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Corporate Governance

In addition to the applicable provisions of the Companies Act, 2013 and DPE Guidelines on Corporate Governance for Central Public Sector Enterprises with respect to corporate governance, provisions of the SEBI Listing Regulations will also be applicable to our Company immediately upon the listing of the Equity Shares on the Stock Exchanges.

Our Chairman & Managing Director is an executive Director. Our Company currently has nine (9) Directors, of which four (4) are executive Directors, one (1) is Government Nominee Director and four (4) are Part-Time Non-Official (Independent) Directors out of which one is a woman Director.

Regulation 17(1)(b) of the SEBI Listing Regulations requires a listed company having an executive chairperson to have at least half of its board comprise of independent directors. As of the date of this Draft Red Herring Prospectus, our Company’s Board is chaired by an executive Director, and consists of nine (9) Directors, of whom four (4) are Part-Time Non-Official (Independent) Director. The composition of the Board will be compliant with the SEBI Listing Regulations prior to the filing of the Red Herring Prospectus. See also “Risk Factors – Our Company is not in compliance with certain provisions of the Companies Act and/or SEBI Listing Regulations in relation to terms of reference of the Audit Committee and the HR, Nomination and Remuneration Committee”.

Pursuant to a MCA notification dated June 5, 2015, the Central Government has exempted/ modified the applicability of certain provisions of the Companies Act, 2013 in respect of Government Companies. In accordance with this notification, the DPE Guidelines on Corporate Governance for CPSE and pursuant to our Articles, matters pertaining to, among others, appointment, remuneration and performance evaluation of our Directors are determined by the President of India. Further, our Statutory Auditor is appointed by the Comptroller and Auditor General of India. Accordingly, in so far as the aforestated matters are concerned, the terms of reference of our HR, Nomination and Remuneration Committee and Audit Committee only allow these committees to take on record the actions of the President of India or the Comptroller and Auditor General of India, as the case may be.

Other than as described above, our Company is in compliance with corporate governance norms prescribed under SEBI Listing Regulations, including in relation to the composition of its committees, such as the Audit Committee; Stakeholder Relationship Committee; HR, Nomination and Remuneration Committee; CSR & Sustainability Committee and Risk Management Steering Committee, policy on related party transactions, whistle blower policy, policy on preservation of documents, policy on code of conduct and policy for determining materiality of an event/information for making adequate disclosure of such an event/information before the stock exchanges.

The corporate governance framework is based on an effective independent Board, separation of the Board’s supervisory role from the executive management team and constitution of the Board Committees, as required under law.

The Board of Directors functions either as a full board or through various committees constituted to oversee specific operational areas. Our Company’s executive management provides the Board with detailed reports on its performance periodically.

The details of the Audit Committee, HR, Nomination & Remuneration Committee, Risk Management Committee, CSR & Sustainability Committee and IPO Committee are given below:

In terms of the provisions of the Companies Act, 2013 and the SEBI Listing Regulations, our Company has constituted/ reconstituted the following Board-level committees:

Audit committee;

HR, Nomination and Remuneration committee;

CSR & Sustainability Committee; and

Stakeholders Relationship Committee.

Audit Committee

The Audit Committee was re-constituted pursuant to the circular resolution adopted on March 20, 2018. The Committee presently comprises of the following members:

Name of the Directors

Position in the Committee

Designation

Bharat Bhushan

Chairman

Part-Time Non-Official (Independent) Director

Kanwaljit Deol

Member

Part-Time Non-Official (Independent) Director

RAdm Inder Paul Singh Bali, IN (Retired)

Member

Part-Time Non-Official (Independent) Director

 Cmde Sanjeev Nayyar, IN (Retired)

Member

Director (Shipbuilding)

Our Director (Finance) is a permanent special invitee on our Audit committee and our Company Secretary is the secretary of the Audit Committee.

