Environmental, Social and Governance (ESG) - Principles and Practice · Stakeholders Rights

Functions and Grievance Redressal of the Stakeholders Relationship Committee

Updated 11 October 2026 · Fact-checked

The Stakeholders Relationship Committee under section 178 considers and resolves the grievances of security holders, such as complaints on share transfer, non-receipt of annual reports or dividends. Its chairperson must be a non-executive director and must attend general meetings. Inability to resolve a grievance in good faith is not a contravention.

Understand Functions and Grievance Redressal of the Committee

A company has many people who put money into it: shareholders, debenture-holders, deposit-holders and other security holders. When something goes wrong for them, they need a fixed place to complain. The Stakeholders Relationship Committee (SRC) is that place.

Section 178 requires the Board of a company with more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year to constitute the committee. The test is the number of security holders in the year, not the company's size or listing status alone.

The main function is stated in one line: the SRC shall consider and resolve the grievances of security holders of the company. Typical grievances are delay or refusal in transfer of shares, non-receipt of the annual report, non-receipt of declared dividend, and issues with new certificates or demat credit. These examples are practical illustrations; the Act itself uses the general word grievances.

The chairperson must be a non-executive director. The Board decides the other members. The chairperson, or in his absence another member he authorises, must attend the general meetings of the company. This lets security holders put their concerns to someone accountable.

The law is fair to the committee. If it is unable to resolve or consider a grievance in good faith, that is not a contravention. But a company that breaches section 178 faces a fine, and officers in default face penalties.

Key rules to remember

When the SRC is required: Security holders > 1,000 at any time during a financial year → Board must constitute the SRC; Security holders include shareholders, debenture-holders, deposit-holders and any other security holders. More than 1,000, so exactly 1,000 does not trigger it.
Composition: Chairperson = non-executive director; other members = as decided by the Board; The Act does not fix a minimum number of members or require independent directors. Do not copy the NRC rule here.
Core function: SRC considers and resolves grievances of security holders; Examples: transfer complaints, non-receipt of annual reports and dividends.
Attendance at general meetings: Chairperson (or authorised member in his absence) attends general meetings; Applies to the chairperson of each committee under section 178.
Good faith protection: Inability to resolve or consider a grievance in good faith ≠ contravention; Protects the committee only where it acted in good faith.
Penalty for contravention: Company: fine ₹1,00,000 to ₹5,00,000; officer in default: penalty ₹1,00,000 (as the text gives it); The official text of the officer penalty is worded with a substituted clause; in the exam, state that officers in default are also penalised, and quote the company fine range.

How to solve Functions and Grievance Redressal of the Committee questions

Use this method for any case-based question on the SRC. It follows provision, analysis, conclusion.

1Identify the company's position: count the security holders (shareholders, debenture-holders, deposit-holders and others) held at any time during the financial year.
2State the provision: if the number is more than one thousand, the Board must constitute the SRC under section 178(5).
3Check composition: is the chairperson a non-executive director? The Board decides the other members.
4Name the grievance in the facts (transfer delay, missing annual report, unpaid dividend) and state that the SRC must consider and resolve it under section 178(6).
5Apply the attendance rule: the chairperson, or an authorised member in his absence, must attend the general meeting.
6Check for good faith: if the grievance remained unresolved, ask whether the committee acted in good faith.
7Conclude clearly, and mention the consequence of contravention: fine on the company and penalty on officers in default.

Quickest way: Four-point SRC check

When to use it: Use when time is short and the question asks whether a company has complied or what the SRC must do.

Count holders: more than 1,000? If yes, SRC is needed.
Chair: non-executive director? If not, there is a breach.
Task: grievances of security holders must be considered and resolved.
Meeting: chairperson (or authorised member) present at the general meeting? Then conclude with good faith and penalty.

