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August 4, 2021

Government sanctioned examination of 366 cases related to CSR rule violations

by Mahesh Mara in Corporate Law

Government sanctioned examination of 366 cases related to CSR rule violations

Government has initiated prosecution proceedings in 366 cases related to violation of CSR provisions under the companies law. Under the Companies Act, 2013, certain class of profitable entities is required to expense out at least 2% of their 3 years average annual net profit towards CSR (Corporate Social Responsibility) activities.

As per amendments to the companies act, non-compliance with CSR provisions has been made “civil wrong” with effect from January 22, 2021. Whenever any violation of CSR provisions is reported, action against such non-compliant companies is initiated as per provisions of the Act after due examination of records and following due process of law. All CSR related defaults are compoundable.

Finance Minister Nirmala Sitharaman, who is in charge of corporate affairs and finance ministries, told Lok Sabha that So far, sanction for prosecution has been accorded in 366 cases. Of these, 148 applications for compounding have been made and 75 cases have been compounded. Compoundable offences are those which can be settled by paying a certain amount of money. In a written reply, Finance Minister also said the CSR architecture is disclosure-based and CSR-mandated companies are required to file details of the activities annually in the MCA 21 registry. An amount of Rs 21,231.15 crore was spent by companies towards CSR activities in 2019-20. The minister also said CSR provisions mentioned under Section 135 of the Companies Act, 2013 are not applicable to public sector banks. As per the data provided by the Department of Financial Services, Public Sector Banks are established under the State Bank of India Act, 1955 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/80 and are not companies incorporated under the Companies Act, 2013 or under any previous company law,” she added.

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