Oil giants fined again for lacking directors

26 Mar 2024 , 03:17 PM

Large state-owned oil and gas companies, such as Indian Oil, ONGC, and GAIL (India), have been fined for the third quarter in a row for not having the required number of directors on its board in accordance with listing norms. Stock exchange filings revealed that a total of ₹32.5 Lakh was fined to refiners Hindustan Petroleum Corporation Ltd (HPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL), explorers Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), gas utility GAIL, and the massive oil refining and fuel marketing company Indian Oil Corporation (IOC).

The companies were quick to point out that the government appointed the directors and they had no involvement in it, but they did detail the fines levied by the BSE and NSE in separate filings for either failing to have the required number of independent directors or the required number of women directors in the third quarter ended December 31, 2023. For the same reason, the corporations were fined in the preceding two quarters.

In their individual filings, the six PSUs revealed that they had been fined ₹5,42,800 apiece for the third quarter. IOC was fined for lacking a woman independent director on its board, while ONGC and its subsidiaries HPCL and MRPL, GAIL and OIL were fined for not having the required number of independent directors on their boards. 

Companies must have independent directors in the same percentage as executive or functional directors in order to comply with listing standards. Additionally, they must have a minimum of one female director on the board. IOC, ONGC, OIL, GAIL, Bharat Petroleum Corporation Ltd, HPCL, and Engineers India Ltd were all hit with fines totaling ₹5.42 Lakh for the second quarter.

'Being a government company, the power to appoint directors (including independent directors) vests with the Ministry of Petroleum and Natural Gas, Government of India,' the Indian Oil Corporation (IOC) stated in its regulatory filing in response to the most recent fine. 'Therefore, the non-appointment of women independent directors on the Board during the quarter ended December 31, 2023 was not due to any negligence/fault by the company.' IOC argued that as a result, the fines should be waived and it shouldn't be required to pay them. 

It added that it had previously received similar notices from the two stock exchanges and that its request for a waiver had been approved. 'IOC regularly takes up with ministry for appointment of requisite number of independent directors (including woman independent director) to ensure compliance with corporate governance norms enunciated under SEBI (LODR) as well as the Companies Act,' the statement read.

'Appointments are outside the purview/control of the GAIL's management,' GAIL stated in the submission. 'The Company has been persistently pursuing the appointment of necessary numbers of independent directors with the Government of India (GoI) to meet the compliance requirements, and the non-compliance with regard to the composition of the Board was not within the control of the Company,' ONGC stated.

According to MRPL, the ministry 'has been actively considering' the request for the nomination of the necessary number of independent directors to the board, which it has been following up with on a regular basis. 

OIL claimed that it has asked the ministry to add independent directors to the company's board of directors in order to comply with Regulation 17(1) of the SEBI (LODR) Regulations, 2015, citing that the non-compliance was outside the company's control. When the corporations were fined for non-compliance in the preceding two quarters, they gave identical explanations and took corrective action.

Additionally, a uniform ₹5,42,800 punishment was imposed on IOC, ONGC, OIL, GAIL, BPCL, HPCL, and Engineers India Ltd for the second quarter. The April-June quarter non-compliance resulted in fines of ₹3.36 Lakh for ONGC, ₹5.36 Lakh for IOC, and ₹2.71 Lakh for GAIL. While Oil India was hit with a charge of ₹5.37 Lakh, HPCL and BPCL were required to pay fines of ₹3.6 Lakh each.

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