NSE and BSE Penalise MTNL for Non-Compliance with SEBI Board Norms

Context:

The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have imposed penalties on Mahanagar Telephone Nigam Limited (MTNL) for violating SEBI’s board composition norms.

Reason for Non-Compliance: Improper constitution of the following committees:

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR Regulations, 2015).

Nomination & Remuneration Committee (NRC)

• Relevant Regulation: Regulation 19 of SEBI LODR, 2015
• Requirement:
  • NRC must have at least 3 directors, all non-executive.
  • At least 50% must be independent directors.
  • The Chairperson of NRC must be an independent director.

Stakeholders’ Relationship Committee (SRC)

• Relevant Regulation: Regulation 20 of SEBI LODR, 2015
• Requirement:
  • Committee must consist of a chairperson (non-executive) and such other members as decided by the board.
  • Looks after redressal of grievances of security holders (shareholders, debenture holders, etc.).

Risk Management Committee (RMC)

• Relevant Regulation: Regulation 21 of SEBI LODR, 2015
• Requirement:
  • Mandatory for top 1,000 listed entities by market cap.
  • Committee must have a majority of board members.
  • Chairperson must be a board member.
  • At least one independent director must be a member.

Nature of Violation

• Failure to properly constitute NRC, SRC, and RMC = Violation of SEBI LODR, 2015 (Regulations 19, 20, 21).
• It is treated as non-compliance with corporate governance norms.
• SEBI may levy fines under SEBI Circular SEBI/HO/CFD/CMD/CIR/P/2018/77 (May 2018) prescribing standardized penalties for LODR violations.

About MTNL

• Full Form: Mahanagar Telephone Nigam Limited
• Status: Wholly owned subsidiary of Bharat Sanchar Nigam Limited (BSNL)
• Headquarters: New Delhi
• Sector: State-run telecom service provider