Indian Oil Corporation Fined for Non-Compliance with Board Composition Norms

Indian Oil Corporation Ltd (IOCL), a leading Indian oil and gas company, has been levied fines by the Bombay Stock Exchange (BSE) and National Stock Exchange of India Limited (NSE) for non-compliance with listing regulations. The penalties relate to the composition of IOCL’s Board of Directors during the quarter ending March 31, 2024.

Details of the Non-Compliance and Penalties

On May 22, 2024, IOCL received notices from the BSE and NSE regarding non-compliance with Regulation 17(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations. This regulation mandates specific requirements for the composition of a listed company’s board, including a minimum number of independent directors and a minimum number of women directors.

According to the exchange notifications, IOCL fell short of the stipulated number of independent directors, including a female independent director, on its board for the quarter ending March 31, 2024. As a consequence, both the BSE and NSE fined IOCL ₹5,36,900 (approximately USD 64,300).

IOCL’s Response and Explanation:

In response to the notices on May 23, 2024, IOCL submitted written representations to both the BSE and NSE. IOCL highlighted its status as a Government Company, where the Ministry of Petroleum and Natural Gas (MoP&NG) holds the authority to appoint directors, including independent directors. IOCL emphasised that the shortfall in independent directors, including the absence of a woman independent director, was not due to any negligence or inaction on their part.

Request for Waiver and Past Precedents

IOCL has requested the BSE and NSE to waive the imposed fines. They have argued that the non-compliance was beyond their control due to the government appointment process. IOCL further emphasised their consistent engagement with MoP&NG to ensure the appointment of the requisite number of independent directors, including a female director, to comply with corporate governance norms outlined by SEBI (LODR) and the Companies Act. Additionally, IOCL cited past instances where similar fines were levied by the exchanges and subsequently waived upon request.

Uncertain Outcome and Potential Implications

The outcome of IOCL’s request for a waiver remains to be determined by the BSE and NSE. If the fines are upheld, it could set a precedent for other government companies facing similar compliance challenges. This situation also highlights the potential complexities of balancing corporate governance norms with the specific governance structures of government-owned enterprises.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.