In Conversation with Ajay Singh, Group General Counsel, CS And Compliance Officer, Sona Comstar

Formative years: Mr Singh, what motivated you to study law. Tell us about the initial years of your career?

I have been a science student till my graduation with aspiration to be an engineer. But destiny had something special for me. During this phase, I used to read various magazines to get more insight on various career options. I read about Company Secretaryship course and potential employment opportunities.  I did enquiries about the profession. After, I got more insight about the profession, I decided to pursue Company Secretaryship course and moved to Delhi from my hometown. The curriculum of the CS course was very comprehensive with focus on diverse corporate laws ranging from economic, labour, Tax etc. and also on the constitution of India. The reading of the constitution of India and case laws were always fascinating to me during this phase.  

I started my career with a company in financial services in Delhi in 1997 where I got insight into various regulatory issues. After a stint of four years, I joined Hero Motors, which was a turning point of my career. During this phase, I realised that addition of law degree may be a boost for my career. I decided to pursue law. The law faculty at Delhi University used to be amongst the top law colleges in India. After evaluating various law colleges, I appeared for law entrance exam at Delhi University and managed to get admission at Faculty of Law, North Campus, Delhi University in second attempt. My boss at Hero was kind enough to allow me to attend regular law classes during my employment. I worked with Hero Motors for almost 6 years and got lot of insight into transactional, legal and corporate secretarial matters. In one of the transactional matters involving court approved demerger and merger, which was later challenged by State of UP on stamp duty issue, relying famous Hindustan Unilever judgment of Supreme Court, was a very good learning experience for me and infact the hand on experience on this matter, became gateway for my entry into Lafarge in Mumbai in 2008. That time, Lafarge was in the process of acquiring the Ready-Mix Concrete Business of L&T, and that was my first transactional project in Lafarge. 

Roles and Responsibilities: What does a day in your shoes look like at work?

Currently, I am working with Sona BLW Precision Forgings Ltd (‘Sona Comstar’) as Group General Counsel, Company Secretary and Compliance Officer. Sona Comstar is one of the world's leading mobility technology companies, designing, manufacturing, and supplying highly engineered, mission-critical, high-quality, complex and bespoke systems and components for global mobility OEMs for both electrified and non-electrified powertrain segments. It is a leading supplier for the fast-growing global Electric Vehicles (EV) market, with 33% of its revenues derived from the EV market. It has 10 manufacturing facilities across India, the USA, Mexico and China and 72% of its sales are for international markets. It has a diversified revenue base across geographies, products, vehicle segments, and customers. It has strong R&D capabilities in precision forging, precision machining, winding, product integration, machine learning, and artificial intelligence, through which it provides high-power density electrical and mechanical systems, sensors, and embedded software solutions. Sona Comstar aspires to become one of the world’s most respected and valuable mobility technology companies.

Sona Comstar got listed in 2021 in the mid of Covid-19 and since then have been consistently into top 200 companies on NSE. At Sona Comstar, I am spearheading legal, contracts, litigations, IPR, transactional matters, corporate governance, ethics and regulatory compliance functions globally. I am also designated as Company Secretary and Compliance Officer for Sona Comstar in India. 

Corporate Governance has been one of the cornerstones at Sona Comstar. We keep improvising and benchmarking our governance practices and also on the basis the external evaluations. In 2023, we have been the winner of Golden Peacock Award for Corporate Governance and also amongst the finalist for corporate governance award by Institute of Company Secretaries of India for the year 2023.

Many of our top global OEM customers have their ethical compliance framework, which is also applicable on us as value chain partners. Some of the customers conduct period annual audit of our compliance framework, which provides us the opportunity to improvise our compliance practices, from time to time. We also conduct periodic voluntary external audit of our compliance framework to bring more efficacy to it.

Sectoral Focus: Given your experience across diverse sectors like auto, infrastructure, mining, and financial services, what unique legal challenges have you encountered in these industries, and how have you tailored your approach to address them?

Auto industry is transitioning from pure fossil fuel to EV and other evolving technologies globally. In the auto industry, new challenges are emerging in the form of protection of IPRs, product liability, recall, trade embargo, vendor due diligence, regulatory compliance, ethics and sustainability. On regulatory side, the framework like Plastic Waste Management Rules introduced by the Ministry of Environment, Forest and Climate Change, Government of India in 2016, to give thrust on plastic waste minimization, source segregation, recycling etc. and addition of the concept of Extended Producer’s Responsibility (EPR) in 2022, casts a huge responsibility on a producer, brand owner and importer. EPR not only necessitates collection of plastic waste but also concerns with plastic waste minimization, segregation, processing and recycling. Under EPR, certain annual Targets are assigned to each individual entity. Compliance with these rules is not only important from environment perspective but also for the sustenance of the organization. Recent promulgation of revamped merger control rules, new dispensation for On-market transactions, fine tuning of merger filing exemptions, refining of remedies process during phase 1 and phase 2 reviews, amongst others, under Competition/Anti-Trust Laws are the unique regulatory challenges which corporates need to be mindful of. These changing regulatory frameworks require the GCs to be constantly on their toes from risk mitigation perspective in their contractual and compliance framework. We regularly conduct periodic training and awareness sessions, apart from monthly updates, for our board members, senior management and employees to develop a culture of compliance in our organisation. 

