IOC, GAIL Fined For Second Straight Quarter For Failing To Meet Listing Norms

State-owned oil and gas giants including Indian Oil and GAIL (India) Ltd have been slapped with fines for the second quarter in a row for failing to meet listing requirements of having the requisite number of independent directors on board.

Stock exchanges have fined oil refining and fuel marketing giant Indian Oil Corporation (IOC), explorers Oil and Natural Gas Corporation (ONGC) and Oil India Ltd, gas utility GAIL, refiners Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), and Engineers India Ltd Rs 5.42 lakh, stock exchange filings showed.

In separate filings, the companies detailed the fines imposed by the BSE and NSE but were quick to point out that appointment of directors was done by the government and they had no role in it.

The fines were for not having the requisite independent directors in the second quarter. They had faced fines for the same reason in the first quarter as well.

While the companies have now been slapped with a uniform Rs 5,42,800 fine, ONGC was previously slapped with Rs 3.36 lakh fine, IOC Rs 5.36 lakh and GAIL Rs 2.71 lakh fine. HPCL and BPCL were each asked to pay Rs 3.6 lakh fine, while Oil India had faced a penalty of Rs 5.37 lakh.

Listing norms require companies to have independent directors in the same proportion as executive or functional directors. They are also required to have at least one woman director on the board.

In its filing, IOC said it has informed 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 (MoPNG), Government of India and hence the non-appointment of women independent director on the Board during the quarter ended September 30, 2023 was not due to any negligence / fault by the company."

IOC said it "should not be held liable to pay the fines and the same should be waived-off."

Stating that it has been regularly taking up with MoPNG for appointment of requisite number of independent directors (including woman independent director) to ensure compliance with corporate governance norms, the company said it had received similar notices from the stock exchanges in the past imposing fines and its waiver request was considered favorably by the exchanges.

GAIL said "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 (India) Limited is a 'Government Company' under the administrative control of the MoP&NG, Government of India. All the Directors on the Board of GAIL (including Independent Directors) are nominated/ appointed by the Government of India.

"As such, appointments are outside the purview/ control of the GAIL's management. The company is regularly following up the Government of India for appointment of requisite number of Independent Directors on its Board," it added.

ONGC said it had in May and again in October submitted to the government the requirement for appointment of additional independent directors on the company board.

"Government of India has been requested for nomination of the requisite number of independent directors on the Board of the company," it said.

BPCL said it complied with the listing requirement of having 50 per cent independent directors on the board till April 30 but is short of one independent director thereafter.

"BPCL has requested the Government of India from time to time for the nomination of one independent director," it said.

"As the directors are appointed after receipt of nomination from Government of India, BPCL has no control over the appointment of directors. Hence, BPCL will be approaching BSE Limited and National Stock Exchange of India Limited for waiver of the fines."

HPCL also has made a similar request to the stock exchanges. "The company is following up with the government from time to time for appointing the required number of Directors on its Board and the government of India is seized of the matter."

OIL said since it is a government of India enterprise, the directors on the board are appointed by the administrative ministry (MoPNG) and the said non-compliance with respect to the composition of the Board was beyond the control of the company, with a request to waive the fines."

"The company is regularly requesting the Ministry of Petroleum & Natural Gas for appointment of independent directors on the board," it said.

EIL said it has "represented to the exchanges for considering waiver of fine since Engineers India Limited is a government company and the power to appoint directors including independent directors on its board vests with MoPNG, Government of India. "The company is following up with the MoPNG from time to time for appointing the requisite number of directors on its Board and the response from the MoPNG is awaited."