table:4.1 Board of Directors

Sl. No.

Name of Directors Nature of Directorship

No. of Board meetings held

No. of Board meetings

Attended

No. of other Directorship

Committee Membership

Attendance at last AGM Mem

ber Chairman

1 Shri A.K.Agarwala

Non-Executive promotors

4 4 4 - - No

2 Shri K.K.Maheshwari

Non-Executive, promotors

4 3 3 2 2 Yes

3 Shri K.C.Jhanwar Non-Executive, promotors

4 4 - - - Yes

4 Shri Biswajit Non-Executive,In

4 4 10 3 3 Yes


Chaudhari dependent

5

Shri P.P.Sharma Non-Executive,Independent

4 3 - - - No

6 Shri J.C.Chopra Non-Executive,Independent

4 4 3 1 - No

7 Shri S.S.Gupta Managing Director,Promotor

4 4 - 1 - Yes

8 Shri Subrajit Bhowmick(upto 4th April 2010)

Non-Executive Nominee Independent

4 3 - 1 - No

9 Shri S.C.Mathur(w.e.f.5th April 2010

Non-Executive Nominee Independent

N.A. N.A. - 1 - N.A.

10 Shri L.S.Naik Non-Executive,Promoter

N.A. N.A. - - - N.A.

Source:Company’s Annual Report

During the year 2009-10, Four (4) Board meetings held,the details of which are given here in-below:

Table 4.2 Board meetings

Sl. No. Date Board Strength No.Of Directors Present

1 29.04.2009 8 8

2 22.07.2009 8 7

3 26.10.2009 8 8

4 20.01.2010 8 6


During the year under review,Shri Lalitkumar Shantaram Naik has been appointed as

Additional Director in the Board w.e.f. 1st April 2010,Shri S.S. Gupta has been re-appointed


as Managing Director of the company w.e.f. 24th october 2009 And Shri S.C. Mathur has

been appointed in the Board in place of Shri Subrajit Bhowmick w.e.f.5th April 2010.

In accordance with the provisions of Companies Act,1956 and Company’s Articles of

Association, Shri A.K. Agarwala and Shri J. C. Chopra,Directors retire by rotation in the

ensuing Annual general meeting of the Company and being eligible.offer themselves for re-

appointement.

As required by Clause 49 of the Listing Agreement, the brief details of Directors seeking

appointment and reappointment is appended to the notice convening the 34th Annual General

Meeting of the Company.

The Code of Conduct, laid down by the Company, binds all the Board Members and Senior

Management of the Company. A declaration by the Managing Director to this effect is

appended to this report.

The Board reviews the Compliance Reports to ensure adherence to all applicable provisions

of Law, Rules and Guidelines on regular basis. Post meeting follow-up, review and reporting

on the actions taken on decisions

of the Board and Committees are being regularly carried out.

4.3 AUDIT COMMITTEE

The Audit Committee of the Board of Directors is constituted in compliance with Corporate

Governance requirements. The three members out of total four members of the Committee

are Independent Directors and all the members are non-Executive Directors and have relevant

finance and audit exposure. The Committee is headed by an Independent Director. The head

of Internal Audit and Statutory Auditors attend and participate in the meeting regularly on

invitation.

The terms of reference and scope of the Committee includes :-

to oversee the Company’s financial reporting process and disclosure of its financial

information, to recommend the appointment/removal of Statutory/Internal Auditors, fixation

of audit fees and approval of payments forany other services, to review and discuss with the

Auditors about internal control systems, the scope of audit including the observations of the

Auditors, adequacy of the internal audit system, major accounting policies,practices and


entries, compliances with accounting standards and listing agreement entered into with the

Stock

Exchanges and other legal requirements concerning financial statements and related party

transactions, if any,to review the Risk Management and Legal matters of the Company, to

review the quarterly, half yearly and annual financial statements before submitting to the

Board of Directors.

Minutes of the Audit Committee meetings are circulated to, discussed and noted by the

members of the Board.The Committee held four (4) meetings during the year under review

on 29.04.2009, 22.07.2009, 26.10.2009 and 20.01.2010. The attendance of members at the

meetings was as follows :

Table 4.3 Audit committee

Name of Members Status No.of meeting Attended

Shri Biswajit Choudhuri Chairman 4

Shri K.K.Maheshwari Member 3

Shri J.C. Chopra Member 4

Shri Subrajit bhowmick Member 3

Shri S.S. Gupta Permanent Invitee 4


4.4 SHAREHOLDERS’ GRIEVANCE COMMITTEE

The Shareholders’ Grievance Committee of the Board, inter-alia, approves issue of duplicate

share certificates and oversees and reviews all matters connected with the securities transfers.

