ASSIGNMENT OF CORPORATE GOVERNANCE & BUSINESS ETHICS

Submitted To Prof. Hari Parmeshwar

Submitted By Shankar Sharan Tripathi Roll.No. 34 JIMS KALKAJI

BACKGROUND OF SATYAM On 24th June 1987, Satyam Computer Services Ltd (Popularly known as Satyam) was incorporated by the two brothers, B Rama Raju and B Ramalinga Raju1, as a private limited company with just 20 employees for providing software development and consultancy services to large corporations (the company got converted into public in 1991). During the year 1996, company promoted four subsidiaries including Satyam Renaissance Consulting Ltd, Satyam Enterprise Solutions Pvt. Ltd., and Satyam Infoway Pvt. Ltd. Satyam Computer Services Ltd in 1997 was selected by the Switzerland-based World Economic Forum and World Link Magazine as one of India's most remarkable and rapidly growing entrepreneurial companies. Satyam Infoway (Sify), a wholly owned subsidiary of Satyam Computer Services Ltd, was the first Indian Internet Company listed on NASDAQ. Mr. B. Ramalinga Raju, Chairman of Satyam, was awarded the IT Man of the Year 2000 Award by Dataquest. In 2001, Satyam became worlds first ISO 9001:2000 company to be certified by BVQI. In 2003, Satyam started providing IT services to World Bank and signed up a long term contract with it. IN 2005, Satyam was ranked 3rd in Corporate Governance Survey by Global Institutional Investors.

PROBLEMS BEGIN Problems in Satyam begin when on December the 16th, 2008; its chairman Mr Ramalinga Raju, in a surprise move announced a $1.6 billion bid for two Maytas companies i.e. Maytas Infrastructure Ltd and Maytas Properties Ltd saying he wanted to deploy the cash available for the benefit of investors. The two companies have been promoted and controlled by Rajus family. The thumbs down given by investors and the market forced him to retreat within 12 hours.2 Share prices plunges by 55% on concerns about Satyams corporate governance3. In a surprise move, the World Bank announced on December 23, 2008 that Satyam has been barred from business with World Bank4 for eight years for providing Bank staff with improper benefits and charged with data theft and bribing the staff.5 Share prices fell another 14% to the lowest in over 4 years. The lone independent director since 1991, US academician Mangalam Srinivasan, announced resignation followed by the resignation of three more independent directors on December 28 i.e. Vinod K Dham (famously known as father of the Pentium and an ex Intel employee), M Rammohan Rao (Dean of the renowned Indian School of Business)

and Krishna Palepu (professor at Harvard Business School)6. At last, on January 7, 2009, B. Ramalinga Raju announced confession of over Rs. 7800 crore financial fraud and he resigned as chairman of Satyam. He revealed in his letter that his attempt to buy Maytas companies was his last attempt to fill fictitious assets with real ones. He admitted in his letter, It was like riding a tiger without knowing how to get off without being eaten.7 Satyams promoters, two brothers B Ramalinga Raju and B Rama Raju were arrested by the State of Andhra Pradesh police and the Central government took control of the tainted company.8 The Raju brothers were booked for criminal breach of trust, cheating, criminal conspiracy and forgery under the Indian Penal Code. The Central Government reconstituted Satyam's board that included three-members, HDFC Chairman Deepak Parekh, Ex Nasscom chairman and IT expert Kiran Karnik and former SEBI member CA chuthan. The Central Government added three more directors to the reconstituted Board i.e., CII chief mentor Tarun Das, former president of the Institute for Chartered Accountants (ICAI) TN Manoharan and LIC's S Balakrishnan. A week after Satyam founder B Ramalinga Rajus scandalous confession, Satyams auditors Price Waterhouse finally admitted that its audit report was wrong as it was based on wrong financial statements provided by the Satyams management.9 On January 22, 2009, Satyams CFO Srinivas Vadlamani confessed to having inflated the number of employees by 10,000. He told CID officials interrogating him that this helped in drawing around Rs 20 crore per month from the related but fictitious salary accounts. Andhra Pradesh State CB-CID raided the house of Suryanarayana Raju, the youngest sibling of Ramalinga Raju who owned 4.3 per cent in Maytas Infra, and recovered 112 sale deeds of different land purchases and development agreements.10 Senior partners S Gopalakrishnan and Srinivas Talluri of the auditing firm PricewaterhouseCoopers (PwC) were arrested for their alleged role in the Satyam scandal. The States CID police booked them, on charges of fraud (Section 420 of the IPC) and criminal conspiracy (120B).

TECK MAHINDRA ACQUIRED SATYAM, RENAMED IT AS MAHINDRA SATYAM AND REPLACED ITS EXECUTIVE BOARD AND AUDITORS
The Mahindra Group, the new owner of Satyam and the largest shareholder in Tech Mahindra, is set to merge the two companies to transform the combined entity into an Information and Communication Technology (ICT). The merger can happen any time in the near future since the accounts of Satyam have been re-stated.

