SIDDHARTH COLLEGE OF LAW

MUMBAI 400-023
2021-22

Student Name: Anuj Patel

Class: S.Y. L.L.B.
Division: C
Roll No.: 183
Subject: Company Law

A project submitted to
University of Mumbai for assignment completion of the degree of
Bachelor of laws

Under the Faculty of Law

Prof. Preeti Brahmania
SIDDHARTH COLLEGE OF LAW
MUMBAI 400-023
2021-22

ASSIGNMENT ON

“CORPORATE SOCIAL RESPONSIBILITY”

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 INDEX

SR. NO. CONTENTS PAGE NO.

1. College and Student details 1
2. Assignment details 2
3. Index 3
4. Introduction 4
5. Concept & Evolution of Corporate Social Responsibility 5
(CSR)
6. CSR Under the Companies Act, 2013 10
7. Corporate Social Responsibility with Decided Case Laws 13
8. Conclusion 17
9. Bibliography 18

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 INTRODUCTION

Corporate Social Responsibility (CSR) is a concept whereby companies not only consider their profitability

and growth, but also the interests of society and the environment by taking responsibility for the impact of

their activities on stakeholders, environment, consumers, employees, communities, and all other members in

the public sphere. The basic premise is that when the corporations get bigger in size, apart from the economic

responsibility of earning profits, there are many other responsibilities attached to them which are more of non-

financial/social in nature. These are the expectations of the society from the corporates to give something in

return to the society with whose explicit or implicit help these entities stand where they are.

CSR aims to fulfil expectations that society has of businesses, and it is viewed as a comprehensive set of social

policies, practices and programs that are integrated throughout business operations. The concept of CSR has

evolved over the years and now used as strategy and a business opportunity to earn stakeholder goodwill.

Corporate Social Responsibility and Corporate Governance are inseparably intertwined. In the recent scenario,

there is a growing perception among enterprises that sustainable business success and shareholder value cannot

be achieved solely through maximizing short-term profits, but instead through market-oriented and responsible

behavior. Companies are aware that they can contribute to sustainable development by managing their

operations in such a way as to enhance economic growth and increase competitiveness whilst ensuring

environmental protection and promoting social responsibility, including consumer interests.

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 CONCEPT & EVOLUTION OF CORPORATE SOCIAL
RESPONSIBILITY (CSR)

The term CSR was coined in the 20th century. It has evolved from the long history of the industrial revolution,

the period that depicts the labor movement, the creation of the business enterprise and the years of perfecting

Corporate Giving as a power to do good for the society. To look at CSR as a much deeper process of evolving

solutions to societal concerns and be proactive about the future, would involve exploring the possibility of

how institutions could cultivate practices that will serve as a constant reminder to putting a “human purpose”

to any endeavor.

All ideas on “Giving” have their roots in the virtues and forms of re-distributing wealth. Triggered by religious

as well as humanistic moral codes, “Giving back” has assumed several creative and cultural forms.

The concept of Corporate Social Responsibility has evolved during last few decades from simple philanthropic

activities to integrating the interest of the business with that of the communities in which it operates. By

exhibiting socially, environmentally and ethically responsible behavior in governance of its operations, the

business can generate value and long term sustainability for itself while making positive contribution in the

betterment of the society.

Similar examples resembling the idea of present day corporate social responsibility came from different

sociological settings of each era to influence the way businesses adopted a more considerate and responsible

behavior. Businesses conducted these activities through specially dedicated charities or foundations and it

developed to what we today have by way of charity work, philanthropy, welfare programs and recently under

connotations of social responsibility.

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THE INDIAN SCENARIO

The philosophy of giving back to the society has been an integral part of the culture, which has also been

imbibed in traditional Indian businesses since time immemorial. India’s ancient wisdom, which is still relevant

today, inspires people to work for the larger objective of the well-being of all stakeholders. These sound and

all-encompassing values are even more relevant in current times, as organizations grapple with the challenges

of modern-day enterprise, the aspirations of stakeholders and of citizens eager to be active participants in

economic growth and development.