Scope and terms of reference: The scope and function of the Audit Committee is in accordance with Section 177 of the Companies Act, 2013, Regulation 18(3) of the SEBI Listing Regulations and the guidelines on corporate governance on Central Public Sector Enterprises issued by the DPE.

Terms of reference for the Audit Committee are as follows:

To assist the Board in its oversight functions relating to:

quality and integrity of disclosures contained in the audited and unaudited financial statements;

compliance with legal and regulatory requirements;

qualifications, experience, performance and independence of external auditors;

integrity of the internal controls established from time to time; and

e)         investments of our Company.

To investigate into any matter in relation to the items specified in Section 177 of the Companies Act, 2013 or referred to it by the Board and for this purpose, shall have full access to information contained in the records of our Company and seek external professional advice, if necessary.

To investigate any activity within its terms of reference.

To seek information from any source including employees.

To obtain outside legal or other professional advice, if necessary.

To secure attendance of outsiders with relevant expertise, if it considers necessary.

To protect whistle blowers.

Overseeing our Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible.

Reviewing with the management, the quarterly / half yearly financial statements before submission to the Board for approval.

Reviewing with the management, annual financial statements and auditors report thereon before submission   to the Board for approval, with particular reference to:

a)         Matters required to be included in the Directors’ Responsibility Statement to be included in the Board’s report in terms of clause (3)(c) of Section 134 of the Companies Act,2013;

b)         Changes, if any, in accounting policies and practices and reasons for the same;

c)         Major accounting entries involving estimates based on the exercise of judgment by management;

d)         Significant adjustments made in the financial statements arising out of audit findings;

e)         Compliance with accounting standards issued by the Institute of Chartered Accountants of India;

f)          Compliance with legal requirements relating to financial statements;

g)         Disclosure of any related party transaction; and

h)         Qualifications in the draft audit report.

Audit(s)

Internal Audit:

a)         Reviewing, with the management, performance of internal auditors (external firms) and adequacy of internal control systems.

b)         Reviewing the adequacy of internal audit (in house) function, if any, including the structure of internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of such audit.

c)         Discussion with internal auditors on any significant findings and follow up thereon.           

d)         Recommending to the Board appointment and fixation of fees for Internal Auditors for Audit and other services if any.

Statutory Audit & Branch Audit:

Discussion with Statutory Auditors & Branch Auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern.

Discussion with Statutory Auditors & Branch Auditors on any significant findings and follow up thereon.

Recommending to the Board the fixation of Statutory and Branch Audit Fees.

Approval of payment to statutory auditors for any other services (other than audit) rendered by them.

Cost Audit & Tax Audit:

Recommending to the Board, the appointment, re-appointment and if required, replacement or removal of cost auditors and tax auditors and fixation of Audit fees and other terms of appointment. 

Reviewing and monitoring the auditors’ independence and performance and effectiveness of audit process.

Review the Cost Audit Report along with full information and explanation on every reservation or qualification contained therein and recommend the report to the Board for consideration

Provide an open avenue of communication between the independent auditor, internal auditor and the Board of Directors.

Review with the independent auditors the co-ordination of audit efforts to assure completeness of coverage, reduction of redundant efforts, and the effective use of all audit resources.

Consider and review the following with the independent auditors and management:

The adequacy of internal controls including computerized information system controls and security, and

Related findings and recommendations of the Independent auditor and internal auditor, together with the management responses.

Consider and review the following with the management, internal auditor and the independent auditor:

Significant finding during the year, including the status of previous audit recommendations

Any difficulties encountered during audit work including any restrictions on the scope of activities or access to required information.

Government audit:  To review the follow up action on the audit observations of the C&AG audit.

Reviewing the findings of any internal investigations by the internal auditors/statutory auditors/other agencies into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors.

To review the functioning of the Whistle Blower Mechanism.

To review the follow-up action taken on the recommendations of committee on public undertakings (COPU) of the Parliament.

Review and pre-approve all related party transactions in our Company. For this purpose, the Audit Committee may designate a member who shall be responsible for pre-approving related party transactions.

