The Hindu Business Line : SEBI proceeds against 20 cos for not complying with Clause 49 norms

Mumbai, Sept. 11 The SEBI has initiated adjudication proceedings against 20 companies for non-compliance with corporate governance norms under their listing agreement with the stock exchanges.

Adjudication proceedings are in the nature of seeking clarification from the companies on the information submitted by stock exchanges in their quarterly reports on compliance with Clause 49 of the listing agreement (which deals with corporate governance).

While SEBI did not identify the companies being proceeded against, Mr Pawan Kumar Bansal, Union Minister of State for Finance, had told the Rajya Sabha in May that for the quarter ended March, 13 of the 104 companies in the BSE ‘A’ group had not complied with Clause 49 stipulations.

In the case of the Nifty, seven of 50 companies are yet to comply with the guidelines.

Welcoming the SEBI move, Mr Deepak Parekh, Chairman of HDFC, said: “Unless the regulator takes action against those who do not comply with its regulations, there is no meaning in having such regulations. [Apart from the penalty]… the regulated entities should fear that violations of regulations could tarnish their reputation.”

“It is an expected development,” said Mr Santosh Nair, Partner (Business Risk Services) at Grant Thornton.

“It shows that the SEBI has moved into the next phase of implementation and institutionalisation of corporate governance norms in India.”

Twenty months is long enough for the companies to adhere to the norms, he added.

Five of the 20 entities are public sector companies who have not complied with provisions related to board composition, the SEBI said in a statement on Tuesday.

Of the remaining 15 companies, which are in the private sector, three have been proceeded against for non-compliance with “almost all the major provisions of Clause 49,” the SEBI said.

The major provisions relate to composition of board, constitution of audit committee, disclosure on related party transactions and utilisation of issue proceeds.