CSR Compliance getting ‘Curiouser & Curiorsor’!
In the wonderland of Indian Corporate Social Responsibility,
CSR Compliance seems to be, as Alice would have said in Lewis Carroll’s
wonderland, getting “curiouser and curiouser”.
CSR Compliance seems to be, as Alice would have said in Lewis Carroll’s
wonderland, getting “curiouser and curiouser”.
General Circular No. 06/2018 dated 28th May 2018
issued by the Ministry of Corporate Affairs (MCA) seeks to address concerns
raised by some stakeholders regarding non-compliance of the first proviso to
sub-section (5) of section 135 of the Indian Companies Act 2013, which lays
down that the company shall give preference to the local area and areas around where
it operates, for spending the amount earmarked for CSR activities.
issued by the Ministry of Corporate Affairs (MCA) seeks to address concerns
raised by some stakeholders regarding non-compliance of the first proviso to
sub-section (5) of section 135 of the Indian Companies Act 2013, which lays
down that the company shall give preference to the local area and areas around where
it operates, for spending the amount earmarked for CSR activities.
The circular emphasizes and reiterates that this provision “has
to be followed in letter and spirit”.
to be followed in letter and spirit”.
Questions:
- What would qualify as local area? The City or town where
the company operates or the entire district or the State? - Does this mean if the company operates only in Mumbai or
Pune, it cannot support activities outside the Municipal boundaries of Mumbai
or Pune? - The term ‘preference’ in the context of this law would
mean ‘priority’ should be given to issues or programs in and around the area
where the company operates. There is nothing wrong with this principle.
However, if one goes strictly by the letter of the first proviso to sub-section
(5) of section 135 of the Companies Act 2013, supporting any activity outside
the area where the company operates would be disallowed and considered
non-compliance under Section 135(5)!
In our opinion, MHA owes yet another clarification to
stakeholders in terms of what would be MCA’s definition of “local area and
areas around where it (the company) operates”!
stakeholders in terms of what would be MCA’s definition of “local area and
areas around where it (the company) operates”!
We have repeatedly been saying this, and we have no hesitation
in reiterating that excessive regulation will ultimately destroy the very
spirit of CSR.
in reiterating that excessive regulation will ultimately destroy the very
spirit of CSR.
Noshir H. Dadrawala