The Committee also looks into redressal of shareholders’ complaints like transfer of shares,

non receipt of annual report/dividend warrants etc. and oversees the performance of

Registrars & Transfer Agents and recommends measures for overall improvements in the

quality of investor services.

The Shareholders’ Grievance Committee comprises two Non-Executive Directors and the

Managing Director and is headed by a Non-Executive Director. The Committee held four (4)

meetings during the year under review on 29.04.2009, 22.07.2009, 26.10.2009 and

20.01.2010. The attendance of members at the meetings was as follows :


Table 4.4: Shareholders’ Grievance Committee


Shri K.K.Maheshwari Chairman 3

Shri Biswajit Choudhuri Member 4

Shri S.S. Gupta Member 4


Shri Akash Mishra, Company Secretary is the Compliance Officer under the relevant SEBI directions.

4.5 REMUNERATION COMMITTEE

In continuation of practices of good corporate governance, the Board has constituted the

Remuneration Committee of Directors of the Company on 17.10.2006 to recommend/review

remuneration of the Managing Director and/ or Whole Time Directors, as per requirement.

The Remuneration Committee comprises three non-Executive Directors. The Committee held

one (1) meeting during the year under review on 26.10.2009. The attendance of members at

the meetings was as follows :

Table 4.5: Remuneration Committee


Shri J.C. Chopra Chairman 1

Shri K.K.Maheshwari Member 1

Shri Biswajit Choudhuri Member 1


4.6 Non Executive Directors


The Non Executive Directors are paid only sitting fees for attending Board/Committee

meetings. The amount of sitting fees paid to Non Executive Directors during the year under

review are as follows :

Table 4.6: Non Executive Directors & fees

Name of Director Sitting fee paid (Rs.)

Shri A.K. Agarwala 80,000/-

Shri K. K. Maheshwari 160,000/-

Shri K. C. Jhanwar 80,000/-

Shri Biswajit Choudhuri 210,000/-

Shri P. P. Sharma 60,000/-

Shri J. C. Chopra 170,000/-

Shri Subrajit Bhowmick

( upto 4th April 2010 )

120,000/-

Shri L. S. Naik

( w.e.f. 1st April 2010 )

N.A.

Shri S. C. Mathur

( w.e.f. 5th April 2010 )

N.A.


There was no other pecuniary relationship or transaction of the Non Executive Directors with

the Company.The Company has not granted any stock option to any of its Directors. As on

31st March 2010, except Shri A. K. Agarwala and Shri Biswajit Choudhuri, Directors, who

hold 11700 and 100 equity shares of the Company respectively, no other Directors of the

Company hold any shares in the Company, as reported.

The aggregate value of salary and perquisites paid for the year 2009-10 to the Managing

Director are as follows :

( all fig. in Rs.Lacs)

Table 4.7: salary and perquisites paid


Salary Variable Pay All other elements of the remuneration package*

Total

Shri S. S. Gupta 37.33 8.86 9.75 55.94

*excluding Gratuity and unencashed Earned Leave Salary.

Besides this, the Managing Director is also entitled to other facilities as per the rules of the

Company and Agreement entered with him.

The re-appointment of Shri S. S. Gupta is for a period of two (2) years w.e.f 24.10.2009. In

the event of cessation of employment of Shri Gupta for reasons attributable to him during the

subsistence of service, he shall not be entitled to any

remuneration on and from the date of termination of his employment. Subject to the

provisions of Section 318 of the Companies Act 1956, the Company shall, in the event of the

termination of the appointment of Shri Gupta as its Managing

Director prior to the expiry of the said period, by the Company, pay compensation to Shri

Gupta equivalent to six month's basic salary as prevailing immediately preceding the date he

ceases to hold office of the Managing Director of the Company.

4.7 SHARE TRANSFER

The Registrar and Share Transfer Agent of the Company M/s. C. B. Management Services

(P) Limited, Kolkata looks after physical as well as electronic transfer of Company's shares.

