APPENDIX – “C”

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(For the Year 2011-12)

1.              As per the guidelines issued by the Department of Public Enterprises, Government of India, a Report on compliance of the provisions on Corporate Governance is provided in succeeding paragraphs :

2.              It is the constant endeavour of the Company to adopt and maintain the highest standards of ethics in all spheres of business activities.  The Company’s philosophy of Corporate Governance is based on the principles of honesty, integrity, accountability, adequate disclosures and legal / statutory compliances, to protect, promote and safeguard the interests of all its stakeholders.  It strives for maximum level of transparency in decision making and avoids conflicts of interest.  It also accords importance to adherence of adopted corporate values and objectives and discharging social responsibilities as a responsible corporate citizen.

3.              In keeping with its professional approach, the Company is implementing the precepts of Corporate Governance in letter and spirit. 

4.              The Company’s activities are monitored by several external agencies like Statutory Auditors, Comptroller & Auditor General of India, the Central Vigilance Commission, Ministry of Defence, Department of Defence Production etc.

Board of Directors

5.               The composition of the Board of Directors of the Company had been re-structured by the Government of India with nine members : four Whole Time Directors, including the Chairman & Managing  Director,  two Part Time  Government  Directors  and  three  Part Time Non-official  Independent  Directors. The  details  of  the  members  of  the Board during the year ended    31 Mar 12 are given below :

6.             Brief Resume of the Directors appointed during the year, nature of their functional areas etc. are furnished below:

RAdm A K Verma

Rear Admiral (Retd) Anil Kumar Verma on completion of his engineering studies joined the Indian Navy on 28 Jan 1978. The Officer retired from the Navy on  31 Oct 2011 after a long and distinguished career of 34 years in the service of the Armed forces.  He has now joined GRSE, Kolkata as Chairman & Managing Director on  01 Nov 2011.

A specialist in Mechanical, Marine and Aeronautical Engineering, the Flag Officer topped the Marine Engineering Specialisation Course in the Navy and  obtained his watchkeeping ticket onboard old destroyer INS Mysore. He also topped the Aeronautical Engineering specialization course at Air Force Technical College, Jalahalli, Bangalore.

During his career in the Indian Navy, the Flag Officer has mostly served onboard Frontline ships and repair yards. The sea tenures of the officer include tenures of 03 years each onboard frigate INS Vindhayagiri and INS Taragiri. During the aforesaid period, the Flag Officer sailed onboard INS Godavari and was involved in OP CACTUS at MALDIVES in 1988.

The Flag Officer’s other important assignments include Fleet Air Technical Officer (1997-98) in the Western Naval Fleet, Command tenures as Command Air Technical Officer in the Western Naval Command (2002-04) and Chief Staff Officer (Technical) of the Southern Naval Command (2007-08).

The Flag Officer has the unique distinction of being the only ‘Technical’ Officer in the Navy to have commanded both the ‘Aircraft’ and the ‘Ship’ Repair Yards [NAY “Kochi” & NSRY “Kochi”]. During these commands, both the yards were also awarded the “CNS HRD Trophies” for being the best industrial units in the Navy for HR practices. One of the major achievements of the Flag Officer was the creation of “Missile Boat Memorial” at Kochi in the Command Parade Ground at Kochi in a record time of three months.  

On promotion to the Flag rank, the officer was appointed as ADGQA(WP)  and was overseeing the inspection of all the equipment being inducted in the Navy for new construction ships prior to assuming his present appointment. The Flag Officer had completely revamped the QA organisation in the Indian Navy and the organisation today is fully geared to face the evergrowing challenges of inducting new ships in the Navy and the Coast Guard.

The Flag Officer was selected by the Govt of India in May 2011 to head the prestigious Shipbuilding Yard at Kolkata, the Garden Reach Shipbuilders & Engineers Limited.  He has taken over the reins of the Yard on 01 Nov 2011.

