Stock exchanges BSE and NSE fined major oil refining and marketing companies such as Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), explorer Oil India Ltd (OIL), gas utility GAIL (India) Ltd, and refiner Mangalore Refinery and Petrochemicals Ltd (MRPL). The fines were due to non-compliance with the requisite number of independent directors and mandated women directors on their boards for the quarter ending June 30, 2024. This marks the fifth consecutive quarter these firms have faced such penalties.
Despite these penalties, the companies highlighted their lack of control over board appointments, citing that these are government decisions. Listing norms specify a balanced ratio of independent directors relative to executive or functional directors, along with the requirement of at least one woman director on the board. Indian Oil Corporation (IOC) disclosed that both BSE and NSE fined the company INR 5,36,900 each for non-compliance with Regulation 17(1) of the SEBI (LODR) regarding board composition during the aforementioned quarter.
"In response to the notices, IndianOil vide letter dated August 22, 2024 has represented to the BSE and NSE that being a government company, the power to appoint directors (including independent directors) vests with the Ministry of Petroleum and Natural Gas, Government of India and hence the shortfall in independent directors including non-appointment of women independent director on the board of the company during the quarter ended June 30, 2024 was not due to any negligence / default by the company," IOC stated.
The company further argued that it should not be held liable for the fines and has requested a waiver of the same. It mentioned regularly communicating with the ministry to appoint the requisite number of directors to comply with corporate governance norms.
"We would also like to inform that the company had received similar notices from the BSE and NSE in the past imposing fines and waiver requests from the company was considered favorably by the exchanges," added IOC.
BPCL reported fines of INR 2,41,900 each from BSE and NSE due to the lack of one independent director on its board. The company noted its inability to influence director appointments and indicated plans to seek fine waivers from both BSE Ltd and NSE.
HPCL confirmed it had been fined INR 5,36,900 each by BSE and NSE. GAIL also faced similar fines. The companies emphasized that the non-compliance was beyond their control and not due to any negligence on their part.
"This is to submit that the non-compliance with regard to the composition of the board was neither due to any negligence/default by the company nor within the control of GAIL's management and continuous efforts were also made to meet the compliance requirements," GAIL stated.
OIL and MRPL were also fined INR 5,36,900 each by BSE and NSE. These firms have struggled to comply with the listing norms since April last year and have faced fines every quarter since then.
For the previous quarter (January-March 2024), the penalties were identical, with IOC, HPCL, BPCL, GAIL, OIL, and MRPL being fined INR 5,36,900 each by NSE and BSE. For the third quarter of 2023 (October-December), the fines were INR 5,42,800 each, mirroring the penalties faced in the second quarter of 2023 (July-September).
The consistent imposition of fines underscores the ongoing governance challenges faced by these major state-run oil firms. Despite efforts to address the issue through communications with the relevant ministry, the adherence to mandated board compositions remains unresolved, leaving these companies susceptible to continuous penalties.
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