The Board of Directors have delegated the power of approving transfer of securities to the

Registrar subject to notification of the same to the Company Secretary on a monthly basis

and intimation to the Committee about such transfers in its meeting.

The Status of total number of requests / complaints received during the year under review is

as follows :

Table 4.8: number of requests / complaints in 2009-10

Sl. No.

Descriptin Nos. received Total Received

Replied/Addressd Pending

QT1

QT2

QT3 QT4


A Letters received from

Statutory bodies

SEBI

0 0 0 0 0 0 0

Stock Exchange 0 0 0 0 0 0 0

B Complaints from

Shareholders

0 0 0 0 0 0 0

C Queries/requests

Issue of duplicate certificates/

change of address, Bank

mandates, Transmission/

transfer of Shares query, Demat

updation status/query, Dividend

related query/revalidation,

query on fully paid up etc.

31 60 36 30 157 157 0

Total 31 60 36 30 157 157 0


Table:4.9 number of requests/complaint for 2005-06 to 2009-10

Description 2005-06 2006-07 2007-08 2008-09 2009-10

R A P R A P R A P R A P R A P

Letters received from

1 1 0 1 1 0 1 1 0 0 0 0 0 0 0


Statutory bodies

SEBI

Stock Exchange 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0

Complaints from

Shareholders

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Queries/requests

Issue of duplicate certificates/

change of address, Bank

mandates, Transmission/

transfer of Shares query, Demat

updation status/query, Dividend

related query/revalidation,

query on fully paid up etc.

211 211 0 161 161 0 158 158 0 84 84 0 157 157 0

Total 212 212 0 162 162 0 159 159 0 85 85 0 157 157 0

Where P-Pending A-Addressed R-received


General Shareholder Information

Table:4.10 General Shareholder Information

Registered Office Aditya Birla Chemicals (India) Limited

Garhwa Road, P.O. Rehla - 822 124

Distt. Palamau (Jharkhand)

Annual General Meeting Date and Time : 6th August, 2010 at 10:00


A.M.

Venue : Aditya Birla Chemicals (India) Limited



Dividend payment date : within 10th August, 2010

Date of Book Closure: 28th July, 2010 to 6th August, 2010.

Financial calendar (Tentative) First Quarter’s Results – By mid of August, 2010

Second Quarter’s Results – By mid of November, 2010

Third Quarter’s Results – By mid of February, 2011

Annual Results – By mid of May, 2011

Listing on Stock Exchanges and Stock Code Bombay Stock Exchange Limited, Mumbai

(Stock Code : 500057)

National Stock Exchange of India Ltd., Mumbai

(Symbol - "ABCIL")

Annual Listing Fee (as applicable) paid upto 2010-11

Demat ISIN in NSDL and

CDSL for Equity shares

ISIN INE605B01016


MARKET PRICE DATA : HIGH, LOW DURING EACH MONTH IN FINANCIAL YEAR 2009-10

Table 4.11: Market Price Data

Bombay Stock Exchange National Stock Exchange


Month High(Rs.) Low(Rs.) High(Rs.) Low(Rs.)

April 2009 50.00 35.50 49.50 35.10

May 2009 68.70 43.25 68.80 42.50

June 2009 76.00 55.90 76.00 55.60

July 2009 71.50 50.00 74.35 50.05

August 2009 74.75 61.40 74.50 61.10

September 2009 81.00 71.00 80.50 71.20

October 2009 95.90 71.25 96.00 71.30

November 2009 83.30 73.15 83.00 72.50

December 2009 89.60 76.50 89.00 75.70

January 2010 102.55 71.00 102.70 70.70

February 2010 79.90 68.05 81.00 64.20

March 2010 79.60 69.60 79.35 69.80


INVESTORS - SHARE HOLDING PATTERNS

Table 4.12: Investors – Shareholding patterns

Registrar and Transfer Agent

M/s. C. B. Management Services (P) Ltd.