A recipient of ‘Vishist Seva Medal’ from the “President of India’ for meritorious service in the Indian Navy,  the Flag Officer has attended the ‘Senior Defence Management Course’ (SDMC) at CDM, Secunderabad and undergone the ‘Core Programme’  at Goa in 2009 along with senior Army, Navy and Air Force Officers, which is the only course conducted in the Armed Forces for the officers of General rank and equivalent.

The Flag Officer is extremely friendly by nature and has been known to be a great team man. Managing men and motivating them to take on new challenges has been his strength. Award of HRD trophies to his units whilst serving in the Navy  are notable examples of his HR capabilities.

The Flag Officer is a strong believer in setting higher goals and achieving them through involvement of all personnel working with him.  He has embarked upon an ambitious plan to transform GRSE into a truly “World Class” shipbuilding yard.

7.      The Board appointed him as Chairman of the Audit Committee & Business Strategy and Capacity Augmentation Committee of the Board of Directors.

Directors’ Attendance

8.       Details of Directors’ attendance at the Board Meetings and Annual General Meetings held during the F.Y. 2011-12 are given below :  

9                 During the year 2011-12 (8) (eight) Board Meetings were held on       28 Apr 11,  20 Jul 11, 17 Aug 11, 21 Sep 11, 28 Oct 11, 30 Nov 11, 02 Feb 12 and 07 Mar 12  The maximum interval between any two Board Meetings was 79 days. 

Board Procedure

10      Board meetings are held at least  once in every quarter, and more often if considered necessary, focusing on  formulation of  policies, strategies, exercising control, delegation of powers, reviewing performance of the Company,  approving contracts for high value items, half yearly/periodical  results, annual accounts, annual operating plan and budgets and also for considering statutorily required matters. The Company believes that a carefully planned agenda note is pivotal for effective Board Meetings. The agenda notes are backed by comprehensive background information to enable the Board to take decisions.  Agenda Notes are generally circulated well in advance to the members of the Board.  The Board Members, in consultation with the Chairman, may bring up any important issue for the consideration of the Board.  As and when required, Senior Executives of the Company are also invited to attend Board Meetings and provide clarifications.  The Part Time Directors play an important role in the deliberations at the Board Meetings and bring to the Company their wide experience in the fields of technology, finance, marketing, public policy and operations.

Remuneration of Whole Time Directors

11.      The remuneration of the Whole Time Directors is fixed by the Government as the Company is a “Government Company” within the meaning of Sec. 617 of the Companies Act, 1956.   

Remuneration of Part  Time Directors

12.    Part Time Government Directors are not eligible for Sitting Fees for the meetings attended by them.  The Part Time Independent Directors are paid Sitting Fees as per the provisions of the Companies Act, 1956 for attending each meeting of the Board / Committee(s) of the Board and are reimbursed actual expenditure for attending the meeting of Board / Board Committee(s).

Code of Business Conduct and Ethics for Board Members and Senior Management

13          As per guidelines issued by the Department of Public Enterprises, the Company has formulated “Code of Business Conduct and Ethics for Board Members and Senior Management” for better Corporate Governance and  fair /  transparent practices.  A copy of the same has been circulated to all concerned and posted at Company’s website.  The Board members and senior management personnel to whom the said Code is applicable have affirmed compliance of the same for the year ended 31 Mar 12. A declaration signed by the Chairman & Managing Director of the Company is appended at the end of this report.

Audit Committee

14         The Audit Committee of the Board was formed on 04 April 2001 and re-constituted from time to time.

15           On joining of Independent Directors on the Board, the Audit Committee has been further reconstituted consisting of following members of the Board with effect  from  28 Apr 11, to fall in line with the guidelines issued by the Department of Public Enterprises, Government of India : 

16               The terms of reference of the Audit Committee are as specified in Sec. 292A of the Companies Act, 1956 and the guidelines issued by the Department of Public Enterprises.  The primary function of the Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the financial reports; the Company’s systems of internal controls regarding finance, accounting and legal compliance that management and the Board have established; and the Company’s auditing,  accounting and financial reporting process generally.

17         The Audit Committee reviews reports of the Internal Auditors, meets Statutory Auditors and discusses their findings, suggestions and other related matters and reviews major accounting policies followed by the Company.  The Audit Committee reviews the half yearly and annual financial statements before their submission to the Board. 

