178. Nomination and Remuneration Committee and Stakeholders Relationship Committee

(1) The Board of Directors of every listed company and such other class or

classes of companies, as may be prescribed shall constitute the Nomination and Remuneration

Committee consisting of three or more non-executive directors out of which not less than

one-half shall be independent directors:

Provided that the chairperson of the company (whether executive or non-executive)

may be appointed as a member of the Nomination and Remuneration Committee but shall not

chair such Committee.

(2) The Nomination and Remuneration Committee shall identify persons who are

qualified to become directors and who may be appointed in senior management in accordance

with the criteria laid down, recommend to the Board their appointment and removal and shall

carry out evaluation of every director’s performance.

(3) The Nomination and Remuneration Committee shall formulate the criteria for

determining qualifications, positive attributes and independence of a director and recommend

to the Board a policy, relating to the remuneration for the directors, key managerial personnel

and other employees.

(4) The Nomination and Remuneration Committee shall, while formulating the policy

under sub-section (3) ensure that—

(a) the level and composition of remuneration is reasonable and sufficient to

attract, retain and motivate directors of the quality required to run the company

successfully;

(b) relationship of remuneration to performance is clear and meets appropriate

performance benchmarks; and

(c) remuneration to directors, key managerial personnel and senior management

involves a balance between fixed and incentive pay reflecting short and long-term

performance objectives appropriate to the working of the company and its goals:

Provided that such policy shall be disclosed in the Board's report.

(5) The Board of Directors of a company which consists of more than one thousand

shareholders, debenture-holders, deposit-holders and any other security holders at any

time during a financial year shall constitute a Stakeholders Relationship Committee consisting

of a chairperson who shall be a non-executive director and such other members as may be

decided by the Board.

(6) The Stakeholders Relationship Committee shall consider and resolve the grievances

of security holders of the company.

(7) The chairperson of each of the committees constituted under this section or, in his

absence, any other member of the committee authorised by him in this behalf shall attend the

general meetings of the company.

(8) In case of any contravention of the provisions of section 177 and this section, the

company shall be punishable with fine which shall not be less than one lakh rupees but

which may extend to five lakh rupees and every officer of the company who is in default shall

be punishable with imprisonment for a term which may extend to one year or with fine which

shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees,

or with both:

Provided that non-consideration of resolution of any grievance by the Stakeholders

Relationship Committee in good faith shall not constitute a contravention of this section.

Explanation.—The expression ‘‘senior management’’ means personnel of the company

who are members of its core management team excluding Board of Directors comprising all

members of management one level below the executive directors, including the functional heads.