SFIO INVESTIGATIONS
The Serious Fraud Investigation Office (SFIO), a multi-disciplinary investigating arm of the Ministry of Corporate Affairs, set up in 2003 with officials from various law enforcement agencies, was asked to investigate the fudging of accounts as admitted by B. Ramalinga Raju. It submitted its preliminary report on April 13, 2009 that runs into 29 volumes contained in 14 thousand pages. On November 30, it filed case24 against Satyam promoter B Ramalinga Raju, his brother B Rama Raju, ex-CFO Vadlamani Srinivas, senior finance manager D. Venkatapathy Raju and finance manager C. Srisailan, along-with companys former statutory auditors S Gopalakrishna and Srinivas Talluri25 under various provisions of the Indian Penal Code, Companies Act and IT Act. The SFIO report believed the confession was not out of Rajus call of conscience; rather it was deliberately painting a distressing face to keep the legal and public dealings with a light hand. According to SFIO report, Satyam founders B Ramalinga Raju, B Rama Raju and ex-CFO Vadlamani Srinivas, and ex-vice president (finance) G Ramakrishna, together hatched a conspiracy to artificially increase the revenues and profits in the books. The report highlights that the falsification was done by deliberately leaving loopholes in the Computerized Accounting System which uses ERP modules. The high-level application landscape of Satyam internal applications has many links between various systems where either there was no integration or there was weak integration. These loopholes were deliberately left to insert fictitious invoices and fictitious bank statements to balance them without being detected. Very smartly fictitious invoices were created in the invoice management system using regular login ids, falsely intimating that any of the employees could be involved in this. In order to cover

up these fictitious entries, the receipts were first accounted with Bank of Baroda, New York branch, (account no- 120559) and they then were relocated as fixed deposits in other accounts. With such artificial entries started giving a blooming picture of the company, the management decided to put the surging profits in better investments. Unfortunately, Raju was now forced to make investments from the non-existing investments. But fate had something else in store. After raising money, Raju disembarked them in losing propositions. As the company was constantly losing money, Raju decided to venture into brand building to avoid bad circumstances. It was then the promoter-directors of the company started commissioning on these inflated profits, which is again an offence under IPC. The SFIO probe also takes a call on the account statements of the company with the Bank of Baroda highlighting jacking up of the books ever since 2001 02.

The report also clarifies that the company had booked false fixed deposits and interests in five banks namely, ICICI, HSBC, HDFC, BNP Paribas and Citi Bank. On the reconciliation of these statements the company books showed major gaps with the actual existing deposits. The SFIO has also booked this offence under various sections of IPC and the Companies Act. The investigation also throws light on the company's paying excess taxes on the non-existing assets and also indulging in forging current account balance statements. This helped the company forge quarterly details of outstanding balances of fixed deposits and interest earned on them. The report says that by showing a rosy picture of the company, the promoters were jacking up the share price and simultaneously selling off their holdings raking in handsome money. The company, apart from this, is also believed to have issued American Depository Shares worth $ 15.2 crore out of which only $ 5.25 crore were brought in to the country.

After detailed investigation, the company was unable to convince the SFIO on the false amount. The allocation of this amount is now considered to be under the Enforcement Directorate. Thus, the report unveils the entire scam with proofs of all false claims.

A CASE OF INSIDER TRADING

Investigations into Satyam scam by the Crime Investigation Department (CID) of the State Police and Central agencies have established that the promoters indulged in nastiest kind of insider trading of the companys shares to raise money for building a large land bank. The funds collected by the former chairman B. Ramalinga Raju, his brother Rama Raju and their relatives were used to purchase lands in the names of 330 companies and about 30 individuals. All of them had equity participation in these entities, of which 327 were linked to the family. They have been charged to use money earned by offloading their shares in Satyam to purchase lands. According to the SFIO findings, promoters of Satyam and their family members during April 2000 to January 7, 2009 sold almost 3.9 crore shares collecting in Rs 3029.67 crore as is revealed in the table 3. The promoters on the basis of the inflated books posed a healthy financial state of the company in the market. As the brand built strong amongst the peers, the share price started shooting up. During this course of time, the promoters kept their objective straight of offloading their shares at frequent intervals. Thus, the promoters not only manipulated share prices to make personal gains but also cheated the other shareholders and investors. SFIO report also states how the promoters during this time traded through 15 brokers, sub-brokers and investment companies in the market, some considered market leaders, namely, the DBS Cholamandalam Securities Ltd, DSP Merrill Lynch Ltd and BNP Paribas equity India Pvt Ltd. During this course, the founder ex-chairman Ramalinga Raju sold 98 lakh shares collecting in Rs 773.42 crores, whereas, his brother Rama Raju, sold 1.1 crore shares pocketing Rs 894.32 crores.

