Related Party Transaction Policy

Madhusudan Industries Limited
Policy and Procedures for the Related Party Transactions (RPT) and policy on materiality of RPTs. (Revised w.ef. 1st April, 2019)


I                Overview:

Madhusudan Industries Limited  (the “Company”) has established and adopted this Policy for the Related Party Transactions (‘RPT’) pursuant to the provisions of Section 188 of the Companies Act, 2013 (“the Act”) read with The Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 23 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’), hereinafter referred to as `Regulations and amendments made thereto on time to time.

This Policy and Procedure Regarding RPTs (“Policy”) describe the process for identifying and approval or ratification of the RPTs including any modification thereof as well as establishing certain reporting requirements

II             Scope, Applicability & Definitions:
                   
              This Policy applies to all the transactions of the Company with the Related Parties including changes which may take place in the list of related parties from time to time as specified in Section 188 of the Companies Act, 2013 and the Company’s (Meeting of Board and its Powers) Rules, 2014 and Regulation 23 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 including any modification made thereon from time to time. This policy is intended to ensure the governance and reporting of transactions between the Company and its Related Parties.
                
III            Policy Statement:   

  •          The Company and its Officers shall not enter into any RPT unless such transaction is in the Ordinary Course of Business and on an Arm’s Length Basis and/or a Transaction within the “RPT Framework”

 

  •          The RPT Policy and RPT Framework will be reviewed, amended and approved from time to time, as the case may be, by the Audit Committee or the Board of Directors or the Shareholders of the Company
  • Subject to the compliance with the RPT Policy and RPT Framework, all RPTs of the Company are to be approved by the Audit Committee of the Company and/or Board of Directors of the Company.

 

IV              Definitions:

(1)

Related Party

"related party" means a related party as defined under sub-section (76) of section 2 of the Companies Act, 2013 or under the applicable Accounting Standards. Provided that any person or entity belonging to the promoter or promoter group of the listed entity and holding 20% or more of shareholding in the listed entity shall be deemed to be a related party.

(2)

Relative

in relation to a Related Party is as defined in Section 2(77) of the Act and Companies (Specification of Definitions Details) Rules, 2014 and revisions  which may take place in the said enactments  from time to time.

(3)

Key Managerial Personnel (KMP)

means

  • the Chief Executive Officer or the  Managing Director or the  Manager and in their absence the Whole-Time Director;
  • the Company Secretary;
  • the Chief Financial Officer; or
  • any other person appointed as may be appointed as the KMP by the Board of Directors of the Company

(4)

Initiator of RPT

means:

  • a person being not below the rank of KMP is responsible to initiate the RPT process under this Policy in conformity with RPT Framework
  • the responsibility to consult the RPT Policy and RPT Framework vests with each Functional Head of the Company.

(5)

Related Party Transactions(RPT)

Company may enter into transactions with its Related Parties  from time to time

Such transactions will be  entered into  on the basis of  :

  • this Policy and  RPT Framework approved and amended from time to time
  • provisions of the Act, Listing Agreement and other applicable laws, if any

 

(6)

Exempt RPT

is a RPT/s which is covered under the RPT Framework and will be considered as the Exempt  RPT/s under Section 188 of the Act and The Companies (Meetings of Board and its Powers) Rules, 2014.

(7)

Non Exempt RPT

is a RPT :

  • Falling outside the scope of the RPT Framework and /or
  • Which are not in the Ordinary Course of Business and / or not on an Arm’s Length basis

will be considered as the Non - Exempt RPT and shall be liable for the compliance requirement  prescribed under this Policy 

(8)

Board of Directors or Board

means the  collective body of the Directors of the Company

(9)

Audit Committee

means the Audit Committee constituted by the Board of Directors of the Company in accordance with Section 177 of the Companies Act, 2013 and Clause 49 (III) of Listing agreement.

 

(10)

Assessors

Chief Executive Officer, Chief Financial Officer, Company Secretary,  or any other Functional Head or person designated as the Assessor (collectively referred to as “the Assessors”). Each RPT shall be  assessed by at least one Assessor.

(11)

Competent Authority

Audit Committee, Board of Directors, Shareholders are jointly and/or severally referred to as the Competent  Authority

V             Interpretation of the  Policy: 

              In this Policy singular expression shall include the plural thereof. This Policy shall be interpreted and administered by or under the direction of the Audit Committee, which shall have the authority to construe, interpret, implement, amend, modify, delegate, review or restate this Policy

  • All RPTs shall be placed before the Audit Committee and/or Board of Directors.