Indian business has traditionally been socially responsible and some of the business houses have demonstrated

their efforts on this front in a laudable manner. However, the culture of social responsibility needs to go deeper

in the governance of all business entities.

In order to integrate CSR into the core business philosophy, the Government has obligated companies, those

meeting certain threshold in terms of turnover, net worth or net profit to set apart two per cent of their net

profit for CSR activities.

FACTORS INFLUENCING CSR

Many factors and influences, including the following, have led to increasing attention being devoted to CSR:

(i) Globalization coupled with focus on cross border trade, multinational enterprises and global supply chains is

increasingly raising CSR concerns related to human resource management practices, environmental protection, and

health and safety, among other things.

(ii) Governments and regulatory bodies, legal prescription, international organisations such as the United Nations, the

Organisation for Economic Co-operation and Development and the International Labour Organization have developed

compacts, declarations, guidelines, principles and other instruments that outline social norms for acceptable conduct.

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(iii) Advances in communications technology, such as the Internet, cellular phones and personal digital assistants, are

making it easier to track corporate activities and disseminate information about them. Non-governmental organizations

now regularly draw attention through their websites to business practices they view as problematic.

(iv) Consumers and investors responsible business practices and are demanding more information on how companies

are addressing risks and opportunities related to social and environmental issues.

(v) Breaches of corporate ethics have contributed to elevated public mistrust of corporations and highlighted the need

for improved corporate governance, transparency, accountability and ethical standards.

(vi) Businesses are recognizing that adopting an effective approach to CSR can reduce risk of business disruptions, open

up new opportunities, and enhance brand and company reputation.

The importance of inclusive growth is widely recognized as an essential part of India’s quest for development.

It reiterates the commitment to include those sections of the society in the growth process, which had hitherto

remained excluded from the mainstream of development.

CSR UNDER INDIAN LEGISLATION

The importance of inclusive growth is widely recognized as an essential part of India's quest for development.

It reiterates the commitment to include those sections of the society in the growth process, which had hitherto

remained excluded from the mainstream of development.

In line with this national endeavor, Corporate Social Responsibility (CSR) was conceived as an instrument for

integrating social, environmental and human development concerns in the entire value chain of corporate

business.

The Ministry of Corporate Affairs has been taking various initiatives for ensuring responsible business conduct

by companies. As a first step towards mainstreaming the concept of business responsibility, the ‘Voluntary

Guidelines on Corporate Social Responsibility’ were issued in 2009. These guidelines were subsequently

revised as ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of

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Business, 2011 (NVGS)’ after extensive consultations with business, academia, civil society organisations and

the government. The NVGs were developed based on India’s socio-cultural context and priorities as well as

global best practices.

There have been various national and international developments in the past decade that have nudged

businesses to be sustainable and more responsible, prior most being the United Nations Guiding Principles on

Business & Human Rights (UNGPs). These became the key drivers for further revision of the guidelines.

Some of these include the thrust of Companies Act, 2013 on businesses to be more mindful of their

stakeholders. The Act casts fiduciary duties on the Directors of a Company (Section. 166) requiring them to

promote the objects of the company for the benefit of its members as a whole, and in the best interests of the

company, its employees, the shareholders, the community and for the protection of environment. There was

also a need to demonstrate more visibly India’s implementation of the UNGPs based on UNHRC’s ‘Protect,

Respect & Remedy’ Framework and also make evident India’s commitment to Sustainable Development

Goals (SDGs).

The National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business,

2011 (NVGs) have been revised by the MCA and formulated the National Guidelines on Responsible Business

Conduct (NGRBC) in the year 2019. These guidelines urge businesses to actualise the principles in letter and

spirit.

These principles are:

1. Businesses should conduct and govern themselves with integrity in a manner that is Ethical, Transparent

and Accountable.

2. Businesses should provide goods and services in a manner that is sustainable and safe.

3. Businesses should respect and promote the well-being of all employees, including those in their value

chains.

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4. Businesses should respect the interests of and be responsive to all their stakeholders.

5. Businesses should respect and promote human rights.

6. Businesses should respect and make efforts to protect and restore the environment.

7. Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is

responsible and transparent.