P-22, Bondel Road, Kolkata - 700 019

Phone No.(s) : 033 - 4011 6728 / 4011 6717 / 2280 6692-93-94 / 2486

Fax No. 033 - 2287 0263

Email : [email protected]

Distribution of shareholding as on 31st march 2010

Category No. of shares % of shareholding

Promoters 13,169,987 56.31

Mutual Funds and UTI 1,500 0.01

Banks/Financial

Institutions/Central

2,034,850 8.70


Govt./

State Govt.(s) / Insurance

Companies / Trust

Corporate Bodies 995,853 4.26

Individuals 6,752,266 28.88

NRI/FII / OCB 253,401 1.08

Clearing Member 178,643 0.76

TOTAL 23,386,500 100.00

Holding of shares as on 31st March 2010

i) NSDL : 8,371,343

ii) CDSL : 13,831,196

iii) Physical : 1,183,961

(5.06% of Company's Equity Shares in physical form)

Plant location Garhwa Road, P.O. Rehla - 822 124


Address for correspondence



Email : [email protected]

[email protected]

[email protected]


ANNUAL GENERAL MEETINGS

Table 4.13: Annual general meeting

Particulars FY 2006- 2007 FY 2007- 2008 FY 2008- 2009

Date and Time 11.08.2007

at 11:30 A.M.

21.08.2008

at 10:30 A.M.

29.06.2009

at 10:30 A.M.

Venue Garhwa Road,

P.O. Rehla - 822 124

Garhwa Road,

P.O. Rehla - 822 124

Garhwa Road,

P.O. Rehla - 822 124


Dist.-Palamau

(Jharkhand)

Dist.-Palamau

(Jharkhand

Dist.-Palamau

(Jharkhand


No Special Resolution was passed in the previous 3 Annual General Meetings of the

Company.

No Special Resolution was passed through postal ballot at the last Annual General

Meeting.

No Special Resolution is proposed through postal ballot at the forthcoming Annual

General Meeting.

4.8 DISCLOSURES

(i) There have been no materially significant related party transactions, pecuniary transactions

or relationships between the Company and its Directors, management, relatives except for

those disclosed in the Annual Report for the year ended 31st March 2010.

(ii) The Company has complied with the requirements of regulatory authorities on capital

markets and no penalties/strictures have been imposed against it in the last 3 years.

(iii) The Company has complied with mandatory requirements, as reflected in this report and

has adopted the non mandatory requirement of constitution of Remuneration Committee.

(iv) The Directors' Responsibility Statement has been stated in the Directors' Report.

(v) Management Discussion and Analysis Report forms part of Directors' Report.

(vi) The Company does not have any Subsidiary Company.

(vii) The Certification under Clause 49(V) by Managing Director and Finance-in-charge to

the Board is appended to this report.

(viii) Notes on the Statement of Accounts referred to in the Auditors' Report are self

explanatory, and therefore, do not call for any further comments under Section 217(3) of the

Companies Act, 1956.

Table:4.14 Disclosures


Items Availability

2005-06 2006-07 2007-08 2008-09 2009-10

Compliances Certificates Yes Yes Yes Yes Yes

Declaretion for code of conduct as per clause-49

Yes Yes Yes Yes Yes

certification in terms of clause-49(V)

Yes Yes Yes Yes Yes

Auditor’s certificate Yes Yes Yes Yes Yes


4.9 MEANS OF COMMUNICATION

The quarterly/half yearly/yearly financial results were published in Business Standard /

Financial Express(all editions) and Ranchi Express.

The Annual Report containing all of its required and important information is circulated to

Members of the Company and others entitled thereto.

Annual Report, Quarterly Results, Shareholding Pattern etc. of the Company are also posted

on the

website : www.corpfiling.co.in

Website of the Company : www.adityabirlachemicalsindia.com

4.10 COMPLIANCE CERTIFICATE OF THE AUDITORS

The Company has obtained Certificate from the Statutory Auditors regarding compliance of

conditions of Corporate Governance as stipulated in Clause 49 and the same is annexed

herewith.

For and on behalf of the Board of Directors

Camp : Mumbai

Dated : 30th April, 2010 A.K. Agarwala L. S. Naik

Director Director


4.11 DECLARATION FOR CODE OF CONDUCT IN TERMS OF CLAUSE 49 OF THE LISTING AGREEMENT WITH STOCK EXCHANGES.

The Board of Directors of Aditya Birla Chemicals ( India ) Limited has laid down a Code of

Conduct for all Board Members and Senior Management of the Company, which is posted on

the website of the Company.The Board Members and Senior Management have affirmed

compliance with the Code of Conduct of the Company.

