Investor Issues
A few companies refuse to divulge employee remuneration details
At a time when every regulator and investor is beating the drum for greater transparency through disclosures and ministers are expressing concerns about obscene salaries, several companies are blatantly flouting disclosure requirements specified by the Companies Act, 1956. The Act, which outlines the regulatory and legal framework for companies in India, lays down specific guidelines regarding disclosures to be made by companies in their annual reports. One such guideline requires companies to disclose particulars of employees who draw a certain amount of salary (now Rs2 lakh per month) as an annexure to the director’s report. The disclosure includes the name, designation, qualification, experience and the name of the previous company where employed. The purpose is to enable shareholders of the company to know if salary is in fact commensurate with the experience and qualification of such employees.
However, several companies have decided to ignore this aspect and have not disclosed these details in their annual reports. These companies include ABG Shipyard, Aptech, Core Projects, Sterlite Industries, Mangalore Refineries and Petrochemicals Ltd and Network18, among others. In their defence, the companies are quoting a certain provision in the Companies Act and a SEBI circular to avoid the disclosure.
Section 217(2A) of the Companies Act makes it mandatory for every listed company to include in the director’s report a statement showing the name of every employee who is in receipt of remuneration (currently not less than Rs2 lakh) or which is in excess of that drawn by managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than 2% of the equity of the company. The section also requires that the statement mention whether such person is a relative of any director or manager of the company and if so, the name of such director. 
However, companies are skipping this section by taking recourse to Provisio (b)(iv) of Section 219(1) of the Companies Act and SEBI circular dated 26.04.2007 on sending abridged annual reports to the shareholders. The provision gives a listed company the option to send a statement containing salient features of balance sheet, profit and loss account and auditors’ report to the members of the company. The SEBI circular, in order to align Clause 32 of the Equity Listing Agreement with the provisions of Section 219(iv) made an amendment in the clause to permit listed companies to send a statement containing salient features of the above documents instead of sending full balance sheet and annual report. Using these legal aspects to their advantage, companies are not sending the required list of employees along with the annual report and are instead asking shareholders to write back to them in case they need the list.
This amounts to going against the Act as it supersedes all other enactments. Also, there is no way a company can abridge its director’s report or any of its annexures as it is dealt with a separate section (section 217 and not Section 219). Nowhere in the SEBI circular is there any clause which gives a listed company an option not to send the list of employees covered under section 217(2A) which is a part of the director’s report.
These companies should take a leaf out of the book of corporate governance biggies like Infosys Technologies and Tata Group of companies, who have set a good example by regularly making necessary disclosures in their annual reports.
Sanket Dhanorkar [email protected]



P P Valsan

6 years ago

This is nothing blatant violation of the provisions of act by some fraudulant people. By not sending salary details how much papers or cost they are saving? Most of the annual reports tom toms about their social commitments and imaginery achievements. If an investor have to write for getting information, he have to spend extra money and time which is not justifiable.

Biased austerity

The austerity move adopted by the babus got a new dimension when corporate affairs minister Salman Khurshid pointed out that even private sector companies should refrain from doling out obscene salaries. But Mr Khurshid should also pay attention to the quasi-government companies, especially the National Stock Exchange (NSE).

The National Stock Exchange (NSE) has created a perception of being a government entity with its virtual monopoly over running the stock market. But it has the highest paid non-promoter executives in the country, Ravi Narain, managing director, and Chitra Ramakrishna, deputy managing director.
Mr Narain and Ms Ramakrishna had an astounding gross annual income of Rs6.89 crore and Rs4.21 crore respectively, besides other perks in 2008-09. The salary of Mr Narain is more than London Stock Exchange (LSE) chief Xavier Roulet (around Rs 5.6 crore) and equal to NYSE Euronext CEO’s, Jean-Fancoise Theodore (around Rs7 crore).
Comparatively, NSE’s supposed competitor Bombay Stock Exchange’s (BSE) CEO Madhu Kannan earned a gross income of Rs1.6crore.
Interestingly, the stock exchanges which are in charge of regulating listed companies themselves refrain from maintaining transparency. NSE refrains from giving any information via Right to Information (RTI). Even its annual reports are not easily available nor does it comply with the Comptroller and Auditor General of India (CAG) norms.
The NSE has even filed a petition for a stay order on a request by the Chief Information Commissioner (CIC) in Delhi from revealing any information relating to NSE. In its petition, NSE has stated that ‘they are a non-government private sector company’ and not under the jurisdiction of RTI. But how just is the argument of the NSE not to reveal any information, considering it has large public sector undertakings like State Bank of India, Life Insurance Company (LIC) etc. as investors? If NSE is a private sector company, it is the only one to have a virtual monopoly in a crucial business that deals with million of citizens.
- Aditya Kshirsagar [email protected]