UNCONVINCED ROLE OF INDEPENDENT DIRECTORS

The Satyam episode has brought out the failure of the present corporate governance structure that hinges on the independent directors,53 who are supposed to bring objectivity to the oversight function of the board and improve its effectiveness. They serve as watchdogs over management, which involves keeping their eyes and ears open at Board deliberations with critical eye raising queries when decisions scent wrong. Stakeholders place high expectations on them but the Satyams case reveals such expectations are misplaced. Six of the nine directors on Satyams Board were independent directors including US academician Mangalam Srinivasan (the independent director since 1991), Vinod K. Dham (famously known as father of the Pentium and

an ex Intel employee), M R ammohan Rao (Dean of Indian School of Business), US Raju (former director of IIT Delhi), T.R. Prasad (former Cabinet Secretary) and Krishna Palepu (professor at Harvard Business School). They were men of standing & reputation.

It is amazing that seven out of the nine directors were present at the board meeting where the unanimous decision to acquire Maytas Infra and Maytas Properties was taken. To avoid any controversy, the two founder directors did not participate in the decision making process for the reason that the provisions of the Companies Act and SEBI regulations mandate presence of only disinterested directors in board meeting where the agenda of such a nature is discussed. This naturally causes suspicion on the role performed by the independent directors present in that meeting. What concerns everyone is that those independent directors allowed themselves to be party to the mysterious designs of the promoter directors. It is hard to believe that such eminent and experienced personalities could not discover the well-planned massive fraud and manipulations.

FAKE AUDIT
PricewaterhouseCoopers (PwC)s audit firm, Price Waterhouse, was in the auditor for Satyam and have been auditing their accounts since 2000-01. The fraudulent role played by the PricewaterhouseCoopers (PwC) in the failure of Satyam matches the role played by Arthur Anderson in the collapse of Enron. S Goplakrishnan and S Talluri, partners of PwC according to the SFIO findings, had admitted they did not come across any case or instance of fraud by the company. However, Ramalinga Raju admission of having fudged the accounts for several years put the role of these statutory auditors on the dock. The SFIO report stated that the statutory auditors instead of using an independent testing mechanism used Satyams investigative tools and thereby compromised on reporting standards. The last straw of deficiencies in statutory standards was despite having observed control deficiencies in the Information Systems and the risk of exposure to frauds, PwC chose to keep silent and did not report the matter to the shareholders. In an admission before the SFIO, VSP Gupta, Global Head Internal audit had said that even though the coverage and resources of internal audit was not commensurate with the size of the business,

PwC ignored this fact and certified the company. PwC did not check even one per cent of the invoices, neither did they pay enough attention to verification of sundry debtors, which according to Ramalinga Rajus confession was overstated by 23 per cent (SFIO report says it was overstated by almost 50 per cent).57 The Statutory auditors also failed in discharging their duty when it came to independently verifying cash and bank balances, both current account and fixed deposits. Ideally, if the company claims it has cash on its hand, that should be enough signal for auditors to check whether that cash in hand is available or not; whether bank balance has been invested properly of not; whether internal control mechanisms are in place. There needs to be a physical verification of assets owned by the company rather than simply relying on the books prepared by the company. Hence, it was required that the auditors (PwC) independently checked with the banks on the existence of fixed deposits, but this was not done for as large as a sum of Rs. 5040 crore. Thus, the statutory auditors on whom the general public relied on for accurate information not only failed in their job but themselves played a part in perpetrating fraud by preparing a clean audit report for fudged, manipulated and cooked books. Another development that came under investigators lens was that between 2003- 2008, audit fee from Satyam had increased three times. Price Waterhouse received an annual fee of 4.3 crore for financial year 2007-2008, which is almost twice as what Satyam peers i.e. TCS, Infosys, Wipro, on an average pay their auditors. This shows that the auditors were being lured by a monetary incentive to certify the cooked and manipulated financial statements. Events of such nature raise doubts about statutory auditors discharging their duty independently and consequently on 24th January 2009, senior partners of PwC, S Gopalakrishna (was due for retirement by March 09) and Srinivas Talluri were booked by Andhra Pradesh CID police on charges of fraud (section 420 of IPC) and criminal conspiracy (120B).58 The PwC has suspended the two partners, who signed on 20 Satyams balance sheet and are currently in prison. The SFIO report also states that PwC outsourced the audit function to some audit firm, Lovelock and Lewis, without the approval of Satyam.