18                The Chairman of the Audit Committee apprises the Board about the observations of the Audit Committee during the Board Meetings.  The Minutes of the Audit Committee Meetings are placed before the Board in their subsequent meetings and taken note of.                              

19            During the financial year 2011-12, five meetings of the Audit Committee were held on 14 Jun 11, 19 Jul 11, 28 Oct 11, 01 Feb 12 and           07 Mar 12.

20            The attendance of the members of the Audit Committee during the financial year 2011-12 is given  below :

Procurement Committee

21           The Procurement Committee of the Board of Directors has been re-constituted on 28 Apr 11 by the Board of Directors with following Members :

22              RAdm (Retd) K C Sekhar retired on the 31 Oct 11. On assuming charge as Chairman & Managing Director, RAdm (Retd) A K Verma became the Chairman of the Procurement Committee with effect from 30 Nov 11.

23            The Procurement Committee has been delegated full powers of the Board in respect of :

(i)         Approval of proposals for placement of orders for procurement of materials, equipment, tools, stores and spares, imports including from Russian Sources, approval of works, sub-contracts and facility hiree etc. for sanctioned projects.

(ii)        Approval of proposals for capital expenditure in respect of the items provided for in the Capital Budget approved by the Board / Government.

(iii)        The Procurement Committee examines all the procurement proposals in conformity and compliance of the Purchase Manual of the Company, CVC Guidelines,  Govt. Regulations etc and approve the proposals. In the event of any deviations of procedures, the proposal with the recommendations of the Committee, is to be placed before the Board for approval. However, if the Committee feels that a particular proposal requires consideration by the Board, same is submitted to the Board  with  recommendation(s) of the Committee.

(iv)            On approval of the proposals by the Committee, Management is authorized to place the order for procurement.

 (v)      All the procurement proposals approved by Procurement Committee are to be placed before the Board for information.

24          The Chairman of the Procurement Committee appraises the Board about the observations of the Procurement Committee,  during the Board Meeting. The Minutes of the Procurement  Committee Meetings are placed before the Board at their subsequent meetings and taken note of.

25             During the financial year 2011-12, four meeting of the Procurement Committee were held on 23 May 11, 17 Aug 11, 21 Sep 11 and 06 Mar 12.

26              The attendance of the Member of the Procurement Committee during the financial year 2011-12 is given below :

HR & Remuneration Committee

27              The Board at its Meeting held on 28 Apr 11 renamed the Remuneration Committee as “HR & Remuneration Committee”. The Committee was re-constituted with following Members :  

28               The terms of reference of HR & Remuneration Committee has been expanded as follows :

(a)      To decide the annual bonus / variable pay pool Performance Related Pay (PRP) and policy for its distribution across the executives (including Board Level executives) and non-unionised supervisors within the prescribed limits for each financial year.

(b)       To examine all the proposals related to HR issue and give its recommendations.

(c)        The recommendations of the “HR & Remuneration Committee” is placed before the Board of Directors for approval.  

29           During the financial year 2011-12, Six Meetings of the HR & Remuneration Committee were held on 18 May 11, 29 Jun 11, 17 Aug 11, 28 Oct 11, 01 Feb 12 and 07 Mar 12.

30                The attendance of the Members of the HR & Remuneration Committee during the financial year 2011-12 is given below :

Business Strategy and Capacity Augmentation Committee

31               To formulate future business strategy of the company to expand its spheres of activities, explore possibilities of export, identifying new product which company  can manufacture and market, imbibe new technologies, identify partners for possible collaboration, identify state-of-the-art  equipment and machineries from India and abroad to improve the quality of ships and other products etc. the Board constituted a Business Strategy and Capacity Augmentation Committee of the Board to look into aforesaid aspects and advise the Board on aspects beneficial for Company’s business.

32              The Committee was constituted by the Board on 28 Apr 11 with following Members :

33              Shri P C Sharma, Part time Non-official Director co-opted to the Committee by the Board of Directors on 17 Aug 11.

