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NESCO Fined Rs5 Lakh by SEBI for Multiple Lapses in Corporate Governance
Moneylife Digital Team 16 April 2025
Investor Interest
Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs5 lakh on NESCO Ltd for multiple violations of corporate governance norms, including the unlawful continuation of Manu M Parpia as an independent director beyond his tenure and failure to comply with disclosure and shareholder approval requirements under SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015.
 
This regulatory action follows an examination triggered by a report from stakeholders empowerment services (SES) dated 27 July 2023, which SEBI received on 20 October 2023. The report raised concerns over the extended tenure of Mr Parpia as an independent director of NESCO beyond his official term, which ended on 9 May 2022.
 
In the order, G Ramar, the quasi-judicial authority (QJA) at SEBI, stated, "I have thoroughly reviewed the facts and evidence against NESCO, along with the circumstances surrounding the violations and the submissions made by NESCO. Based on the principles of preponderance of probabilities, I conclude that the charges related to violations of the LODR Regulations and the Companies Act, as outlined in this order, have been substantially proven."
 
SEBI's investigation revealed that, despite the expiry of his tenure, Mr Parpia continued to be listed and function as an independent director on NESCO board until May 2023. The company's corporate governance reports (CGRs) from June 2022 to March 2023 inaccurately portrayed him as an independent director. Moreover, he actively participated in board and audit committee meetings during this period, leading to alleged breaches of Regulation 25(2) of the LODR and Section 149(10) of the Companies Act 2013.
 
The lapse was admitted by the company as a clerical oversight. However, further violations were noted. On 12 July 2023, NESCO’s board approved the appointment of three independent directors, including Mr Parpia.
 
However, NESCO failed to include these appointments in the annual general meeting (AGM) agenda scheduled for 4 August 2023. Instead, shareholder approval was sought through a postal ballot issued on the same date, with results declared on 7 October 2023. This process violated Regulation 17(1C) of the LODR Regulations which mandates shareholder approval in the next general meeting or within three months of board approval, whichever is earlier.
 
SEBI also found that Mr Parpia's reappointment did not comply with the statutory cooling-off period of three years required between two independent tenures. The 14-month gap between his terms, during which he received professional fees and participated in board functions, resulted in a material pecuniary relationship with the Company, compromising his independence under Regulation 16(1)(b)(iv) of the LODR.
 
Additionally, NESCO delayed the disclosure of the postal ballot notice. Although approved by the board on 4 August 2023, the notice was disclosed to the stock exchanges only on 6 September 2023, far beyond the mandated 12-hour window. 
 
In addition to the financial penalty of Rs5 lakh, SEBI has advised NESCO to strengthen its internal compliance systems to prevent such violations in the future.
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