Review our Company’s financial policies, commercial policies and risk management policies.

Evaluation of internal financial controls and risk management system.

Reviewing with the management, the statement of uses/application of funds raised through an issue (public issue, right issue, preferential issue etc.), the statement of funds utilized for purposes other than those stated in this offer document/prospectus/notice, and the report submitted by the monitoring agency monitoring the utilization of proceeds of a public or right issue, and making appropriate recommendations to the Board to take up steps in this matter.

Scrutiny of inter-corporate loans and investments.

Valuation of undertakings or assets of our Company, wherever it is necessary.

Approval or any subsequent modification of transactions of our Company with related parties.

Review the following information:

The management discussion and analysis of financial condition and results of operations;

Statement of significant related party transactions (as defined by the Audit Committee), submitted by the management;

Management letter / letters of internal control weaknesses issued by the statutory auditors;

Internal audit reports relating to internal control weaknesses;

The appointment, removal and terms of remuneration of internal auditors/chief internal auditor; and

Certification / declaration of financial statements by the chief executive/chief finance officer.

To call for comments of the auditors about internal control systems, the scope of audit, including the observations of the auditors and review of financial statement before their submission to the Board and to discuss any related issue with the internal and statutory auditors and the management of our Company.

Carrying out such other functions as may be specifically referred to the Committee by our Company’s Board of Directors and/or other Committees of Directors.

HR, Nomination and Remuneration Committee

The HR, Nomination and Remuneration Committee was re-constituted pursuant to a circular resolution adopted on March 20, 2018. It was renamed as HR, Nomination and Remuneration Committee by circular resolution adopted on November 01, 2017.

The Committee presently comprises of the following members:

Name of the Directors

Position in the Committee

Designation

Kanwaljit Deol

Chairman

Part-Time Non-Official (Independent) Director

Bharat Bhushan

Member

Part-Time Non-Official (Independent) Director

Dr. Ajai Bhandari

Member

Part-Time Non-Official (Independent) Director

Our Director (Personnel) is a permanent special invitee on the HR, Nomination and Remuneration Committee and our Company Secretary is the secretary of the HR, Nomination and Remuneration Committee.

Scope and terms of reference:   

Terms of reference for the HR, Nomination and Remuneration Committee are as follows:

To decide the annual bonus / variable pay pool Performance Related Pay (PRP) and policy for its distribution across the executives (including Board Level executives) and non-unionised supervisors within the prescribed limits for each financial year.

To examine all the proposals related to HR issue and give its recommendations.

The recommendations of the “HR, Nomination and Remuneration Committee” are placed before the Board of Directors for approval.

 
CSR & Sustainability Committee

The CSR & Sustainability Committee was re-constituted on February 9, 2018. It presently comprises of the following members:

Name of the Directors

Position in the Committee

Designation

Kanwaljit Deol

Chairman

Part-Time Non-Official (Independent) Director

Cmde Sanjeev Nayyar, IN (Retired)

Member

Director (Shipbuilding)

Asit Kumar Nanda

Member

Director (Personnel)

Our Company Secretary is the secretary of CSR & Sustainability Committee

Scope and terms of reference:

Terms of reference for the CSR & Sustainability Committee are as follows:

Formulate and recommend to the Board, a Corporate Social Responsibility and Sustainability Policy which shall indicate the activities to be undertaken by the Company as specified in Schedule - VII of the Companies Act, 2013.

Recommend amount of expenditure to be incurred on CSR activities.

Monitor the Corporate Social Responsibility and Sustainability Policy of the Company and its effective implementation from time to time.

