NBCC (INDIA) LIMITED

(A Government of India Enterprise) CIN: L74899DL1960GOI00335

Regd. Office: NBCC BHAWAN LODHI ROAD NEW DELHI-110003,

Website: www.nbccindia.com Email ID: co.sectt@nbccindia.com

NBCC - Policy on Materiality of Related Party

Transactions and Reporting of Related Party Transaction

(As approved by the Board of Directors on 29th March, 2019)

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NBCC (INDIA) LIMITED

NBCC - Policy on Materiality of Related Party Transactions and Reporting of Related Party Transaction

1. Introduction

NBCC recognizes that Related Party Transactions (as defined below) may pose potential or actual conflicts of interest and may raise questions whether such transactions are in the larger interest of the Company as well as the stakeholders concerned and in compliance with the provisions of the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended from time to time.

This policy as duly formulated and adopted by the Board of Directors of the Company at the 467th meeting held on March 29, 2019 under the nomenclature “NBCC - Policy on materiality of Related Party Transactions and Reporting of Related Party Transaction” shall be implemented with immediate effect.

1.2 Scope and purpose of the policy

The Board of Directors of the Company upon the recommendation of Audit Committee has adopted this Policy on Materiality of Related Party Transactions. The policy envisages the procedure governing Related Party Transactions required to be followed by Company to ensure compliance with the requirements under law.

As per the requirement of the Listing Agreement further replaced by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the Listing Regulations) made effective from 01st December, 2015 every Listed Company shall have a Related Party Transaction Policy. Further in view of SEBI (LODR) Amendment Regulation, 2018 to come into effect from 1st April, 2019 all listed companies to formulate a policy on materiality of related party transactions and also on dealing with related party transactions. Accordingly, this policy has been framed and adopted by the Board in supersession of the earlier policy on the subject followed under the erstwhile Statutory provisions.

2. Definitions 2.1 Act means the Companies Act, 2013 including any amendment or modification thereof. 2.2 Arm’s Length Transaction means a transaction between two related parties that is

conducted as if they were unrelated..

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2.3 Associate Company a company as defined under section 2(6) of the Act and as defined by Indian Accounting Standard (Ind AS) 28 on Accounting for Investments in Associates in Consolidated Financial Statements.

2.4 Audit Committee means the Committee of the Board constituted under section 177 of the

Act and Regulation 18 of the Listing Regulations. 2.5 Board means Board of Directors of the Company.

2.6 Body Corporate means an entity as defined under section 2(11) of the Act.

2.7 Company or NBCC means NBCC (India) Limited.

2.8 Director means a person as defined under section 2(34) of the Act. 2.9 Employees shall mean the employees and officers of the Company, including but not

limited to Whole-time Directors.

2.10 Key Managerial Personnel” means key managerial personnel as defined under the

Companies Act, 2013 which includes- (i) The Chief Executive Officer or the managing director or the manager; (ii) Company Secretary; (iii) the whole-time director; (iv) Chief Financial Officer; (v) such other officer, not more than one level below the directors who is in whole-time

employment, designated as key managerial personnel by the Board; and (vi) such other officer as may be prescribed 2.11 Listing Regulations means the Securities and Exchange Board of India (Listing

Obligations and Disclosure Requirements) Regulations, 2015 as amended from time to time.

2.12 Material Related Party Transaction: In terms of the SEBI (LODR) Regulations it means

a transaction with a related party 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.

i) Notwithstanding the above, a transaction involving payments made to related party with

respect to brand usage or royalty shall be considered material, if the transactions to be entered into individually or taken together with the previous transactions during a financial year exceeds 2% of the annual consolidated turnover of the Company as per the last audited financial statement of the Company, which require the approval of the shareholders under the Listing Regulations, and other such RPT(s) which require the approval of the shareholders in terms of section 188(1) of the Act read with rule 15(3) of the Companies (Meetings of Board and its Powers) Rules, 2014 as amended from time to time.

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ii) Under companies Act, 2013 material related party transactions have not been defined. However, Section 188 of the Companies Act, 2013, read with related rules specify certain contracts and arrangements as enlisted in Column (1) of the Table given below , which if entered into between the Company and its related party(ies), will be considered as material related party transaction(s) only if such transactions are not on Arm’s Length Basis and are not in the Ordinary Course of Business and are falling in the ambit of thresholds as enlisted in Column (2) of the Table given below. The company shall also be required to pass an ordinary resolution if such transaction or transactions, exceed the limits as mentioned below:

Transactions covered*

(Column ‘1’) Transaction value

(Column ‘2’) sale, purchase or supply of any goods or materials directly or through appointment of agents

amounting to ten per cent or more of Turnover or Rs. 100 Crore, whichever is lower

selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agents

amounting to ten per cent or more of Net Worth or Rs. 100 Crore, whichever is lower.

