Govt likely to water down conditions for prosecution under CSR rules

The move to dilute prosecution norms could be viewed distinctly from the govt's efforts to tighten the screws on CSR

The ministry of corporate affairs is likely to water down conditions for prosecution under corporate social responsibility (CSR) rules. 

It is planning to drop prosecuting companies for not complying with CSR norms unless they are repeat offenders, said senior ministry officials.

The Companies Act need not be amended for the purpose and merely a notification will be enough, officials said. 

A policy note, which Business Standard has reviewed, floated within the ministry says, “Once offence is made good, no fruitful purpose would be served in pursuing prosecution as the policy intent of the ministry has been to make companies compliant rather than penalise them.” 

Under the prosecution norms, companies not complying with CSR rules may be fined a minimum of Rs 50,000, which can increase to Rs 25 lakh. Also, every officer of the company which is in default could be punished with imprisonment up to three years or/and could be fined Rs 50,000-5,00,000. 

The government has sanctioned prosecution proceedings against 284 companies and sent 5,382 notices to companies that have not met the mandatory corporate social responsibility (CSR) expenditure norms, Minister of State for Corporate Affairs P P Chaudhary said in the winter session of Parliament. 

Companies with a net worth of at least Rs 500 crore, revenues of at least Rs 1,000 crore or a net profit of at least Rs 5 crore in a financial year are required to spend at least 2 per cent of the average profits of the preceding three financial years on CSR, according to the Companies Act, 2013. 

The move to dilute prosecution norms could be viewed distinctly from the government’s efforts to tighten the screws on CSR. 

Earlier, the government planned to audit CSR spends by companies. 

At least 33 companies, or one-third of firms on the S&P BSE 100 list, have fallen short of the required corporate social responsibility (CSR) spending. 

Earlier, a committee was set up to review CSR provisions. Sections 134 and 135 of the Companies Act are related to CSR. The committee looked at how to get companies to adhere to CSR norms voluntarily instead of the government having to oversee everything. 

The government has constituted a centralised prosecution mechanism for companies that did not spend as much as they should have on CSR in 2015-16.

What's new?

 

• Only those who violate CSR norms multiple times will be prosecuted
• The government does not want to prosecute and penalise companies once offence is made good
• A committee has been constituted to rework CSR norms