Common mistakes in Functions and Grievance Redressal of the Committee

Saying the SRC is needed only for listed companies.
Students mix it up with the Nomination and Remuneration Committee, which applies to listed public companies and prescribed classes.
Fix: Remember the SRC test in section 178(5) is the number of security holders: more than 1,000 at any time in the financial year.
Requiring independent directors on the SRC.
The NRC rule of three non-executive directors with half independent is memorised and applied to both.
Fix: For the SRC, only the chairperson must be a non-executive director. Other members are decided by the Board.
Counting only shareholders when testing the 1,000 limit.
The word stakeholders sounds like shareholders.
Fix: Add shareholders, debenture-holders, deposit-holders and other security holders together.
Saying the SRC chairperson attends only the AGM.
Students think of the annual meeting only.
Fix: The Act says general meetings. Write general meetings, and add that an authorised member can attend in the chairperson's absence.
Treating any unresolved grievance as an automatic offence.
Students ignore the proviso to section 178(8).
Fix: State that inability to resolve or consider a grievance in good faith is not a contravention.
Stating the SRC's role as deciding dividends or approving share transfers by default.
Grievance topics are confused with the Board's own powers.
Fix: The SRC deals with complaints about these matters. It considers and resolves grievances; it does not replace the Board.

Worked examples

Example 1

Sunrise Textiles Ltd has 800 shareholders, 250 debenture-holders and 100 fixed deposit-holders during the financial year. The Board has not formed an SRC. Advise whether it is required.

Show the solution

Provision: under section 178(5), a company with more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year must constitute an SRC.
Analysis: add the holders: 800 + 250 + 100 = 1,150.
1,150 is more than 1,000, so the threshold is crossed.
Consequence: failure to constitute the committee is a contravention of section 178, attracting a fine on the company and penalty on officers in default.

Answer: Yes. Total holders are 1,150, which is more than 1,000, so the Board must constitute an SRC with a non-executive director as chairperson. Not doing so is a contravention of section 178.

Example 2

Meera, a shareholder of Kaveri Industries Ltd, complains that she has not received the dividend declared two months ago. The SRC chairperson, Mr. Rao, an executive director, did not attend the AGM. The SRC says it tried to resolve the complaint in good faith but the bank details were incomplete. Discuss.

Show the solution

Provision: section 178(6) requires the SRC to consider and resolve grievances of security holders. Non-receipt of dividends is a typical grievance.
Analysis on the grievance: the SRC must take it up. The proviso to section 178(8) says inability to resolve or consider a grievance in good faith is not a contravention. Incomplete bank details, with genuine effort, supports good faith.
Analysis on the chairperson: section 178(5) requires the chairperson to be a non-executive director. Mr. Rao is an executive director, so the composition is defective.
Analysis on attendance: section 178(7) requires the chairperson, or an authorised member in his absence, to attend general meetings. Nobody attended the AGM, so this is breached.
Conclusion: the unresolved grievance is protected by good faith, but the composition and attendance defaults are contraventions.

Answer: The unresolved dividend complaint is not a contravention if the SRC acted in good faith. However, appointing an executive director as chairperson and the absence of the chairperson or an authorised member at the AGM breach section 178, exposing the company and officers in default to penalty.

Exam tips

Write the section number: 178(5) for constitution and composition, 178(6) for functions, 178(7) for attendance, 178(8) for penalty and good faith.
In case studies, always count all categories of security holders before deciding if the SRC is needed.
Do not copy the NRC composition rule into an SRC answer. Examiners test this contrast.
Use the structure provision, analysis, conclusion, and end with a one-line conclusion.
When asked about functions, list real grievances (transfer, annual report, dividend) as examples after stating the statutory function.

Practice questions from Stakeholders Rights

Functions and Grievance Redressal of the Committee in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

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Functions and Grievance Redressal of the Committee: frequently asked questions

What are the functions of the Stakeholders Relationship Committee?

Under section 178(6), it considers and resolves the grievances of security holders of the company. Common examples are complaints on share transfer and non-receipt of annual reports or dividends.

Who can be the chairperson of the SRC?

The chairperson must be a non-executive director. The Board decides who the other members are. The Act does not require independent directors on this committee.

Must the SRC chairperson attend the general meeting?

Yes. Section 178(7) requires the chairperson of each section 178 committee to attend general meetings. If he is absent, another member authorised by him may attend.

Is a company liable if the SRC cannot resolve a grievance?

Not if the inability to resolve or consider the grievance was in good faith. The proviso to section 178(8) says this does not constitute a contravention.

Which companies must have an SRC?

A company with more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year. The Board must constitute the committee.