Mobile IMEI number game

I remember a joke about an engineer and a politician debating on who is more productive and result oriented among them. The engineer claims since he has organised everything in a proper order across the world which was in a mess, he is more efficient. The politician simply says, but tell me who created that mess? Funny, isn't it? But this is what happens to every issue, problem in our country.

Take for example, the International Mobile Equipment Identity (IMEI) issue. As per DoT and security agencies in India, mobiles with fake or no IMEI number, mostly imported from China and hence called Chinese mobiles, can pose security risks and should be banned. DoT had even issued tough directives to ban use of these handsets, but since then, the order has been postponed twice, following "reservations" from mobile service providers and importers.

Chinese handsets have a 15-digit IMEI number while genuine handsets, or rather those handsets sold with a bill and warranty from reputed brands, come embedded with a 16-digit IMEI that can be easily tracked by the operators.
Almost all the mobiles, which come in India, do have an IMEI number, but some China-made phones carry a fake IMEI number which is the issue. Also, the problem was not just of IMEI numbers, it is the import of these so called Chinese mobiles, which are smuggled into India.
As per market information, the illegal trade of importing and selling Chinese mobiles in India alone accounts for about Rs70 billion and about 20% to 25% subscribers use these handsets. The industry obviously scared of losing millions of subscribers has taken some damage control measures. The Cellular Operators Association of India (COAI) has tied up with the Mobile Standard Alliance of India (MSAI) to set up 1,600 retail outlets across the country to implant IMEI numbers on these handsets for a fee of about Rs200 for each instrument.
However, there are more questions regarding the IMEI implant itself. With software like this, it is now clear that an IMEI number can be implanted into any handset, so what is the assurance that such programmes will not used for other, mostly stolen handsets, in the future as well? Secondly, there is a website to check genuine IMEI numbers (, but when I checked some IMEI numbers, it showed the numbers as genuine and issued somewhere in 2001-2002 for the primary market of Europe while the handsets were made in China and are in use in India.
This brings out other, more serious questions about the origin of the IMEI number. Suppose, if there is one Chinese handset with an IMEI code but the IMEI code belongs to some other manufacturer and a defunct handset like the Nokia 5110, then how can the mobile service provider ban such handsets? Since the mechanism to check originality of IMEI numbers is restricted, in terms of infrastructure, data sharing between operators, I wonder whether this (the ban on fake IMEI) will sustain?
On the surface, banning handsets with fake IMEI looks like a good idea, but it is not sufficient. The issue here is not of banning the use of these mobiles with bad or non-genuine IMEI numbers, but to curtail the highly prosperous illegal trade of mobile imports, which is going on since the last few years, through the porous borders along Pakistan and Nepal.
The illegal trade of the so-called Chinese handsets mostly takes place via Pakistan through the Rajasthan route, with a few consignments coming in via Nepal. Due to the turmoil in Nepal, the Pakistan route is supposed to be safer, as there are very few restrictions. Most of the time, the smugglers work hand in glove with the authorities in Pakistan.
In this scenario, it would be interesting to see how DoT, COAI and MSAI would keep the deadline. Will there be another extension for the ban, in order to import some more illegal handsets into the country? Well, we don't know, but what we know for sure is that the market for Chinese handsets continues to glitter.


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