VI            Identification of the Related Parties:

  • On an annual basis, the CS shall request a disclosure from each Director and KMP, their concern or interest in any Company or Companies or bodies Corporate (including shareholding interest), firms or other association of Individuals, in the prescribed format.

 

  • Directors and KMPs would be responsible for promptly notifying the CS in case of any changes / updates occur in their concern or interest declared by them as per referred in 6 (i) above.
  • Any individual appointed/elected as a director or KMP shall be responsible to promptly complete and submit to the CS, the Disclosure referred in 6 (i) above.
  • The CS shall be responsible to maintain the updated list of Related Parties based on the disclosures received from them 
  • Senior management shall make disclosures to the board of directors relating to all material, financial and commercial transactions, where they have personal interest that may have a potential conflict with the interest of the Company at large.

 

VII             RPT Framework:

  •      The Board of Directors of the Company will approve the RPT Framework and delegate the same to the Audit Committee which will regulate the RPTs falling within this Policy and such RPTs will be approved by the Audit Committee and/or Board of Directors in accordance with the RPT Policy and RPT Framework.
  • The Board of Directors of the Company in its discretion may seek approval of the Shareholders of the Company for the RPT Framework as and when required.

 

  • All the RPTs of the Company will be subjected to evaluation and assessment by any KMP.

VIII             Material Related Party Transactions::

  •      As per Listing Regulations, a transaction with a related party shall be considered material if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the company as per the last audited financial statements of the company.
  • Notwithstanding the above, a transaction involving payments made to a related party with respect to brand usage or royalty shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds two percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the company.

 

  • All material Related Party Transactions (other than transactions entered into by the company with its wholly owned subsidiary, whose accounts are consolidated with the company and placed before the shareholders at the general meeting for approval) shall require approval of the shareholders through appropriate Resolution and the related parties shall abstain from voting on such resolutions.

IX             Notification, Approval, Rejection of  a RPT :

 

(1)

Notification of RPT
  • No RPT shall be executed by the Company unless such RPT is covered within the scope of the approved RPT Framework

 

  • If rejected, any such RPT shall not be proceeded with and shall be subjected to the approval from Board of Directors and the Share Holders of the Company as the case may be.

(2)

Preliminary Assessment of RPTs
  • If in the opinion of any of the Assessors the intended transaction is not exempt RPT such transaction will be referred back to the Initiator  with reasons thereof

 

  • If in the opinion of the Assessor, the intended transaction is exempt RPT, such transaction will be referred to the Audit Committee/Board of Directors for approval
  • If in the opinion of any of the Assessor, the intended transaction is not an Exempt RPT,  such transaction shall be referred to the Audit Committee/Board of Directors for review and further directions

 

  • The Initiator, Assessors and Committee of Directors shall respond to RPT approval requests within a time frame.

(3)

Approval of  the RPTs

 

The Audit Committee , upon receipt of the views from the Assessor, shall review the RPT and comments of the Assessor and may take the following actions :

  • Approve the RPTs for execution
  • Send the RPT back  for  seeking additional justification or substantiation
  • Reject the RPT 
  • Recommend the RPT for approval of, Board of Directors or Shareholders as the case may be

 

X             Procedure for Approval of the Non Exempt RPT:

  • The Assessor will refer all non-exempt RPT to the Audit Committee for assessment and approval

 

  • The Audit Committee will review and assess the said Non Exempt RPT and if the RPT is found : 

Exempt

Approve the RPT for execution

Non Exempt

Recommend to the Board of Directors for further direction and compliance

 

XI           Ratification of the  RPT :

  • RPTs entered into inadvertently or accidentally without the approval of the Competent Authority needs to be ratified within three months or next Board meeting from the date of the execution of   the said RPT by the Board/Shareholders of the Company, as the case may be.