leasing of property of any kind* amounting to ten per cent or more of Turnover or Net Worth or Rs. 100 Crore, whichever is lower.

availing or rendering of any services directly or through appointment of agents

amounting to ten per cent or more of Turnover or Rs. 50 Crore, whichever is lower.

such related party's appointment to any office or place of profit in the company, its subsidiary company or associate company

monthly remuneration exceeding Rs. 2.5 Lakh

Remuneration for underwriting the subscription of any securities or derivatives thereof, of the company

exceeding 1% of Net Worth

*The Turnover or Net Worth referred in the above table shall be computed on the basis of the Audited

Financial Statement of the preceding financial year. 2.13 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:

A ‘related party' is a person or entity that is related to the company. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party, directly or indirectly, in making financial and/or operating decisions and includes the following:

1. A person or a close member of that person’s family is related to a company if that person:

a. is a related party under Section 2(76) of the Companies Act, 2013 which are as follows:

(i) a director or his relative ;

(ii) a key managerial personnel or his relative ;

(iii) a firm, in which a director, manager or his relative is a partner ;

(iv) a private company in which a director or manager or his relative is a member or director ;

(v) a public company in which a director or manager is a director and holds along with his relatives, more than two per cent of its paid-up share capital ;

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(vi) any body corporate whose Board of directors, managing director, or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager ;

(vii) any person under whose advice, directions or instructions a director or manager is accustomed to act :

Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;

(viii) any company which is –

(A) a holding, subsidiary or an associate company of such company ;

(B) a subsidiary of a holding company to which it is also a subsidiary ;or

(C) an investing company or the venturer of the company;";

Explanation.—For the purpose of this clause, “the investing company or the venturer of a company” means a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate.

(ix) such other person as may be prescribed;

Explanation: For the purposes of sub-clause (ix) of clause (76) of section 2 of the Act, a director other than an independent director or key managerial personnel of the holding company or his relative with reference to a company, shall be deemed to be a related party.

b. Director or key managerial personnel of the holding company or his relative with reference to a company; or has control or joint control or significant influence over the company; or

c. is a key management personnel of the company or of a parent of the company; or 2. An entity is related to a company if any of the following conditions applies:

a. The entity is a related party under Section 2(76) of the Companies Act, 2013; or

b. The entity is a related party under the applicable Accounting Standards.

c. The entity and the company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others); or

d. One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member); or

e. Both entities are joint ventures of the same third party; or f. One entity is a joint venture of a third entity and the other entity is an associate of the

third entity; or

g. The entity is a post-employment benefit plan for the benefit of employees of either the company or an entity related to the company. If the company is itself such a plan, the sponsoring employers are also related to the company; or

h. The entity is controlled or jointly controlled by a person identified in (1).

i. A person identified in (1)(b) has significant influence over the entity (or of a parent of the entity); or “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.”

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Provided that this definition shall not be applicable for the units issued by mutual funds which are listed on a recognised stock exchange(s);

2.14 Related party Transactions means a transaction, entered/to be entered with related

party/parties of the Company, either as specified under section 188 of the Companies Act, 2013 or as defined under Regulation 2(1)(zc) of the SEBI (LODR) Regulations, 2015 as amended time to time.

2.15 Ordinary course of business:

Ordinary course of business means the usual transactions, customs and practices undertaken by the Company to conduct its business operations and activities, which includes-

(i) Payment of remuneration, including the monthly salary, performance related pay, and ex-

gratia/reward for services, to Functional Directors and Key Managerial Personnel,

(ii) Payment of sitting fee to the Independent Directors;

(iii) Payment of expenditure incurred on travel, conveyance, boarding, lodging and on other expenditure incidental thereto, incurred by the Company in connection with the discharge of official duties by the Directors and Key Managerial Personnel;

(iv) Infusion of equity in the Subsidiaries and Joint Ventures Companies and the dividend

received on such investments.

(v) Such other transactions as the Audit Committee/Board may decide from time to time. 2.16 Policy means NBCC - Policy on Materiality of Related Party Transactions and Reporting of

Related Party Transaction. 2.17 Relative: Relative’’, with reference to any person, means anyone who is related to another, if— i. they are members of a Hindu Undivided Family; ii. they are husband and wife; or iii. one person is related to the other in such manner as may be prescribed, which is as

follows: (a) Father (including step-father) (b) Mother (including step-mother) (c) Son (including step-son) (d) Son’s wife (e) Daughter (f) Daughter’s husband (g) Brother (including step-brother) (h) Sister (including step-sister)

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2.18 Subsidiary means a company as defined in Section 2(87) of the Companies Act, 2013.

2.19 Turnover means the gross amount of revenue recognised in the profit and loss account

from the sale, supply, or distribution of goods or on account of services rendered, or both, by a company during a financial year.