For ADITYA BIRLA CHEMICALS (INDIA) LIMITED

S. S. GUPTA

[ Managing Director ]

4.12 CERTIFICATION IN TERMS OF CLAUSE 49 (V) OF THE LISTING AGREEMENT WITH STOCK EXCHANGES

We hereby certify that :

a) we have reviewed financial statements and the cash flow statement for the year ending 31st

March 2010 and that to the best of our knowledge and belief :

i) these statements do not contain any materially untrue statement or omit any material fact or

contain statements that might be misleading;

ii) these statements together present a true and fair view of the Company's affairs and are in

compliance with existing accounting standards, applicable laws and regulations.

b) there are, to the best of our knowledge and belief , no transactions entered into by the

Company during the year which are fraudulent, illegal or violative of the Company's Code of

Conduct.

c) we accept responsibility for establishing and maintaining internal controls for financial

reporting and that we have evaluated the effectiveness of internal control systems of the

Company pertaining to financial reporting and we have disclosed to the Auditors and the

Audit Committee, deficiencies in the design or operation of such internal controls, if any, of

which we are aware and the steps we have taken or propose to take to rectify these

deficiencies.


d) we have indicated to the Auditors and the Audit Committee;

i) significant changes in internal control over financial reporting during the year;

ii) significant changes in accounting policies during the year and that the same have been

disclosed in the notes to the financial statements; and

iii) instances of significant fraud of which we have become aware and the involvement

therein, if any, of the Management or an Employee having a significant role in the Company's

internal control system over financial reporting.

Brijesh Kumar S. S. Gupta

[Finance In-charge] [Managing Director]

4.13 AUDITORS’ CERTIFICATE

AUDITORS' CERTIFICATE ON COMPLIANCE OF CONDITIONS OF CORPORATE

GOVERNANCE AS STIPULATED IN CLAUSE - 49 OF THE LISTING AGREEMENT

AUDITOR'S CERTIFICATE

To

The Members of Aditya Birla Chemicals (India) Limited

1. We have examined the compliance of conditions of Corporate Governance by Aditya Birla

Chemical (India) Limited ('the Company') for the year ended March 31, 2010 , as stipulated

in clause 49 of the Listing Agreement of the Company with Stock Exchanges.

2. The compliance of conditions of Corporate Governance is the responsibility of the

management. Our examination was limited to procedures and implementation thereof,

adopted by the Company for ensuring the compliance of the conditions of the Corporate

Governance. It is neither an audit nor an expression of opinion on the financial statements of

the Company.


3. In our opinion and to the best of our information and according to the explanations given to

us, we certify that the Company has complied with the conditions of Corporate Governance

as stipulated in the above mentioned Listing Agreement.

4. We further state that such compliance is neither an assurance as to the future viability of

the Company nor the efficiency or effectiveness with which the management has conducted

the affairs of the Company.

For and on behalf of

Khimji Kunverji & Co.

Chartered Accountants

Firm Registration No. 105146W

Dated : 30th April 2010 Hasmukh B Dedhia

Place : Mumbai Partner (F-033494)

4.14 DEMAT / TRANSFER INFORMATION

Depository System (DS)

Trading in shares of the company is permitted only in dematerialised form. As such, we wish

to advise members to arrange to dematerialise their shareholding in the company as DS

weeds out several problems which are otherwise associated with the scrip-based system such

as bad deliveries, fraudulent transfers, fake certificates, thefts in postal transit, delay in

transfers, long settlement cycles, mutilation of share certificates, etc. At the same time, DS

offers several advantages like exemption from stamp duty, elimination of the concept of

market lot, elimination of bad deliveries, reduction in transaction costs, improved liquidity,

etc.

Share transfers

Share transfers in physical form are registered normally within two to three days from the

date of receipt, provided that the documents are clear in all respects.

The Investor Relations and Finance Committee of the Board considers and approves transfers

above 5,000 shares and debentures under one transfer deed. Further, certain officers of the

company have been authorised to approve transfers up to 5,000 shares and debentures under

one transfer deed.


ECS facility

Shareholders holding shares in physical form and desirous of availing the facility of

electronic credit of dividend or recording change in their existing mandate registered with the

Company.

In respect of electronic share accounts, members are requested to notify / update their ECS

details to / with their respective depository participants.

