Audit Committee

The Audit Committee functions according to its Charter that defines its composition, authority, responsibility and reporting functions in accordance with the Act, listing requirements and US regulations applicable to the Company and is reviewed from time to time. Whilst, the full Charter is available on the Company's website, given below is a gist of the responsibilities of the Audit Committee:

1. Reviewing the quarterly/annual financial statements before submission to the Board, focusing primarily on:
   • Overseeing the Company's financial reporting process and the disclosure of its financial information, including earnings, press release, to ensure that the financial statements are correct, sufficient and credible;
   • Review Reports on the Management Discussion and Analysis of financial condition, results of Operations and the Directors' Responsibility Statement;
   • Compliance with accounting standards and changes in accounting policies and practices;
   • Major accounting entries involving estimates based on exercise of judgment by Management;
   • Draft Auditors' Report, qualifications, if any and significant adjustments arising out of audit;
   • Analysis of the effects of alternative GAAP requirements on the financial statements;
   • Compliance with listing and other legal requirements concerning financial statements;
   • Scrutinise inter corporate loans and investments; and
   • Disclosures made under the CEO and CFO certification and related party transactions to the Board and Shareholders.
2. Reviewing with the management, external auditor and internal auditor, adequacy of internal control systems and recommending improvements to the management.
3. Reviewing, with the management, the statement of uses/ application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilised for purposes other than those stated in the offer document/ prospectus/ notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of a public or rights issue and making appropriate recommendations to the Board to take up steps in this matter.
4. Recommending the appointment/removal of the statutory auditor, cost auditor, fixing audit fees, name of Audit Firms and approving non-audit/consulting services provided by the statutory auditors' firms to the Company and its subsidiaries; evaluating auditors' performance, qualifications, experience, independence and pending proceeding relating to professional misconduct, if any. It shall also ensure that the cost auditors are independent, have arm's length relationship and are also not otherwise disqualified at the time of their appointment or during their tenure.
5. Reviewing the adequacy of internal audit function, coverage and frequency of internal audit, appointment, removal, performance and terms of remuneration of the chief internal auditor.
6. Discussing with the internal auditor and senior management significant internal audit findings and follow-up thereon.
7. Reviewing the findings of any internal investigation by the internal auditor into matters involving suspected fraud or irregularity or a failure of internal control systems of a material nature and report the matter to the Board.
8. Discussing with the external auditor before the audit commences, the nature and scope of audit, as well as conduct post-audit discussions to ascertain any area of concern.
9. Reviewing the Company's financial and risk management policies.
10. Establish and review the functioning of the Vigil Mechanism under the Whistle-Blower policy of the Company and review the functioning of the legal compliance mechanism.
11. Reviewing the financial statements and investments made by subsidiary companies and subsidiary oversight relating to areas such as adequacy of the internal audit structure and function of the subsidiaries, their status of audit plan and its execution, key internal audit observations, risk management and the control environment.
12. Look into the reasons for any substantial defaults in payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividend) and creditors, if any.
13. Reviewing the effectiveness of the system for monitoring compliance with laws and regulations.
14. Approving the appointment of CFO after assessing the qualification, experience and background etc. of the candidate.
15. Engage a registered valuer in case valuations are required in respect of any property, stocks, shares, debentures, securities, goodwill, assets, liabilities or net worth of the Company.
16. Review and suitably reply to the report(s) forwarded by the auditors on the matters where auditors have sufficient reason to believe that an offence involving fraud, is being or has been committed against the Company by officers or employees of the Company.
17. Review the system of storage, retrieval, display or printout of books of accounts maintained in electronic mode during the required period under law.
18. Approve all or any subsequent modification of transactions with related parties.

During the year, the Committee reviewed key audit findings covering operational, financial and compliance areas. Management personnel presented their risk mitigation plan to the Committee. It also reviewed the internal control system in subsidiary companies, status on compliance of its obligations under the Charter and confirmed that it fulfilled its duties and responsibilities. The Committee, through self-assessment, annually evaluates its performance. The Chairman of the Audit Committee briefs the Board members about the significant discussions at Audit Committee meetings.