 

  • If such RPTs are not ratified by the Board/Shareholders of the Company as the case may be,  such transaction shall be void ab initio and not binding on the Company

XII           Threshold limits for approval of RPT :

Sr. No. Nature of Transaction(s) Monetary Ceiling for transaction(s) during a financial year per related party
1 Sale, purchase or supply of any goods or materials or services directly or through appointment of agent amounting to ten percent or more of the turnover of the Company or rupees one hundred crore, whichever is lower as per the last audited financial statements of the Company.
2 Selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agent amounting to ten percent or more of net worth of the Company or rupees one hundred crore, whichever is lower as per the last audited financial statements of the Company
3 Leasing of property of any kind amounting to ten percent or more of the net worth of company or ten per cent or more of turnover of the Company or rupees one hundred crore, whichever is lower as per the last audited financial statements of the Company
4 Availing or rendering of any services, directly or through appointment of agent amounting to ten percent or more of the turnover of the Company or rupees fifty crore, whichever is lower
5 Such related party's appointment to any office or place of profit in the Company or subsidiary company or associate company at a monthly remuneration of two and a half lacs rupees
6 Remuneration for underwriting the subscription of any securities or derivatives thereof, of the Company exceeding one percent of the net worth of the Company as per the last audited financial statements of the Company
7 Other related Party Transactions in the normal course of business Such other transactions as would be required by the approval of the Audit Committee and/or Board of Directors

The approval of Board of Directors and Shareholders required for related party transactions (RPT) have been mentioned in the Table below:

(Approval of Audit Committee is required for all related party transactions)

Transactions Not in ordinary course of business Not at Arm`s length Basis In ordinary course of business At Arm`s length Basis
Material RPT (as per Listing regulations) Board approval & Shareholder`s approval by ordinary resolution
All RPT exceeding limits of Rule 15 under Companies (Meetings of Board and its Powers) Rules, 2014 Board approval & Shareholder`s approval by ordinary resolution Board approval & Shareholder`s approval by ordinary resolution None None
All RPT within limits under Rule 15 of Companies (Meetings of Board and its Powers) Rules, 2014 Board Resolution Board Resolution None None

Note: All RPTs exceeding the limits prescribed under Rule 15 of Companies (Meetings of Board and its Power) Rules, 2014 will require prior approval of the Shareholders.

XIII          Reporting and Review:

 

  • Quarterly Reporting:

At each quarterly Meeting of the Audit Committee and/or Board meeting, the CFO and CS shall jointly provide a comprehensive Report summarizing all RPTs, for the immediately preceding fiscal Quarter of the Company including all RPTs (exempt/non-exempt).

XIV          Competent Authority for  RPT Policy and Framework: 
              The Audit Committee of the Company, subject to supervision of the Board, shall be the Competent Authority for investigating and taking an appropriate disciplinary action for any breach and / or defaults in complying with this Policy. Such disciplinary action shall be in addition to the penal provisions of the Act.

XV         Compliance with the RPT Policy :

 

  • Every person responsible for RPT shall be accountable for complying with this Policy 
  • A Director or any other employee of a company, who had entered into or authorised the contract or arrangement in violation of the RPT Policy and RPT Framework shall be guilty of non-compliance

 

  • In case of breach of this Policy; Audit Committee and/or Board of Directors may initiate appropriate action against the person/s responsible 
  •      A person shall not be eligible for the appointment as a Director of a Company if he has been convicted of the offence under Section 188 of the Act at any time during the last preceding five years

XVI        Disclosure of the RPTs :

RPTs and prescribed details thereof will be disclosed in the Directors’ Report/Annual Report in accordance with the provisions of the Act and Rules framed there under.
XVII       Governing Law and Amendments:

The RPT Policy along with RPT Framework will be governed by the relevant provisions of Section 188 of the Companies Act, 2013 and The Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing agreement and amendments thereto form time to time. This Policy and the RPT Framework may be reviewed and/or amended at any time and/or subject to the revisions on the applicable laws, regulations and amendment thereto from time to time and/or the actions taken by the Board of Directors and/or the Audit Committee of the Company.


XVIII       Review of the RPT Policy::

This RPT policy and RPT framework shall be effective from 1st April, 2019 and may be further reviewed and/or amended at any time and/or upon revisions of applicable laws, regulations and amendment thereto from time to time and/or the actions taken by the Board of Directors and/or the Audit Committee of the Company, subject to atleast once in every three year.

This policy shall be deemed to be amended/or modified pursuant to any amendment or modifications or replacements or re-enactment of SEBI(LODR) Regulations, 2015 or the Companies Act, 2013 or any other laws and/or Regulations as amended, modified, replaced or re-enactment from time to time by the SEBI, Govt. of India and/or any other regulating authority.

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