Demat

Dematerialisation of shares and liquidity

The Equity Shares of the Company are required to by compulsorily traded in the

dematerialised form. The Equity Shares of the Company are admitted for trading under both

the Depository System in India — NSDL and CDSL. The International Securities

Identification Number (ISIN) allotted to the Company’s Equity Shares under the Depository

System is INE605B01016.

Statement of Physical transfer of shares & electronic transfer of 5000 & above shares during

the period Oct.2010 to Dec.2010:-

The statement dealing number of shares transferred in physical form during the period from

1st oct. to 31st Dec. 2010 were presented before the committee for its notification.The

committee noted that during the aforesaid period,650 physical shares bearing transfer no.

from 1227 to 1230 were transferred and timely action was taken in transferring the shares

lodged for transfer.The statements detailing no. of shares (more than 5000 shares) purchased

& sold in electronic form during the period Oct.2010 to dec 2010 were also presented before

the committee for its notification.The committee noted the same.

Taking Note of Dematerialisation of equity shares as on 31st March 2011.

Table 4.15: Dematerialisation of equity shares

Sl.no.

Description

As on 31.12.2010

Total no. of shares

As on 31.03.2011

Total no. of shares


1.

In Demat form

1.NSDL

2.CDSL

90,94,972

1,31,24,347

91,83,892

1,30,43,213

2.

In physical form 11,67,181 11,59,395

Total

2,33,86,500

2,33,86,500

Source:Company’s Database

The committee noted that 95.01% shares had been dematerialized upto 31st dec.2010 and out

of total physical holding of 11,67,181 shares,promoters were holding 7,75,000 shares in

physical form,thus out of total physical holding of 4.99%,promoters holding in physical form

stood at 3.31%.

INVESTORS - FINANCIALS

Table 4.16: Investors-financials

PERFORMANCE UNIT 2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

Gross Turnover Rs. In Crores

107.84 124.83 129.05 166.31 202.51 230.91 241.08

PBDIT Rs. In Crores

37.96 50.88 55.31 71.30 85.1 79.90 94.83

PBDT Rs. In Crores

25.78 41.95 47.52 60.58 75.81 74.32 91.26

PAT Rs. In Crores

8.63 26.45 26.15 33.76 49.27 46.08 60.74


EPS Rs. In Crores

4.84 11.31 11.18 14.43 21.07 19.70 25.97

ROCE % 21.07 27.39 32.00 21.25 23.04 19.62 23.15

EVA

Rs. In Crores

2.98 11.91 10.23 6.20 12.50 8.51 8.27

Source:Website(www.moneycontrol.com)

4.15 COMMUNITY SERVICES

Beyond the business, the company committed for upliftment of the society and social

environment where it operates and transacts businesses. The Company is sincerely working

for the various noble causes in the form of promotion to rural education, women

empowerment, self reliance and many more as outlined hereunder-

- Medical Camps in every week at Medical Centers of 40 villages adopted by the Company,

where 17624 patients were given free treatment.

- Eye Camp, Eye Check up & Operation for 12 days in which 1038 Cataract operations

conducted

- Artificial Limb camp conducted, where 59 handicapped persons benefited with Artificial

Limbs.

- Family Planning camp, Mother-child health camp, immunization camp, Dental Check up

camp, Homeopathic camp, AIDS awareness camp and other camps conducted, where the

beneficiaries were more than 6403.

- NID Pulse Polio Programme organized in 29 booths, where the beneficiaries were more

than 23473.

- 2059 blanket & woolen cloths distributed among poor and needy

- Old Age Monthly pension distribution for 31 poor and needy persons

- Scholarships were given to 110 poor girls, bicycle were distributed to 11 poor girls and

Tailoring training was given to 40 needy girls.

- 26000 tree saplings distributed among farmers


- Wheat seeds distributed among 585 farmers

- 17809 catties were provided vaccination for the benefit of 5300 villagers.

- 158 hand pumps repaired/ installed in our adopted villages.

- Construction of 2 Hydel Towers and repair of Check Dam to provide water to nearby

society.

4.16 INDUSTRIAL RELATIONS

The industrial relations with the employees and workmen of the company continued to be

cordial. The Company continues to improve the manpower productivity.