Stakeholders Relationship Committee

The Stakeholders Relationship Committee was constituted pursuant to the Board Resolution passed on November 14, 2017. It presently comprises of the following members:

Name of the Directors

Position in the Committee

Designation

Bharat Bhushan

Chairman

Part-Time Non-Official (Independent) Director

Kanwaljit Deol

Member

Part-Time Non-Official (Independent) Director

Sarvjit Singh Dogra

Member

Director (Finance)

Asit Kumar Nanda

Member

Director (Personnel)

Scope and terms of reference:

The Committee shall consider and resolve the grievances of the security holders of the listed entity including complaints related to transfer of shares, non-receipt of annual report and non-receipt of declared dividends.

from the abovementioned committees our Company has also constituted the following Committees:

Risk Management Steering Committee

Pursuant to the Risk Management Policy of our Company approved vide a Board resolution dated August 25, 2014, the Risk Management Steering Committee was constituted vide C&MD’s Ty Order No. 19/15 dated May 5, 2015, which currently consists of:

Name of the Directors

Position in the Committee

Designation

Cmde Sanjeev Nayyar, IN (Retired)

Chairman

Director (Shipbuilding)

Asit Kumar Nanda

Member

Director (Personnel)

Sarvjit Singh Dogra

Member

Director (Finance)

Arun Ratan Pal

Member

CGM (ERP)

The terms of reference of the risk management steering committee of our Company include the following:

Lead the Risk management initiative within the Company.

Set standards for risk documentation and monitoring.

Recommend training programs for staff with specific risk management responsibilities.

Review and approve the risk management report including selection of critical risks to be put before the Board.

The Risk Management Steering Committee shalt be responsible for reviewing the risk appetite of the company on a yearly basis and revising the same based on changes in internal/ external business environment and stakeholder expectations.

IPO Committee

In addition to above committees, our Board has also constituted an IPO Committee pursuant to a resolution dated November 14, 2017, which currently consists of:

Name of the Directors

Position in the Committee

Designation

RAdm Vipin Kumar Saxena, IN (Retired)

Chairman

Chairman & Managing Director

Ashwani Kumar Mahajan

Member

Government Nominee Director

Sarvjit Singh Dogra

Member

Director (Finance)

The terms of reference of the IPO Committee of our Company include the following:

Approve the Restated/ Audited Financial Statements for inclusion in the DRHP and/ or the RHP and/ or the Prospectus as the case may be in connection with this Offer.

Approve, adopt and file the DRHP, RHP and the Prospectus for this Offer, with SEBI, the RoC, of the State in which the Corporate Office of the Company is located and/or the Stock Exchanges, as the case may be, and to make any corrections or alterations therein.

Finalise, approve, execute and deliver or arrange the delivery of this Offer Agreement, Syndicate Agreement, Underwriting Agreement, Escrow Agreement, certificates, Registrar Agreement and all other documents, agreements and instruments as may be required or desirable in relation to this Offer and any amendments, supplements, notices or corrigenda thereto, together with any summaries thereto, as may be required or desirable in connection with this Offer of the Equity Shares by the Company;

Open with the Bankers to this Offer such account as are required by the regulations issued by SEBI.

Open and operate bank accounts of the Company in such name and style as may be decided for the handling/ collecting/ refund for this Offer and to authorize one or more officers of the CPSE to execute all documents/ deeds as may be necessary for this Offer;

Make applications to the RBI and such other authorities as may be required for the purpose of Allotment of Equity Shares to Non-Resident Investors.

Approve all actions required to dematerialize the Equity Shares of the Company;

Do all such acts, deeds, matters and things and execute all such other documents etc. as it may, in its absolute discretion, deem necessary or desirable for such purpose, including without limitation, to Allot the Equity Shares to the successful Allottees as permissible in law, issue of share certificates in accordance with the relevant rules;

Make applications for listing of the Equity Shares of the Company and to execute and to deliver or arrange the delivery of necessary documentation to the concerned Stock Exchange(s).

Take all action as may be necessary or authorized in connection with this Offer;

Seek the admission of the Company’s Equity Shares into the CDSL and the NSDL;

Seek, if required, the consent of the Company’s lenders, parties with whom the Company has entered into various commercial and other agreements, all concerned Government and regulatory authorities in India or outside India, and any other consents that may be required in connection with the IPO.