8. Businesses should promote inclusive growth and equitable development. 9. Businesses should engage with

and provide value to their consumers in a responsible manner.

The 21st Report of the Parliamentary Standing Committee on Finance is one of the prime movers for bringing

the CSR provisions within the statute. It was observed by the Standing Committee, that annual statutory

disclosures on CSR required to be made by the companies under the Act would be a sufficient check on non-

compliance. Section 135(4) of the Companies Act 2013 mandates every company qualifying under Section

135(1) to make a statutory disclosure of CSR in its Annual Report of the Board.

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 CSR UNDER THE COMPANIES ACT, 2013

The Companies Act, 2013 is a legislation which officially embarked on one of the world’s largest experiments

of introducing the concept of CSR as a mandatory provision. The inclusion of CSR is an attempt by the

government to engage the businesses with the national development agenda. With the introduction of new Act,

there is a statutory obligation for the corporates to take initiatives towards Social, Environmental and

Economic Responsibilities.

APPLICABILITY

As per section 135(1) of the Companies Act 2013, the CSR provision is applicable to companies which fulfills

any of the following criteria during the immediately preceding financial year:-

• Companies having net worth of Rs. 500 crore or more; or

• Companies having turnover of Rs. 1000 crore or more; or

• Companies having a net profit of Rs. 5 crore or more.

The Companies (Corporate Social Responsibility Policy) Rules, 2014 have widen the ambit for compliance

obligations to include the holding and subsidiary companies as well as foreign companies whose branches or

project offices in India which fulfills the criteria specified above.

According to the Rule 3 of the CSR Rules, the CSR provision will also be applicable to every company

including its holding or subsidiary, and a foreign company having its branch office or project office in India

having net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more or a net profit of Rs. 5 crore

or more during the immediately preceding financial year.

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MCA CLARIFICATIONS

1) Clarification on spending of CSR funds for Awareness and public outreach on COVID-19

Vaccination programme (General Circular, Dated January 13, 2021)

In continuation to MCA General Circular No. 10/2020 dated March 23, 2020 wherein it was clarified that

spending of CSR funds for COVID-19 is an eligible CSR activity, it is further clarified that spending of CSR

funds for carrying out awareness campaigns/programmes or public outreach campaigns on COVID-19

Vaccination programme is an eligible CSR activity under item no. (i), (ii) and (xii) of Schedule VII of the

Companies Act, 2013 relating to promotion of health care, including preventive health care and sanitization,

promoting education, and, disaster management respectively.

The companies may undertake the aforesaid activities subject to fulfilment of Companies (CSR Policy) Rules,

2014 and the circulars related to CSR, issued by the MCA from time to time.

2) Clarification on spending of CSR funds for setting up makeshift hospitals and temporary COVID

Care facilities-reg. (General Circular No. 05/2021, dated April 22, 2021)

The MCA has clarified that spending of CSR funds for ‘setting up makeshift hospitals and temporary COVID

Care facilities ‘ is an eligible CSR activity under item nos. (i) and (xii) of Schedule VII of the Companies Act,

2013 relating to promotion of health care, including preventive health care, and, disaster management

respectively. The companies may undertake the aforesaid activities in consultation with State Governments

subject to fulfilment of Companies (CSR Policy) Rules, 2014 and the circulars related to CSR issued by MCA

from time to time.

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3) Clarification on spending of CSR funds for ‘creating health infrastructure for COVID care’,

‘establishment of medical oxygen generation and storage plants’ etc. - reg. (General Circular No. : 09/

2021, dated May 05, 2021)

The MCA has further clarified that spending of CSR funds for ‘creating health infrastructure for COVID care’,

‘establishment of medical oxygen generation and storage plants’, ‘manufacturing and supply of Oxygen

concentrators, ventilators, cylinders and other medical equipment for countering COVID-19’ or similar such

activities are eligible CSR activities under item nos. (i) and (xii) of Schedule VII of the Companies Act, 2013

relating to promotion of health care, including preventive health care, and, disaster management respectively.