4.17 SAFETY, HEALTH, ENVIRONMENT PROTECTION AND POLLUTION CONTROL

The Company is conscious about safety of the employees vis-a vis all the stakeholders

involved directly or indirectly in their activities. The company is pleased to share that year

2009-10 has been a ZERO accident year.

Company has taken various steps for safety, health and pollution control, such as -

commissioning of Auto liquid Chlorine filling stations, installation of Auto Control valves

(on-off) in liquid Chlorine storage tanks, installation of Chlorine sensors, Pressure gauge and

temperature sensors, Continuous monitoring of Mercury bearing hazardous waste earlier

disposed in defined lagoon, Centralized control

on emission of ancillaries through Calcium Hypo unit, Safe storage of solid waste of

ancillary units in lined lagoon, Change in logic of cell load reduction from the rectifier

cubicle directly instead of DCS which takes lesser time as compared to load reduction from

DCS, Provision of explosion vent in boiler flue gas path to prevent over pressurization,

automated vent in APH of boiler for safety against any entrapped combustible gasses inside;

and mistake proofing against operational errors, Fail safe TG trip interlocking for turbine etc.

Table:4.16 Evaluation of status of CG during 2005-06 to 2009-10

Items Availability

2005-06 2006-07 2007-08 2008-09 2009-10


Compny’s philosophy on corporate governance

Yes Yes Yes Yes Yes

Board of Directors Yes Yes Yes Yes Yes

Details of Board meetings held Yes Yes Yes Yes Yes

Audit committee prescribed by SEBI’s clause-49

Yes Yes Yes Yes Yes

Meeting held for Audit committee

Yes Yes Yes Yes Yes

Shareholders’ Grievance committee prescribed by SEBI’s clause-49

Yes Yes Yes Yes Yes

Meeting held for Shareholders’ Grievance committee

Yes Yes Yes Yes Yes

Remuneration committee prescribed by SEBI’s clause-49

Yes Yes Yes Yes Yes

Meeting held for Remuneration committee

Yes Yes Yes Yes Yes

Non-executive directors and fees

Yes Yes Yes Yes Yes

Salary and perquisities to MD Yes Yes Yes Yes Yes

Share transfer Yes Yes Yes Yes Yes

No.of requests/complains Yes Yes Yes Yes Yes

General shareholders Information

Yes Yes Yes Yes Yes

Market price data Yes Yes Yes Yes Yes

Investors shareholding patterns Yes Yes Yes Yes Yes

Annual general meetings Yes Yes Yes Yes Yes

Disclosures

1.Registrar And Transfer agent

2.Plant location

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes


3.Address for correspondence

4.Annual general meeting’s Date & time

5.Venue for Annual general meeting

6.Listing of stock exchange

7.Stock code

8.Registered Office

9.Directors’ responsibility statement

10.Directors’ report

11.Auditors’ report

12.Basis of related party transctions

13.Disclosure of accounting treatment

14.Board disclosures-Risk management

15.Proceeds from public issues,right issues etc.

16.CEO/CFO certification

17.report on Corporate governance

18.Shareholders

19.Compliance

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Compliances Certificates Yes Yes Yes Yes Yes

Declaretion for code of conduct as per clause-49

Yes Yes Yes Yes Yes

certification in terms of clause-49(V)

Yes Yes Yes Yes Yes


Auditor’s certificate Yes Yes Yes Yes Yes

Demat transfer information Yes Yes Yes Yes Yes

Statement of physical transfer of shares & electronic transfer

Yes Yes Yes Yes Yes

Investors-financials Yes Yes Yes Yes Yes

Policies regarding

1.Human resource depatment

2.Industrial relations

3.Corporate social responsibilty

4.Safety and health

5.Others like IT,Quality,Public Recognition etc

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Code of conduct Yes Yes Yes Yes Yes

Other provisions as to Board nad Meetings

Yes Yes Yes Yes Yes


CHAPTER 5

SUMMARY OF FINDINGS,

SUGGESTIONS AND CONCLUSION


5.1 General Finding

1. Clause 49 of the Listing Agreement to the Indian stock exchange comes into effect from

31 December 2005. It has been formulated for the improvement of corporate governance

in all listed companies.

2. As per Clause 49, for a company with an Executive Chairman, at least 50 per cent of the

board should comprise independent directors.

3. In the case of a company with a non-executive Chairman, at least one-third of the board

should be independent directors.