PROMOTERS PLEDGING OF SHARES

According to the SFIO findings, when the company started feeling a credit crunch, they had to resort to share pledging to raise funds. To cover such an act, the promoters transferred their individual shareholding to SRSR Holdings Private Limited (SRSRHP) and pledged shares as a

security for the loans obtained from various Private limited entities. These were later transferred to it by the founder B. Ramalinga Raju and his wife and the money for the same were brought to Satyam as a liability which was not recorded in the books of account of Satyam. It was in September 2008 that the global crises made the existence of the company further stringent. Due to a drop in the valuation of the 21 shares the promoters had to additionally pledge 3.61 crore shares of Maytas Infra Ltd to meet the margins. In the last attempt to cover up the frauds, Raju tried to make an acquisition of Maytas Properties and Maytas Infra Ltd, which led to the entire fall out.

DESIRED POLICY ACTIONS TO PREVENT ANOTHER SATYAM

Some of the steps which could be taken to strengthen corporate governance are: have in all listed companies a code on ethics; independent regulatory body on the lines of the Public Company Accounting Oversight Board (PCAOB) of USA; rotation of external auditors in non-financial institutions; Reform Audit Education; split offices of chairman and CEO; encourage competent directors; abolish practice of nominating independent directors, exempt independent directors from vicarious liability; provide insurance cover to them; review the definition of independent director given in clause 49 of listing agreement; close supervision of rating agencies; superior Board practices, improve remuneration policy; legislative sanction to insider trading laws; introduce new audit standards; make audit committee strictly independent; prohibit political funding; install whistleblower system; introduce class action suit & compensation; make CSR compliance a mandatory provision; have in place permanent PPP system, and enhance criminal and civil penalties.

ASSIGNMENT ON
The corporate governance status of three listed companies
What is corporate governance?

Corporate governance refers to the set of systems, principles and processes by which a company is governed. They provide the guidelines as to how the company can be directed or controlled such that it can fulfil its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the board of directors, management, shareholders to customers, employees and society. The management of the company hence assumes the role of a trustee for all the others.

Corporate governance is based on principles such as conducting the business with all integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions, complying with all the laws of the land, accountability and responsibility towards the stakeholders and commitment to conducting business in an ethical manner. Another point which is highlighted in the SEBI report on corporate governance is the need for those in control to be able to distinguish between what are personal and corporate funds while managing a company.

Why is it important?

Fundamentally, there is a level of confidence that is associated with a company that is known to have good corporate governance. The presence of an active group of independent directors on the board contributes a great deal towards ensuring confidence in the market. Corporate governance is known to be one of the criteria that foreign institutional investors are increasingly depending on when deciding on which companies to invest in. It is also known to have a positive influence on the share price of the company. Having a clean image on the corporate governance

front could also make it easier for companies to source capital at more reasonable costs. Unfortunately, corporate governance often becomes the centre of discussion only after the exposure of a large scam.

CORPORATE GOVERNANCE OF ICICI BANK

Companys philosophy on code of governance Our corporate governance policies recognize the accountability of the Board and the importance of its decisions to all our constituents, including customers, investors, employees and the regulatory authorities, and to demonstrate that the shareholders are the cause of and ultimate beneficiaries of our economic activities. The functions of the Board and the executive management are well-defined and are distinct from one another. We have taken a series of steps including the setting up of sub-committees of the Board to oversee the functions of executive management. These sub-committees of the Board which mainly consists of non-executive directors meet regularly to discharge their objectives. Board of Directors Our Board consists of eight members, and is responsible for the management of our business. The Boards role, functions, responsibility and accountability are clearly defined. In addition to its primary role of monitoring corporate performance, the functions of the Board include : approving corporate philosophy and mission; participating in the formulation of strategic and business plans; reviewing and approving financial plans and budgets; monitoring corporate performance against strategic and business plans, including overseeing operations; ensuring ethical behaviour and compliance with laws and regulations; reviewing and approving borrowing limits; formulating exposure limits; and keeping shareholders informed regarding plans, strategies and performance. To enable the Board to discharge its responsibilities effectively, our executive management places detailed reports on our performance on a quarterly basis.

Audit and Risk Committee The Audit and Risk Committee consists of five directors, all of which are independent directors. It provides direction to and oversees the audit and risk management function, reviews the financial accounts, interacts with statutory auditors and reviews matters of special interest. Shri Uday M. Chitale, Smt. Lalita D. Gupte, Shri R. Rajamani, Shri B. V. Bhargava and Dr. Satish C. Jha are the members of the Committee.

Committee of Directors The Committee of Directors consists of five directors, including the Managing Director and Chief Executive Officer. This Committee has delegated financial powers and approves loan proposals and expenditures within the broad parameters of the delegated authority. Shri K. V. Kamath, Smt. Lalita D. Gupte, Shri B. V. Bhargava, Shri Uday M. Chitale and Shri H. N. Sinor are the members of the Committee.