2.20 Any other term not defined herein shall have the same meaning as defined in the

Companies Act, 2013, the Listing Regulations, Securities Contract Regulation Act, SEBI Act or any other applicable law or regulation.

3. Procedures 3.1 Identification of Related Party Transactions 3.1.1 The respective Director/ Key Executive/ Head of Department will ensure that a notice of

any potential Related Party Transaction (being any contract or other services proposed to be entered with JVs, Subsidiaries and SPVs including appointment of/to any office or place of profit in any JVs, Subsidiaries or SPVs, and other related parties) is delivered well in advance to the Audit Committee and Board, so that the Audit Committee and Board will have adequate time to obtain and review information about the proposed transaction and arrange for necessary prior approval of Audit Committee - in terms of regulation 23(2) of the Listing Regulations read with section 177(4)(iv) of the Act; prior consent of the Board - in terms of section 188(1) of the Act; prior approval of the Company by a resolution - in terms of first proviso under section 188(1) of the Act; and ratification by the Board or, as the case may be, by the shareholders within three months - in terms of section 188(3) of the Act.

3.1.2 Key Executive/Head of Department shall intimate to Central Compilation Division within

7 days of the end of each quarter all the transactions with related parties.

Based on the above, all the related party transactions entered into during each quarter shall be consolidated by the Central Compilation Division and submitted to the Audit Committee and Board, as duly approved by the Director (Finance)/ Chief Finance Officer along with Quarterly/Annual Accounts.

Review and approval of Related Party Transaction 4.1 Audit Committee

All the transactions with the related party, require the prior approval of the Audit Committee, in terms of regulation 23(2) of the Listing Regulations. Further, subsequent modification of such transaction also require the approval of the Audit Committee as provided under section 177(4)(iv) of the Act. The Audit committee shall consider the following factors while deliberating the related party transactions for its approval: -

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(i) Name of party and nature of relationship;

Nature of transaction and material terms thereof including duration of transaction and the value of transaction;

(ii) the manner of determining the pricing to ascertain whether the same is on arm’s length; and

(iii) Business rationale for entering into such transaction

Any member of the Committee who has a potential interest in any Related Party Transaction will recluse himself and abstain from discussion and voting on the approval of the Related Party Transaction. The audit committee shall review all related party transactions in the company. For this purpose, the Audit Committee may designate a member who shall be responsible for reviewing related party transactions. A statement in summary form of transactions with related parties in the normal and ordinary course of business shall be placed periodically before the Audit Committee. The Audit Committee shall also review statement of related party transactions submitted by management. Further, the details of material individual transactions with related parties, which are not in the normal and ordinary course of business, shall be placed before the Audit Committee. Details of material individual transactions with related parties or others, which are not on an arm’s length basis should be placed before the Audit Committee, together with Management’s justification for the same. Omnibus Approval Audit Committee may grant omnibus approval for related party transactions as provided under section 177(4)(iv) of the Act read with rule 6A of the Companies (Meetings of Board and its Powers) Rules, 2014, and regulation 23(3) of the Listing Regulations. The audit committee shall lay down the criteria for granting the omnibus approval in line with the policy on related party transactions of the listed entity and such approval shall be applicable in respect of transactions which are repetitive in nature. This will include the related party transaction by NBCC with respect to the maintenance/works/contracts to its subsidiaries by retaining 1% agency charges.

Further, the Audit Committee shall consider and approve the omnibus approval based on the following criteria: The maximum value of all RPTs, in aggregate, which can be allowed under omnibus route in a year, shall not exceed 25% of the annual consolidated turnover of the company as per last audited financial statements.

The maximum value per RPT which can be approved under omnibus route shall not exceed 10% of the consolidated turnover of the company as per last audited financial statements.

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However, where the need for related party transaction cannot be foreseen and details regarding transaction are not available, audit committee may grant omnibus approval for such transactions subject to their value not exceeding rupees one crore per transaction. While assessing a proposal put up before the Audit Committee / Board for approval, the Audit Committee / Board may review the following documents / seek inter alia the following information from the management in order to determine if the transaction is in the ordinary course of business and at arm’s length or not:

Nature of the transaction i.e. details of goods or property to be acquired / transferred or

services to be rendered / availed – including description of functions to be performed, risks to be assumed and assets to be employed under the proposed transaction;

Key terms (such as price and other commercial compensation contemplated under the

arrangement) of the proposed transaction, including value and quantum;

Key covenants (non-commercial) as per the draft of the proposed agreement/ contract to

be entered into for such transaction;

Special terms covered / to be covered in separate letters or undertakings or any other

special or sub arrangement forming part of a composite transaction;

Benchmarking information that may have a bearing on the arm’s length basis analysis, such as: market analysis, research report, industry trends, business strategies, financial forecasts,

etc.; third party comparables, valuation reports, price publications including stock exchange

and commodity market quotations;

management assessment of pricing terms and business justification for the proposed

transaction; comparative analysis, if any, of other such transaction entered into by the company.