34                 RAdm  A K Verma,  appointed as Chairman of the Committee on his assumption of charge of Chairman & Managing Director of the Company.

35                 The Committee has been tasked with :

(a)                 Business Strategy formulation for future growth

(b)      Infusion of new technologies

(c)      Identify Schemes for Productivity improvement

(d)      Finalise the Infrastructure Augmentation / Capacity Enhancement to meet future business strategy and to improve shipbuilding efficiency.

36              The recommendation of the Committee are to be placed to the Board for consideration and approval.

Annual General Meetings

37.       The details of the last three Annual General Meetings of the Company are given below :

Disclosures 

38.         During the year 2011-12, the Company has not entered into any transactions with the Directors that may have potential conflict with the interests of the Company at large. The members of the Board, apart from receiving Directors’ remuneration (wherever applicable), do not have any material pecuniary relationship or transaction with the Company  which, in the judgement of the Board, may affect independence of judgement of the Directors.

39.     During the last three years, there has been no instance of non-compliance by the Company on any matters related to Companies Act, 1956 or any Industrial Law. 

40.         Regarding “whistle blower” mechanism, the guidelines issued by the Government of India have been complied with.  The mechanism, inter alia, contains a provision enabling  any Personnel  to approach the Chairman of the Audit Committee in exceptional cases.

41.           The Central Vigilance Commission (CVC) issued a circular on 4 Dec 07 recommending adoption and implementation of the Integrity Pact (IP) in respect of all major procurements of the Government Organisations. Accordingly, the Company adopted Integrity Pact in procurement of material and / or service for a value above `100 crore.  The IP envisages formation of a panel of Independent  External Monitors (IEMs). Accordingly, the Company has following IEMs considered by CVC:

(i)     Shri Sakti Kumar Banerjee, Ex-CMD, NALCO

             (ii)   Shri Prabir Roy, Ex-CMD, Bengal Chemical & Pharmaceuticals Ltd.

42.      The IEMs are reviewing independently and objectively, whether and what extent parties have complied with the obligations under the Pact and examine complain received by them and submit a report to CMD.

43.       During the year 3 no of Structured Meeting of the IEMs with the CMD were held. Presently six number of high value cases are monitored by the IEMs.

44.    The guidelines issued by the Department of Public Enterprises, Government of India have been complied with.

45.    The Company has not incurred any expenditure which is not for the purpose of the Company’s business, nor has the Company incurred any expenditure which are personal in nature for the Board of Directors and top management.

46.      Details of Administrative and Office expenses as a percentage of total expenses vis-à-vis financial expenses are furnished below :

                                                                                                       (` In Crore)

General

47.       The Company’s communication system with its Shareholders, Directors and other stakeholders is through all means of communication channels including correspondence and the official website of the Company. The Company has  a Website (www.grse.nic.in)  which provides information on GRSE management, Chairman’s Statement, Director’s Report, Financial Status, Corporate Governance, Product Spectrum, Vendor registration procedure, details  of  tenders, payment status of suppliers’ bills etc. The performance of the Company, including unaudited / provisional financial results are communicated to the Administrative Ministry every month. The results are not required to be published in any newspaper.

48.      The Company continuously strives to maintain accounts in transparent, true and fair manner in conformity with the accounting principles generally accepted in India. During the last eleven years (1999-2000 to 2010- 2011) there have been no audit qualifications.  The Company has also received “Nil” comments from the CAG during these years. 

49.       Need based Training Programmes are formulated from time to time.

Declaration

As provided under the Guidelines on Corporate Governance for CPSEs 2012 issued by the Government, it is hereby declared that all Board Members and Senior Management Personnel affirmed compliance with the Code of Conduct for Directors and Senior Management Personnel of Garden Reach Shipbuilders & Engineers Limited for the year ended 31st March, 2012.

                                           For Garden Reach Shipbuilders & Engineers Limited

                                                                            A K Verma

Kolkata                                                       Rear Admiral (Retd.)

……………., 2012                              Chairman & Managing Director