Compensation Committee The Compensation Committee consists of four directors, including the Managing Director and Chief Executive Officer. The functions of the committee include considering and recommending to the Board the amount of compensation payable to the executive directors, fees payable to other directors and framing the guidelines for and management of the employee stock option scheme. Smt. Lalita D. Gupte, Shri Somesh Sathe, Shri Uday M. Chitale and Shri H. N. Sinor are the members of the Committee.

Nomination Committee The Nomination Committee consists of four directors, including the Managing Director and Chief Executive Officer. The functions of the committee include the submission of recommendations to the Board to fill vacancies on the Board or in senior management positions.

Share Transfer Committee

The Share Transfer Committee consists of four directors, including the Managing Director and Chief Executive Officer. This committee reviews and approves transfers of equity shares and debentures. Smt. Lalita D. Gupte, Shri B. V. Bhargava, Shri Uday M. Chitale and Shri H. N. Sinor are the members of the committee.

Means of Communication The Board of Directors of the Company approve the audited financial accounts on a quarterly basis within one month of the quarter for which the accounts are adopted. The Board further takes on record the audited financial results in the prescribed proforma of the stock exchanges within one month of close of the quarter and announces forthwith the results to all the stock exchanges where the shares of the Company are listed as also to various news and wire agencies all over India. Further, the highlights of quarterly audited financial results are also published in two newspapers within 48 hours of the conclusion of the meeting of the Board in which they are taken on record. Generally, the quarterly results in the prescribed proforma is published in Financial Express (in English) at Mumbai and in Sandesh (in Gujarati) at Vadodara, the place of the Registered Office of the Company. The Managements Discussion and Analysis about the performance of the Bank for the year ended March 31, 2012 is included in the current annual report. The quarterly results as well as press releases of the Company are put on the Companys Website at http://www.icicibank.com. General Shareholder Information Share transfer system : The Company has formed two committees viz., Share Transfer Committee of Executives and Share Transfer Committee of Directors for considering transfers and allied activities. The Share Transfer Committee of Executives comprises 4 members including the Managing Director and Chief Executive Officer. The other members are senior officials of the Bank. This committee considers transfer request for lodgement of transfers up to 1,000 shares per folio per lodgement. This committee meets at an interval of 7 days or thereabout. The meetings are generally chaired by the Managing Director and Chief Executive Officer. 38 meetings of the committee were held during the year from April 1, 2011 to March 31, 2012.

 CORPORATE GOVERNANCE OF JAI PRAKASH ASSOCIATES LTD.

COMPANYS PHILOSOPHY ON CODE OF GOVERNANCE Any Corporate strategy needs to be dynamic, vibrant, responsive to the changing economic scenario and flexible enough to absorb environmental and fiscal fluctuations. It must harness the inherent strengths of available human resources and materials, have the capacity to learn from success or failure and, more importantly, ensure growth with human face. This has always been the guiding philosophy in the Company and will continue to be so in future. The historic structural reforms initiated by the Government in early 90s have irrevocably transformed the Indian business environment landscape. Deregulation and decontrol, dismantling of trade barriers, partial convertibility and encouragement of foreign investment pose challenges to industry but simultaneously have opened up new avenues for growth.

BOARD OF DIRECTORS The constitution of the Board aims at ensuring Directors commitment to participate in the affairs of the Company with understanding and competence to deal with current and emerging business issues. The Companys policy does not prescribe any pre-determined or specific tenure for Directors (except Whole-time Directors who are appointed for a term of five years) as this has the inherent advantage of not losing valuable contribution from the Directors who, over the years, have developed insight into the Company and its affairs. The Board of Directors comprised 18 Directors as on March 31, 2009 out of which 8 are Independent Directors. As per Clause 49 of the Listing Agreement, in case of an Executive Chairman, at least half of the Board should comprise Independent Directors. Our Board, which is headed by Executive Chairman, earlier had 10 Independent Directors, out of which nomination of Shri M J Subbaiah has been withdrawn by ICICI Bank Ltd. and Shri ERC Shekar has since resigned due to personal reasons. The Company will reconstitute the Board within the prescribed period. AUDIT COMMITTEE As a measure of good Corporate Governance and to provide assistance to the Board of Directors in fulfilling the Boards oversight responsibilities, an Audit Committee has been constituted by