During the year under review, the Committee comprised of four Independent Directors, all of whom are financially literate and have relevant finance and/or audit exposure. Mr S M Palia, who was the Financial Expert, stepped down as Director with effect from April 25, 2013. Mr Munjee has been appointed as the Financial Expert in his place. The quorum of the Committee is two members or one-third of its members, whichever is higher. The Chairman of the Audit Committee also attended the last Annual General Meeting of the Company. During the period under review, ten Audit Committee meetings were held on April 3, 2013, May 27, 2013, July 9, 2013, August 6, 2013, September 16, 2013, October 8, 2013, November 7, 2013, January 16/17, 2014, February 8, 2014 and March 25, 2014. Each Audit Committee meeting which considers financial results is preceded by a meeting which is attended only by the Audit Committee members and the Auditors.

The composition of the Audit Committee and attendance at its meetings is as follows:

The Committee meetings are held at the Company's Corporate Headquarters or at its plant locations and are attended by Managing Director, Executive Directors, Chief Financial Officer, Chief Internal Auditor, Statutory Auditors and Cost Auditors. The Business and Operation Heads are invited to the meetings, as and when required. The Company Secretary acts as the Secretary of the Audit Committee. The Chief Internal Auditor reports to the Audit Committee to ensure independence of the Internal Audit function.

The Committee relies on the expertise and knowledge of the management, the internal auditors and the independent Statutory Auditor in carrying out its oversight responsibilities. It also uses external expertise, if required. The management is responsible for the preparation, presentation and integrity of the Company's financial statements including consolidated statements, accounting and financial reporting principles. The management is also responsible for internal control over financial reporting and all procedures are designed to ensure compliance with accounting standards, applicable laws and regulations as well as for objectively reviewing and evaluating the adequacy, effectiveness and quality of the Company's system of internal control.

Deloitte Haskins & Sells LLP, Mumbai (ICAI Firm Registration No.117366W/W – 100018), the Company's Statutory Auditor, is responsible for performing an independent audit of the Financial Statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in India.

Nomination And Remuneration Committee

During the year under review, the Remuneration Committee of the Board held meetings on May 29, 2013 and November 8, 2013 wherein all members namely, M/s. N N Wadia, Chairman, Cyrus P Mistry, Ravi Kant and S Bhargava were present.

Further during the year under review the Nominations Committee of the Board held a meeting on May 29, 2013, attended by all members, namely M/s. N N Wadia, Chairman, Cyrus P Mistry and Ravi Kant.

Pursuant to Section 178(1) of the Act the Company merged its Nomination Committee and Remuneration Committee into the Nomination and Remuneration Committee on November 8, 2013, not less than one half of the Committee, including the Chairman are Independent Directors. Further, based on the requirements of the Act and the current applicable Clause 49 of the Listing Agreement, the constituted Committee has the following terms of reference:

1. Formulate the criteria for determining qualifications, positive attributes and independence of a director.
2. Recommend to the Board a policy relating to the remuneration for the directors (including specific remuneration packages for Executive Directors including pension rights and any compensation payment), key managerial personnel and other employees. While formulating the policy, it shall ensure that –
   1. 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;
   2. Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and
   3. 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.
3. Identify persons who are qualified to become directors (including independent directors) and who may be appointed in senior management in accordance with the criteria laid down and recommend to the Board their appointment and removal. Whilst recommending appointment of Executive Directors, a balance between functional and business unit representatives may be considered.
4. Carry out evaluation of every director's performance including review of remuneration of CEOs of certain significant subsidiaries.
5. Take steps to refresh the composition of the Board from time to time.

During the year under review, a meeting of the Committee was held on March 10, 2014. The decisions are taken by the Committee, at meetings or by passing circular resolutions. The composition of the Nomination and Remuneration Committee and attendance at its meeting is as follows:

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