Lok Sabha Question No. 403 (STARRED), answered on 2018-03-23
Subject: Duties of Independent Directors
Ministry: CORPORATE AFFAIRS
Asked by: HARI BABU KAMBHAMPATI

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS

LOK SABHA STARRED QUESTION NO. 403 ANSWERED ON FRIDAY, THE 23rd MARCH, 2018/ CHAITRA 2, 1940 (SAKA)

## DUTIES OF INDEPENDENT DIRECTORS

## QUESTION

*403. DR. KAMBHAMPATI HARIBABU:

Will the Minister of CORPORATE AFFAIRS कारपोरेट कार्य मंत्री be pleased to state:

(a)  whether the independent directors appointed by the Government on the Boards of various Public Sector Undertakings (PSUs) are more accountable for the good and bad deeds of the companies; (b)    if  so,  the  details  of  the  roles  and  responsibilities  of  independent directors appointed on PSUs; (c)  whether  any  mechanism  is  in  place  to  check  the  duties  of  the independent directors and if so, the details thereof; and (d)  the  number  of  independent  directors  who  have  been  punished  for

- dereliction of duties during the last five years, PSU-wise?

## ANSWER

THE MINISTER OF CORPORATE AFFAIRS                     (SHRI ARUN JAITLEY) कारपोरेट कार्य मंत्री (श्री अरुण जेटली)

(a) to (d):- A statement is laid on the Table of the House.

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STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (d) OF THE STARRED QUESTION NO. 403 FOR ANSWER IN LOK SABHA ON 23.03.2018 (a) to (d):-  (i) The role and responsibilities of Independent Directors (IDs) are laid down in Section 149, 177, 178 and 135 read with Schedule IV of the Companies Act,  2013  (the  Act)  and  are  aimed  at  improving  the  corporate  governance standards in the companies. The functions of independent directors, inter-alia, include to bring independent judgment and value addition to the decision making process of the board and its committees; evaluate the performance of board or management;  safeguard  the  interest  of  all  stakeholders  including  minority shareholders etc.   The decisions of Board of Directors of a company are taken collectively and all the directors are accountable for decisions with regard to functioning of the company. (ii)  Since  IDs  are  not  involved  in  day  to  day  functioning  of  the  companies, provisions of Section 149 (12) of the Act provide that an ID shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through board process, and with his consent or connivance or where he had not acted diligently. (iii)    Pursuant  to  provisions  of  section  134(3)(p)  of  the  Act  listed  and  bigger unlisted public companies are required to disclose, in their Board's report, a statement indicating the manner in which formal annual evaluation has been made by Board of its own performance and that of its committees and individual directors. In case of Government companies, these provisions do not apply in case the directors are evaluated by the Ministry or Department of the Central Government which is administratively in charge of the company, or, as the case may be, the State Government, as per its own methodology. (iv) It has been stated by the Department of Public Enterprises, Ministry of Heavy Industries and Pubic Enterprises that no independent director of Public Sector Undertakings  (PSUs)  has  been  punished  for  dereliction  of  duties  under  the Companies Act during the last three years.

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