The companies including Government companies may undertake the activities or projects or programmes

using CSR funds, directly by themselves or in collaboration as shared responsibility with other companies,

subject to fulfillment of the Companies (CSR Policy)Rules, 2014 and the guidelines issued by the MCA from

time to time The companies may undertake the aforesaid activities subject to fulfilment of Companies (CSR

Policy) Rules, 2014 and the circulars related to CSR, issued by the MCA from time to time.

4) Clarification on spending of CSR funds for COVID-19 vaccination General Circular No: 13/2021,

dated July 30, 2021

In continuation to General Circular No. 10/2020 dated March 23, 2020 wherein it was clarified that spending

of CSR funds for COVID-19 is an eligible CSR activity, the MCA has further clarified that spending of CSR

funds for COVID19 vaccination for persons other than the employees and their families, is an eligible CSR

activity under item no. (i) of Schedule VII of the Companies Act, 2013 relating to promotion of health care

including preventive health care and item no. (xii) relating to disaster management.

The companies may undertake the aforesaid activity subject to fulfilment of Companies (CSR Policy) Rules,

2014 and the circulars related to CSR issued by the MCA from time to time.

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CORPORATE SOCIAL RESPONSIBILITY WITH DECIDED CASE
LAWS

• In the recent case of Technicolor India (P.) Ltd. v. Registrar Of Companies, the Company met the

net profit criteria, U/ s 135 of the Companies Act, 2013, and had a CSR committee but it spent some

amount as per the CSR Policy of the Company during the fiscal year 2017-18, which remain below the

threshold mentioned in Section 135 (5) of the Act for which a reason was duly provided by the company

in its Director’s Report. However, it was found that the amount spent on the CSR and associated detail

is incorrectly captured in the Director’s report hence the company forwarded an application to NCLT

Bangalore. The tribunal allowed the application of the company to revise its report giving liberty to

the company to file for compounding under section 441 of the Act.

Personal Opinion- As seen in the above case law, it is suggested that the Company in future maintains

requisite personnel and practices to oversee that the required CSR amount for which the Company is

obligated to spent as per the provisions of the Companies Act, 2013 and rules made thereunder and

inculcates the same in their CSR Policy and get it approved by their CSR Committee and Board, so as to

avoid any proceedings against the Company.

• Alok Pharmaceuticals and Industrial Company Private Limited, Rapid Estates Private Limited

and Avinash Developers Private Limited, where this Compounding Application was filed before

the Registrar of Companies, Chattisgarh (hereinafter as ROC) and the same has been forwarded to the

NCLT, Mumbai along with the ROC Report. The Learned ROC has informed that, this application was

filed because the Company has violated the provision of S. 134 (3) (o) of the Companies Act, 2013

(hereinafter as Act) r.w. Rule 8 of Companies (Corporate Social Responsibility Policy) Rules,

2014 wherein the Company fails to give explanation for the non-spending of the CSR amount for the

Financial Years 2011-12 to 2013-14 in respective years Director’s Report. It has been observed that

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 the compounding of offence in respect of violation of Section 134 (3) (o) for non-disclosure of the

CSR policy details in the Board’s Report can be done by forwarding an application under Section 441

of the Act.

Personal Opinion- As seen in the above case law, it is suggested that the Company in future spends the

required CSR amount for which the Company is obligated to spent as per the provisions of the Companies

Act, 2013 and rules made thereunder, so as to avoid any proceedings/ legal actions against the Company.

• M/s. Hira Power and Steels Limited, the determination of the Quantum of the CSR responsibility

can only be ascertained after the finalization of accounts at the close of the Books of Accounts of a

particular financial year. Hira Power & Steels Limited, promoted by the Agrawal family is a leading

player in the Steel Segment in Central India. The Company’s main business interests are in Ferro

Alloys, Power and Mining and it has its manufacturing facilities in Chhattisgarh, India, an area known

for low cost production of Steel due to the easy availability of Raw Materials, Cheap Labour and

Supportive Government Policies. The Company filed a Compounding application before Registrar of

Companies (ROC), Chattisgarh and the same has been forwarded to the NCLT, Mumbai along with

ROC Report.

