Centre has cracked down against corporates over CSR norms. According to Union Minister PP Chaudhary, the companies which fail to comply with CSR norms will be subjected to penal action.
Centre has cracked down against corporates over CSR norms. According to Union Minister PP Chaudhary, the companies which fail to comply with CSR norms will be subjected to penal action. There are 160 firms over which Corporate Social Responsibility (CSR) action has been ordered. CSR is mandatory and compliance is monitored by way of mandatory disclosure requirements under the Companies Act, 2013. Even though the government does not demand or direct the companies in regard to allocation of CSR funds but it is the company’s duty to spend 2 per cent of its annual average net profit made in three-year time period towards some social cause. After finding discrepancies in CSR spending data, so far, 1,018 companies have been given show cause notice by corporate affairs ministry for not spending the requisite amount in Corporate Social Responsibility activity.
The decision to take penal action against defaulter entities by the Ministry of State for Corporate Affairs was taken after the Regional Director and Registrar of Companies submitted reports. According to a PTI report, as many as 530 companies that are required to comply with CSR norms have been found violating it (non- compliance, and non-disclosure) during 2014-15. The action is also being taken against the companies if found to have failed to comply with the provision. “The ministry has accorded permission for initiating penal action under Section 134(8) of the Act for non- compliance… against 160 companies,” said PP Chaudhary to PTI.
According to a report in Indian Express, Rajya Sabha was informed by the government that in an assessment of CSR expenditure among 7,334 companies during 2014-15, 4,195 companies were found to be defaulters and had no CSR expenditure to show. The remaining 3,139 companies had spent a total of Rs 8,803 crore on CSR activities. For certain violations, companies may have to face a loss from a minimum amount of Rs 50,000 to Rs 25 lakh as fine under section 134(8).
“Earmarking of CSR funds of companies for any particular activity/ activities is beyond the purview of the Companies Act, 2013,” and the boards of respective companies have been empowered under the law to take decisions with respect to the allocation of such funds, the minister told PTI.