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SES flags concerns on Ravindra Kulkarni’s appointment as independent director at M&M

LiveMint logoLiveMint 01-08-2017 Jayshree P Upadhyay

Mumbai: Proxy advisory firm Stakeholder Empowerment Services (SES) has flagged concerns on the appointment of an independent director at Mahindra and Mahindra Ltd (M&M).

In a report released on Monday, the proxy advisory firm said that Ravindra K. Kulkarni, an independent director at M&M and also a partner at Khaitan and Co., has a potential conflict of interest.

Under Companies Act 2013, an independent director is entitled to a sitting fee, and only in cases where a director is a nominee director, the nominating institution is paid the fee.

But in the case of M&M, the sitting fee and reimbursement of expenses has been paid to the law firm.

In an emailed response, M&M said “Mr. Ravi Kulkarni’s appointment as independent director was approved by shareholders in August 2014. The appointment of Mr. Kulkarni is in full compliance with all laws and regulations.”

Khaitan & Co. declined to comment on an email query sent on Monday.

In addition, an independent director cannot be any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to 10% or more of the gross turnover of the firm.

To be sure, as advocates of M&M, Khaitan was paid professional fees of Rs97.4 lakh in FY 2016-17, which in the opinion of SES may not be material to vitiate independence given the size of Khaitan.

“SES fails to understand that how can an independent director’s remuneration be paid to a firm. In a normal case, a director’s remuneration is being paid to a firm/organisation/company when the director represents interests of that firm/organisation/company. If that is the case, then what interest of Khaitan & Co. does Mr. Kulkarni represent? If he does represent Khaitan, then he cannot be an independent director of the company,” said J.N. Gupta, co-founder and managing director at SES.

Kulkarni has been associated with M&M for 20 years. Initially, the sitting was paid to Kulkarni directly, however, post FY 2011, the entitled fee was paid to the law firm.

“Considering Mr. Kulkarni’s 20 years association with the company, holding shares of the company valued at more than Rs5 crore and being a deemed nominee of Khaitan & Co., SES is of opinion that Mr. Kulkarni cannot be an independent director of the company. SES is of the view that the company should classify him as a non-executive director,” SES said in the report.

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