Transactions of following nature shall not be subject to the omnibus approval of the Audit Committee: Transactions which are not at arm’s length and not in the ordinary course of business

Transactions which are not repetitive in nature

Individual Transactions exceeding 10% of the consolidated turnover of the Company as

per latest preceding year audited financial statements.

Transactions in respect of selling or disposing of the undertaking of the company

Financial Transactions e.g. Loan to related parties, Inter Corporate Deposits, subscriptions to bond, debenture or preference shares issued by the related parties, corporate guarantee given/received from related parties

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transactions entered into between two government companies;

Any other transaction the Audit Committee may deem not fit for omnibus approval

The Audit Committee shall review, at least on a quarterly basis, the details of related party transactions entered into by the company pursuant to each of the omnibus approval given;

All omnibus approvals by the Audit Committee shall be valid for 1 year and shall require a fresh approval after expiry of such financial year. 4.2 Board of Directors All Related Party Transactions which are either not on arm’s length basis or not in the Ordinary Course of Business shall be recommended by the Audit Committee for the approval of the Board of Directors. The Board of Directors shall further recommend the same for the approval of the Shareholders by way of Resolution of the Company, in case the said transaction is a Material Related Party Transaction

However, no such approval of the Board shall be required for the transactions entered into with other government company/companies or any transaction entered into by the Company with a related party in the ‘ordinary course of business’ and at ‘arm’s length basis’, as specifically provided under the Act.

Any member of the Board who has any potential interest in any Related Party Transaction will recluse himself and abstain from discussion and voting on the approval of the Related Party Transaction. 4.3 Shareholder approval As per SEBI (LODR) Regulations all material related party transactions shall require approval of the shareholders through resolution at a general meeting or through postal ballot and no related party shall vote to approve such resolutions whether the entity is a related party to the particular transaction or not: In accordance with SEBI (LODR) read with MCA Notification No. GSR 463(E)[F.NO.1/2/2014-

CL-V], Dated 5-6-2015, following transactions are exempted from the requirements of obtaining

the Shareholders approval:

i) Transactions entered into by NBCC with other government companies;

ii) Transactions entered into between NBCC and its wholly owned subsidiary

whose accounts are consolidated with NBCC and placed before the

shareholders at the general meeting for approval.

However approval of Shareholders would be required under the Companies Act 2013 for the transactions specified at (ii) above, if they are not in the ordinary course of business and are not on arms length basis and material in nature. Further, no member of the Company who is related to the transaction shall vote on resolution for prior approval or, as the case may be, ratification.

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4.4 RPT Exempted: Notwithstanding the foregoing, the following Related Party Transactions shall not require approval of Audit Committee, Board of Directors or Shareholders:

i. transactions entered into between two government companies;

ii. transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.

However approval of Shareholders would be required under the Companies Act 2013 for above transactions if they are not in the ordinary course of business and are not on arms length basis and material in nature

In accordance with Section 188 of the Companies Act, 2013 read with related rules issued

thereon, in case of wholly owned subsidiary, the resolution passed by the holding company

shall be sufficient for the purpose of entering into the transactions between wholly owned

subsidiary and holding company.

5 Disclosures

5.1 Every Director of a Company who is in any way, whether directly or indirectly, concerned

or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into –

5.1.1 With a body corporate in which such director or such director in association with any

other director, holds more than two per cent. shareholding of that body corporate, or is a promoter, manager, Chief Executive Officer of that body corporate; or

5.1.2 With a firm or other entity in which, such director is a partner, owner or member, as the

case may be;

shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting:

Provided that where any director who is not so concerned or interested at the time of entering into such contract or arrangement, he shall, if he becomes concerned or interested after the contract or arrangement is entered into, disclose his concern or interest forthwith when he becomes concerned or interested or at the first meeting of the Board held after he becomes so concerned or interested.

5.2 The transaction entered into with the related party/ies shall be disclosed in the Annual

Report/Accounts as per the disclosure requirement of the Companies Act, 2013 and Listing Regulations.

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5.3 The particulars of all the Related Party Transaction entered into with the approval of the Audit Committee / Board of Directors / Shareholders shall be entered into the Register of Contract or Arrangements in which Directors are interested, maintained by the Company and all the compliance related thereto shall be done as per the provisions of the Companies Act, 2013 and Listing Regulations.

The Policy on Related Party Transaction shall be disclosed on the website of the Company and a

web link thereto shall also be provided in the Annual Reports of the Company.

This policy may be reviewed, amended and approved at least in every three years or from time to time by the Board of Directors of the Company upon the recommendation of the Audit Committee.

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