the Board comprising four Directors, all being Non-Executive with majority of them being independent. The Chairman of the Audit Committee is an Independent Director. The Company Secretary acts as the Secretary to the Audit Committee. The constitution of the Audit Committee also meets the requirements under Section 292A of the Companies Act, 1956 (The Act). The terms of reference and powers of the Audit Committee are in keeping with those contained under Clause 49 of the Listing Agreement and the Act. The Audit Committee inter-alia reviews: Management Discussion and Analysis of financial conditions and results of operations. Quarterly and Annual Financial Results. Annual Budget and Variance Reports. Significant related party transactions. Internal Audit Reports/ Cost Audit Reports including letters on internal control weaknesses, if any, issued by Statutory/Internal Auditors. Recommendation for appointment of Statutory and Cost Auditors. Appointment and remuneration of Internal Auditors. REMUNERATION COMMITTEE The Remuneration Committee, constitution of which is a non-mandatory requirement, was constituted by the Board to recommend/review the Remuneration package of the Whole-time Directors. The Remuneration Committee comprises three independent Directors. Two meetings of Remuneration Committee were held during the year on October 18, 2008 and January 17, 2009. SUBSIDIARY COMPANIES The Company has two material non-listed subsidiary companies viz. Jaiprakash Power Ventures Limited and Jaypee Karcham Hydro Corporation Limited. Names of the independent directors of the Company who are represented as directors on the Board of these subsidiary companies are as under: Jaiprakash Power Ventures Limited Shri B.K. Goswami(Director) Jaypee Karcham Hydro Shri Gopi K. Arora(Director) The Audit Committee of the Company reviews the Financial Statements and investments made by the above subsidiary companies.

The minutes of the Board meetings of the above subsidiary companies and statement of significant transactions and arrangements entered into by these subsidiaries are also placed at the Board Meetings of the Company.

RISK MANAGEMENT The Company manages risks as an integral part of its decision making process. The Audit Committee and the Board of Directors are regularly apprised regarding key risk assessment and risk mitigation mechanisms. CEO/CFO CERTIFICATION In terms of the requirements of clause 49 (v) of the Listing Agreement, the Executive Chairman & CEO and Whole-time Director (Finance) & CFO have submitted necessary certificate to the Board of Directors stating the particulars specified under the said clause. This certificate has been reviewed by the Audit Committee and taken on record by the Board of Directors at the respective meetings held on June 6, 2009.

SECRETARIAL AUDIT FOR RECONCILIATION OF CAPITAL A qualified practicing Company Secretary carried out quarterly Secretarial Audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. The audit confirmed that the total issued/paid-up capital was in agreement with the aggregate of the total number of shares in physical form and the total number of dematerialized shares held with NSDL and CDSL. MEANS OF COMMUNICATION The quarterly, half yearly and annual results were published in leading Newspapers which included Economic Times, Business Standard, Financial Express, Hindustan Times, Dainik Jagran and Swatantra Bharat. The same were sent to Stock Exchanges and were also displayed on the website of the Company, www.jalindia.com and simultaneously posted on the Electronic Data Information Filing and Retrieval website namely www.sebiedifar.nic.in. The website is also accessible through a hyperlink EDIFAR from SEBIs official website, www.sebi.gov.in. The data is also posted on Corporate Filing and Dissemination System (CFDS) website www.corpfiling.co.in.

The Company also displays the Presentations made by the Company to Institutional investors or to Analysts and the Official News Releases on its website.

LISTING ON STOCK EXCHANGES AND STOCK CODES

The Equity shares of the Company are currently listed on the National Stock Exchange of India Limited (Code: JPASSOCIAT) and The Bombay Stock Exchange Limited (Code: 532532). The Company has paid annual listing fees due to NSE and BSE for the year 2008-2009. The FCCBs issued by the Company during the financial years 2004-05, 2005-06 and 2007-08 are listed on Singapore Stock Exchange. SHARE TRANSFER SYSTEM

The shares received in physical mode, for transfer by the Company, are transferred expeditiously, provided the documents are complete and the relative shares are not under any dispute. The share certificates duly endorsed in favour of the Transferees are returned promptly to shareholders. Confirmations in respect of the requests for dematerialisation of shares are expeditiously sent to the respective depositories i.e. NSDL and CDSL. DEMATERIALISATION OF SHARES AND LIQUIDITY The shares of the Company are in compulsory demat segment and are available for trading in the depository systems of both NSDL and CDSL. As on March 31, 2009, 96.82% of the Share Capital of the Company had been dematerialized. The shares of the Company have been included as a part of BSE Sensex w.e.f. March 14, 2008 and continue to be part of NSE Junior Nifty. The same are actively traded on both BSE and NSE.

