SEBI Clarifies Scope of “Related to Promoters or Directors” for Independent Directors under LODR Regulations
The Securities and Exchange Board of India (SEBI) has issued an interpretative letter dated 2 March 2026 in response to an application submitted by Maithan Alloys Limited under the Securities and Exchange Board of India (Informal Guidance) Scheme, 2025. The application sought guidance on the interpretation of Regulation 16(1)(b)(iii) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations).
Background
Maithan Alloys Limited informed SEBI that Mr. Siddhartha Shankar Agarwalla is a member of the promoter group of the company and a director in two subsidiaries of the company. The company proposed to appoint his cousin as an Independent Director on its board, citing her professional qualifications, including a doctorate degree, fellowship programme from IIM Kolkata, and P.G.D.M. from IIM Kozhikode. The proposed appointee is an Assistant Professor at Praxis Business School and Head of the Corporate Branding Team.
According to the application, the proposed appointee is the daughter of Mr. Siddhartha Shankar Agarwalla’s father’s sister.
Applicant’s Submissions
The company submitted that the expression “related to promoters or directors” appearing in Regulation 16(1)(b)(iii) of the LODR Regulations is limited to relatives as defined under Regulation 2(1)(zd) of the LODR Regulations. The company further submitted that a cousin is not covered by that definition and therefore is not related to the promoter or directors of the listed entity for the purposes of Regulation 16(1)(b)(iii).
The company also submitted that the explanation to Regulation 17(1)(b) concerning the expression “related to any promoter” is confined to that provision and does not apply to Regulation 16(1)(b)(iii).
Query Raised Before SEBI
The company sought clarification on the following question:
“Is cousin of Director/Promoter qualify as person related to such Director/Promoter in terms of clause (iii) of Regulation 16(1)(b) of SEBI (LODR) Regulations, 2015?”
SEBI’s Response
SEBI noted that Regulation 16(1)(b)(iii) requires that an Independent Director should not be related to promoters or directors in the listed entity, its holding company, subsidiary, or associate company.
SEBI further recorded that:
- Mr. Siddhartha Shankar Agarwalla and his wife are part of the promoter group and together hold 18.07% of the shares of the company.
- Mr. Siddhartha Shankar Agarwalla is a director in two subsidiaries of the company.
- The proposed Independent Director is the daughter of Mr. Siddhartha Shankar Agarwalla’s father’s sister.
SEBI observed that a cousin is not identified as a “relative” under the Companies (Specification of Definitions Details) Rules, 2014 read with Section 2(77) of the Companies Act, 2013 and Regulation 2(1)(zd) of the LODR Regulations. On that basis, SEBI stated that the cousin of Mr. Siddhartha Shankar Agarwalla may be eligible to be appointed as an Independent Director of the company on the stated facts.
SEBI also noted that Regulation 16(1)(b) contains other qualification and eligibility criteria for appointment as an Independent Director, including criteria relating to holding securities or interest in the listed entity. SEBI stated that while appointing any person as an Independent Director, the listed company must ensure compliance with the conditions stipulated under the LODR Regulations, the Companies Act, 2013 and the rules made thereunder.
Conclusion
In its interpretative letter, SEBI stated that since a cousin is not identified as a “relative” under the applicable statutory provisions referred to in the letter, the proposed appointee may be eligible for appointment as an Independent Director of Maithan Alloys Limited on the facts presented in the application, subject to satisfaction of the other applicable eligibility requirements under the LODR Regulations and the Companies Act, 2013.
Disclaimer: The views expressed herein are solely for legal research purposes and do not constitute legal opinion, legal advice, solicitation, or professional guidance of any nature. The views are personal to the author and do not necessarily reflect those of PJ Law Offices (www.pjlaw.in), its principal, representatives, associates, retainers, affiliates (collectively, “PJLaw”). Readers are advised to seek independent legal counsel before acting on any information contained herein. PJLaw makes no representation or warranty, express or implied, regarding the accuracy or completeness of the contents and expressly disclaims all liability arising from reliance upon or use of the same.