4. It would be necessary for chief executives and chief financial officers to establish and

maintain internal controls and implement remediation and risk mitigation towards

deficiencies in internal controls, among others.

5. Clause VI (ii) of Clause 49 requires all companies to submit a quarterly compliance

report to stock exchange in the prescribed form. The clause also requires that there be a

separate section on corporate governance in the annual report with a detailed compliance

report.

6. A company is also required to obtain a certificate either from auditors or practicing

company secretaries regarding compliance of conditions as stipulated, and annex the

same to the director's report.

7. The clause mandates composition of an audit committee; one of the directors is required

to be "financially literate".

8. Clause 49, when it was first added, was intended to introduce some basic corporate

governance practices in Indian companies and brought in a number of key changes in

governance and disclosures (many of which we take for granted today).

9. It specified the minimum number of independent directors required on the board of a

company.

10. The setting up of an Audit committee, and a Shareholders’ Grievance committee, among

others, were made mandatory as were the Management’s Discussion and Analysis

(MD&A) section and the Report on Corporate Governance in the Annual Report, and

disclosures of fees paid to non-executive directors.

11. A limit was placed on the number of committees that a director could serve on.

12. In late 2002, SEBI constituted the Narayana Murthy Committee to assess the adequacy

of current corporate governance practices and to suggest improvements. Based on the


recommendations of this committee, SEBI issued a modified Clause 49 on October 29,

2004 (the ‘revised Clause 49’) which came into operation on January 1, 2006.

13. The revised Clause 49 has suitably pushed forward the original intent of protecting the

interests of investors through enhanced governance practices and disclosures.

14. Five broad themes predominate. The independence criteria for directors have been

clarified. The roles and responsibilities of the board have been enhanced. The quality and

quantity of disclosures have improved. The roles and responsibilities of the audit

committee in all matters relating to internal controls and financial reporting have been

consolidated, and the accountability of top management—specifically the CEO and

CFO—has been enhanced. Within each of these areas, the revised Clause 49 moves

further into the realm of global best practices (and sometimes, even beyond.

5.2 Specific Findings

1.The company has optimum combination of executives and non-executive directors with not less than fifty percentage of the Board of directors comprising of non-executive directors.

2.The Audit committee of the board of directors is constituted in compliance with corporate governance.

3.In continuation of practices of good corporate governance,the board has constituted the remuneration committee of Directorsof the company.

4.The Shareholders’ Grievance committee of the board,inter-alia,approves issue of duplicate share certificates and oversees.

5. The Board of directors have delegated the power of approving transfer of securities to the Registrar subject to notification of the same to the company secretary.

6.Company has disclosed the status of total no. of requests/complaints and general shareholders information.

7. The financial results were published in business standards/Financila express and also posted on website.

8. Company has disclosed Directors’ responsibility statement.

9. Company has received proceeds from public issues,right issues,preferential issues etc.

10. Details of fixed component and performance linked incentives,along with the performance criteria are disclosed.

11.Comapny has separate policy for human resource department,community services,health and safety.


5.3 Suggestions to improve overall structure of corporate governance

1.Current norms of corporate governance are efficient but at Initial level. There must be improvement in terms of code of conduct of corporate governance.

2.More and more development programmes should be conduct to improve the awareness level of Investors.

3.Implementation of current norms should be made efficient.

4.Company should appoint more internal auditor for audit committee.

5.Cross check step should be implemented for betterment of investors.

6.Stakeholders value enhancement steps should be considered at large.

7.More and More programmes should be arranged to educate shareholder about corporate governance.

5.4 CONCLUSION

Corporate governance is a way of life and not a set of rules, a way of life that necessitates

taking into account the stakeholder’s interest in every business decision.


BIBLIOGRAPHY

Websites

http://www.sebi.org

http://www.bseindia.com

http://www.adityabirlachemicals.com

http://www.adityabirlachemicalsindia.com

http://www.corpfiling.co.in

http://www.google.com

http://www.moneycontrol.com

Books Corporate governance

Arya P. P. Tandon B. B. Vashint A. K.

Corporate Governance-New paradigm

Gopalsamy N

Corporate Governance Putting Investors first

Scott C. Newquist, Max B. Russell

Date post:	19-Jul-2016
Category:	Documents
Upload:	gourav-kumar
View:	65 times
Download:	0 times

Corporate Governance

Documents