SHARE WARRANTS During the year under report, out of the 5,00,00,000 (Five Crore) Warrants issued on preferential basis to a Promoter Group Company entitling the holder to apply for allotment of one Equity share of Rs.2 at a premium of Rs.395 on full payment, per Warrant, in one or more tranches, 1,00,00,000 (One Crore) Warrants were converted into 1,00,00,000 (One Crore) Equity Shares of Rs.2/- each at a premium of Rs.395 per share on October 10, 2008. The Conversion Option for

the balance Warrants can be exercised by July 21, 2009 whereafter, if not exercised, the same shall elapse. Further during the year, considering the growth opportunities in different fields of business interest of the Company and with a view to further augment the long term resources for growth and diversification plans, approval of shareholders was received through Postal Ballot on October 18, 2008 for further issue and allotment of 12 Crore (Twelve Crore) Warrants on preferential basis to a Promoter Group Company at premium on full payment. However, the allotment of the said 12,00,00,000 (Twelve Crore) Warrants was not made as the Board of Directors in their meeting held on 21st October, 2008 decided to raise a sum of approx. Rs. 1800 Crores through the Rights Issue to meet the Companys requirements of funds instead of issuing further Warrants to the Promoters on Preferential basis. Accordingly, the said allotment as approved by the shareholders, was not made and, thus, the same elapsed. However, keeping in view the capital market conditions during the relevant period, the Company has not so far launched the said Rights Issue.

CORPORATE GOVERNANCE OF BAJAJ AUTO

The commitment of Bajaj Auto Limited (Bajaj Auto, BAL or the Company) to the highest standards of good corporate governance practices predates SEBI and clause 49 of the Listing

Agreements. Transparency, fairness, disclosure and accountability are central to the working of the Company and its Board of Directors. Given below are the companys corporate governance policies and practices for 2006-07.

Board of directors

Bajaj Auto had obtained approval of the central government to increase the number of directors from 15 to 18. Recognizing the importance of having a broad-based board, the company has appointed two additional directors during the year P. Murari and Niraj Bajaj. Their details are given in the notice to the annual general meeting. Tarun Das, a non-executive independent director, resigned from the board on 9 April 2006. Non-executive directors compensation

A sitting fee of Rs.20,000 per meeting is paid to non-executive directors, including independent directors, for every meeting of the board or committees of the board attended. This has been fixed by the board of directors. Based on the attendance at the board and the committee meetings, non-executive directors are also paid commission within the overall ceiling of 1 per cent on net profits. This is currently distributed at the rate of Rs.50,000 per meeting of the board and its committees attended by them. Payment of such commission has been approved by the shareholders at their meeting held on 15 July 2006 for an additional period of five years with effect from 1 April 2006. The Company currently does not have a stock option programme.

Information supplied to the board

In advance of each meeting, the board is presented with all relevant information on various matters related to the working of the Company, especially those that require deliberation at the highest level. Directors have separate and independent access to senior management at all times. In addition to items which are required to be placed before the board for its noting and / or approval, information is provided on various significant items. In terms of quality and

importance, the information supplied by management to the board of Bajaj Auto is far ahead of the list mandated under clause 49 of the listing agreement.

Audit committee

Constitution and composition Bajaj Auto set up its audit committee in 1987. Since then, the company has been reviewing and making appropriate changes in the composition and working of the committee from time to time to bring about greater effectiveness, and comply with various requirements under the Companies Act, 1956 and clause 49 of the listing agreement. The present audit committee consists of the following directors: 1. S H Khan, Chairman 2. D J Balaji Rao 3. J N Godrej 4. Naresh Chandra 5. Nanoo Pamnani

All members of the audit committee are independent, non-executive directors and are financially literate as required by clause 49. Moreover, S H Khan, D J Balaji Rao, J N Godrej and Nanoo Pamnani have accounting or related financial management expertise.

Meetings, attendance and topics discussed

During 2006-07, the audit committee met four times: 18 May 2006, 15 July 2006, 18 October 2006 and 16 January 2007. The meetings were scheduled well in advance. In addition to the members of the audit committee, these meetings were attended by the heads of finance and internal audit functions, the statutory auditors and cost auditors of the Company, and those executives who were considered necessary for providing inputs to the committee. The Company Secretary acted as the secretary to the audit committee.

Subsidiary companies

During the year, the audit committee reviewed the financial statements (in particular, the investments made) of each unlisted Indian subsidiary company - Bajaj Auto Holdings Ltd. (BAHL), Bajaj Allianz General Insurance Company Ltd. (BAGICL) and Bajaj Allianz Life Insurance Company Ltd. (BALICL). Minutes of the board meetings of these subsidiary companies were regularly placed before the board of Bajaj Auto. So too was a statement of the significant transactions and arrangements entered into by these subsidiary companies.

Disclosures A summary statement of transactions with related parties was placed periodically before the audit committee during the year. Suitable disclosures have been made in the financial statements, together with the managements explanation in the event of any treatment being different from that prescribed in accounting standards. At its meeting of 16 July 2005, the board laid down procedures to inform it of the Companys risk assessment and minimization procedures. These would be periodically reviewed to ensure that management identifies and controls risk through a properly defined framework.