Timeline of Events

ROC had informed that, this application was filed because the Company had violated the provision of

Section 134 (3) (o) of the Companies Act, 2013 read with Rule 8 of Companies (Corporate Social

Responsibility Policy) Rules, 2014 wherein the Company fails to give explanation for the non-spending

of the CSR amount for the Financial Year 2014-15 in Director’s Report.

Hira Power & Steels Limited submitted that due to inadvertent mistake the Company has failed to

comply with the provisions of the S. 134 (3) (o) and were willing to comply with the provisions of the

Act bona fidely. They had made all endeavours to comply with the provisions of the Act however,

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because of number of Circulars which were issued by the Ministry of Corporate Affairs with respect

to CSR there was ambiguity in the correct implementation of the provisions.

It is further stated that the Company had constituted the CSR Committee as per the provisions of the

Act on August 05, 2015 and made the necessary declarations as per Section 134 (3) (o) in the Director’s

Report for the F. Y. 2015-16. Consequently, the Default has been made good.

It is also submitted that, due to number of Circulars / Notifications issued by the Government the

Applicants / Defaulters herein, could not ascertain the actual position of the CSR amount to spend and

therefore the said contravention has happened.

In light of above submissions it is submitted that since, the Applicants / Defaulters herein had not

deliberately contravened the provisions of the Companies Act, 2013 and subsequently, after

ascertaining the correct position, made the committed default hence, this Application may be allowed

and minimum Compounding Fee may be imposed.

Judgment

The Bench said that, this provision regarding CSR is newly incorporated in the Statute and thereafter

number of circulars was issued and as a result of those circulars no clear clarification regarding the

provision can be recorded by the Company or its Directors. It is also noticed that the Company had

made the default good by constituting the CSR committee and by furnishing declaration in the

Director’s Report for the F. Y. 2015-16.

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 The determination of the Quantum of the CSR responsibility can only be ascertained / quantified after

the finalisation of accounts at the close of the Books of Accounts of a particular financial year. As a

result, the amount to be contributed for charitable purpose as CSR responsibility can be intimated to

the concerned authorities thereafter only i.e. after the finalisation of accounts of a particular financial

year.

Personal Opinion- For the avoidance of any unnecessary and harmful litigations, law suits, actions, etc. it

is always better to keep the processes, reporting mechanisms in the Company as consistent as possible so

that the compliances, reporting and filings by the Company takes places within the specified timelines and

no event of default or delays takes place.

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 CONCLUSION

The United Nations Industrial Development Organisation (UNIDO) puts forward the following definition of

Corporate Social Responsibility (CSR) –

"Corporate Social Responsibility is a management concept whereby companies integrate social and

environmental concerns in their business operations and interactions with their stakeholders. CSR is generally

understood as being the way through which a company achieves a balance of economic, environmental and

social imperatives (“TripleBottom-Line Approach"), while at the same time addressing the expectations of

shareholders and stakeholders."

CSR, as it was practiced in India many years ago, has undergone a transformation as a result of its exposure

to the Western approach pursued by transnational corporations on Indian soil. Another reason for the change

in that approach can be attributed to Indian companies venturing into the global arena to compete with the rest

of the world. The trends followed world-wide have not only created awareness, but have also put pressure on

Indian companies to reevaluate their CSR endeavors and to align them with the global trends. Though

corporate philanthropy and community development still remain a strong aspect of India's CSR, globalization

has led to the emergence of the multi-stakeholder approach. Under such an approach, companies are

responsible for all stakeholders, a term that includes employees and both community and financial

stakeholders. This approach requires that CSR be integrated into a sustainable business strategy.

Some of the aspects that all Companies need to incorporate, oversee and improve in for betterment of business

reporting, compliances with applicable laws and maintaining consistency, are-

• Integrate CSR into business strategy as opposed to practicing sporadic corporate philanthropy.

• Promote multi-stakeholder approach, with focus on both internal and external stakeholders.

• Spreading CSR along the supply chain.

• CSR Reporting.

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 BIBLIOGRAPHY

www.google.com

www.indiankanoon.org

www.lawyerservices.in

www.casemine.com

ICSI

ICAI

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