Being a public listed company, we are also regulated by SEBI. Keeping the pace with ever evolving regulatory framework, require constant vigil on the part of general counsels and compliance officers. With increasing activism by stakeholders, proxy advisors, regulatory oversight and increasing independence of Boards, the corporates always need to improvise on their governance practices and disclosures. Regulations on Insider Trading, structural digital data base, surveillance by exchanges and rumours verifications etc. are the critical areas, which can turn out to be a big compliance issue, if the organisations are not properly geared up for these compliance issues. We have a dedicated compliance program on Insider Trading for our designated persons. Apart from dedicated orientation sessions on Insider Trading, we publish case studies of SEBI rulings and case laws on Insider Trading, as and when new one is reported, to keep the momentum of awareness alive amongst our designated persons.

My journey in Lafarge has also been very exciting. I got the opportunity to work on various transactional matters and issues involving mining laws, competition laws and stamp duty laws, amongst others. I have been part of the India team on Competition law issue emanating from the global merger of Lafarge of Franse and Holcim of Switzerland, both having significant global presence, which was subject to anti-trust approvals in various jurisdictions including in India. This global merger was second example in the competition law jurisprudence in India where CCI mandated phase II structural remedies, which was a great learning experience for me. This structural remedy has been subject to iterations by CCI twice first in the form of assets sale and thereafter in the form of transfer of control due to regulatory issues surrounding the transferability of the captive mines. I also got the opportunity to work on the famous cement cartelisation case in India, wherein 12 cement companies including Lafarge were penalised by CCI to the tune of INR 6700 crores. Mining laws in India have been subject to frequent changes since 2015, which requires constant vigil and careful evaluation of regulatory issues in a M&A. This underscores the need for a robust compliance program in an organisation and more specifically on Anti-Trust laws. 

IPO, QIP and ESOPs Experience: With your extensive experience in IPOs, QIP and ESOPs, what are some of the key challenges you encountered during these processes, and how did you ensure compliance with regulatory requirements while meeting business objectives?

With always evolving regulatory framework and oversight, raising of capital in India has been a big milestone. While working on any offer document for raising capital, one will realise how important are your historical documents, compliance and governance practices in an organisation. There are enormous disclosures in the form of industry, financials, expert reports, compliance, litigations, governance practices etc. These issues can throw spanner in your fund raise plan, had it not been handled diligently, and putting off the track the project timelines. 

With all these governance and compliance practice in place, we were able to successfully launch the IPO of INR 53 billion in the mid of Covid 2019 in the shortest possible time with staller listing. In Sept 2024, again we have been able to raise INR 24 billion in QIP in the shortest possible time. SEBI ICDR Regulations are subject to frequent changes and keeping the pace and the groundwork is important for a successful capital raise. If the organisation focuses on governance and compliance issues, the turn around can be faster for capital raiseESOPs over the period have been an important tool to enhance performance, and incentivising employees of the Company. It helps in retention of high calibre employees. Desgning of ESOP plans require careful evaluations of various share-based reward programs, valuation aspects, and governing rules and regulations. SEBI Insider Trading Regulations also govern trading in ESOP shares, which require lot of alertness on the part of the compliance officers, in terms of applicable provisions, guidance notes and case laws, while permitting trade in ESOP shares and in particular when the employees may be in possession of UPSI, as many times the compliance officers are faced with the dilemma in terms of probabilities. Recent changes in SEBI Insider Trading Regulations pertaining to trading plans are also important to note. 

Litigation and Regulatory Compliance: How do you approach litigation and statutory compliance in heavily regulated industries, and what measures do you take to mitigate potential legal risks for the company?

Commercial contracts and Regulatory compliance, if not handled meticulously, may expose an organisation to potential litigation. It is very much important for a GC to understand the business of the Company. In the upstream and downstream contracts, it is important to focus more on the business related issues and covenants from risk mitigation perspective. Other boilerplate clauses like indemnity, litigation of liability, dispute resolution etc. are also important. If the former is reviewed and addressed properly, the probability of invocation of later will reduce.   

Litigation should be the last resort in an organisation, given time and resources involved in the protracted litigation in India. The contracts should provide options like consultations, conciliation, mediation before invoking arbitration or jurisdiction of courts. Once need to be very careful, while drafting a dispute resolution mechanism in a commercial contract. Choosing the right forum for dispute resolution, venue, seat and reciprocity of jurisdictions are important aspect worthing considering from enforcement and risk mitigation perspective.

Periodic reviews of the contractual and compliance framework, and in particular keeping in mind emerging judicial precedents and regulatory framework help in risk mitigation.   

Tech-Driven Legal Departments: In your view, what does the future hold for legal teams embracing technology?  How do you see governance and compliance frameworks changing with the emergence of legal tech and AI?

Embracing of the newer evolving technologies streamlines the legal and compliance functions. We are increasingly using these tools in our legal, compliance and governance functions. Choosing the right tool, specific to ones need, is very much important, given the various tools available in the market.