Remuneration committee Bajaj Auto constituted a remuneration committee of the board on 16 January 2002. For 2006-07, the committee consisted of the following non-executive independent directors :

1. D J Balaji Rao, Chairman 2. S H Khan 3. Naresh Chandra.

Non-executive directors Non-executive directors are paid sitting fees and commission on net profits as separately stated in this report.

Executive directors There was no change in the terms of remuneration paid to Rahul Bajaj, Madhur Bajaj, Rajiv Bajaj, Sanjiv Bajaj and D S Mehta during the year under review. On their retirement, all the executive directors, excluding D S Mehta, are entitled to superannuation benefits payable in the form of an annuity from the Life Insurance Corporation of India and these form a part of the perquisites allowed to them. No pension is paid by the Company. Bajaj Auto has no stock option plans and hence it does not form a part of the remuneration package payable to any executive and / or non-executive director. During the year under review, none of the directors was paid any performance-linked incentive. In 2006-07, the Company did not advance any loans to any of the executive and / or non-executive directors. Table 3 gives details of the remuneration paid or payable to directors during 2006-07.

Management
Management discussion and analysis This is given as a separate chapter in the annual report. Disclosure of material transactions Senior management made periodical disclosures to the board relating to all material financial and commercial transactions where they had (or were deemed to have had) personal interest that might have been in potential conflict with the interest of the company. Warning against insider trading Comprehensive guidelines in accordance with the SEBI regulations are in place. The code of conduct and corporate disclosure practices framed by the company has helped in ensuring compliance with the requirements.

Communication to shareholders Quarterly, half-yearly and annual financial results are published in numerous leading dailies, such as Hindustan Times, Times of India, The Economic Times, Sakal, Kesari, Financial Express, Hindu Business line and Business Standard along with the official press release. In addition, the half-yearly and annual financial results are published in the Financial Times, UK. The company also sends the half-yearly financial results, along with a detailed write-up, to each household of shareholders. Bajaj Auto has its own web-site, www.bajajauto.com which contains all important public domain information, including presentations made to the media, analysts, institutional investors. The web-site also contains information on matters such as dividend and

bonus history, answers to frequently asked queries (FAQs) by the various shareholder categories and details of the corporate contact persons. All financial and other vital official news releases are also communicated to the concerned stock exchanges, besides being placed on the Companys web-site. The company also files the following information, statements, reports on the electronic data information filing and retrieval (EDIFAR) website maintained on-line by National Informatics Centre (NIC) as specified by SEBI : Full version of the annual report including the balance sheet, profit and loss account, directors report and auditors report, cash flow statements, half-yearly financial statements and quarterly financial statements. Corporate governance report. Shareholding pattern. The company further files on-line on the approved website of London Stock Exchange such information on financial statements and other matters as specified by it.

Shareholders and investors grievance committee

The board of directors of Bajaj Auto constituted its shareholders and investors grievance committee in 2000. This committee specifically looks into the shareholders and investors complaints on matters relating to transfer of shares, non-receipt of annual report, non-receipt of dividend etc. In addition, the committee also looks into matters that can facilitate better investor services and relations. The committee consisted of the following non-executive independent directors as on 31 March 2007 : 1. D J Balaji Rao, Chairman 2. J N Godrej 3. Naresh Chandra 4. S H Khan

During the year under review, the committee met on 17 March 2007 to review the status of investors services rendered. All members were present at the meeting. The secretarial auditor as well as the Company Secretary (who is also the compliance officer) was also present. All physical transfers of shares as well as requests for dematerialisation / rematerialisation are processed in weekly cycles. Bajaj Auto has not appointed any registrar or share transfer agent and the work regarding dematerialization / Dematerializations is handled in-house through its own connectivity with the National Securities Depository Limited and Central Depository Services (India) Limited. No query / complaint received during the year under review remained unattended / unresolved, except where the matters were sub-judice. More details have been furnished in the chapter on Additional Shareholder Information.

CEO / CFO certification The CEO and CFO have certified to the board with regard to the financial statements and other matters as required by clause 49 of the listing agreement. The certificate is contained in this annual report. Report on corporate governance This chapter, read together with the information given in the chapters on Management Discussion & Analysis and Additional Shareholder Information, constitute the compliance report on corporate governance during 2006-07. Auditors certificate on corporate governance The company has obtained the certificate from its statutory auditors regarding compliance with the provisions relating to corporate governance laid down in clause 49 of the listing agreement. This report is annexed to the directors report, and will be sent to the stock exchanges along with the annual return to be filed by the company.

Combined code of governance of the London Stock Exchange The London Stock Exchange has formulated a combined code, which sets out the principles of good governance and code of best practice. The code is not legally applicable to the company. However, given that Bajaj Autos GDRs are listed on the London Stock Exchange, the company

has examined the code and has noted that it is substantially in compliance with the critical parameters, especially in matters of transparency and disclosures.