Case Law - CHAPTER 7 – CORPORATE SOCIAL RESPONSIBILITY

CHAPTER 7 – CORPORATE SOCIAL RESPONSIBILITY

13.11.2019

Apurva Natvar & Company India Private Limited vs. Registrar of Companies, Mumbai

NCLT, Mumbai bench

Section Violated

Section 135 r/w 134(3)(o) of the Companies Act, 2013.

Facts of the case

The Company has violated the provision of Section 135 r/w Section 134 (3) (o) of the Com-

panies Act, 2013 (hereinafter as Act) r/w. Rule 8 of Companies (Corporate Social Responsi-

bility Policy) Rules, 2014 wherein the Company has not made CSR Expenditure and has not

explained the reasons in Board’s Report of F. Y. 2014-15 for non-spending of the CSR

amount along with other disclosure as required under Section 135 (2) of the Act.

Provisions of Companies Act, 2013

According to the provision of Section. 135 (5) of the Act, the Board of the Company was

required to spend, in every financial year, at least 2% of the average net profit of the Com-

pany during the three immediately preceding financial years, in pursuance of its Corporate

Social Responsibility (CSR) policy, applicable to every company having net worth of Rupees

Five Hundred Crore or more, or turnover of Rupees One thousand crore or more, or having net

profit of Rupees Five Crore or more, during Financial Year. Further the provision of S. 134 (3)

(o) provides that, if company fails to comply with the provision of S. 135 (5), then the

Board in its report shall specify the reasons for not spending the amount.

But the Applicants / Defaulters herein, have not complied with the provision of S. 134 (3)

(o) of the Act. But the Company had made the default good by constituting the CSR com-

mittee and by furnishing declaration in the Board of Directors Report from the F. Y. 2015-16.

NCLT, Mumbai bench observed that Application made by the Applicants/Defaulters herein for

compounding of offence committed under S. 134 (3) (o) of the Companies Act, 2013, merits

consideration, though belatedly the default has been made good.

The NCLT on 21/08/2019 imposed a Compounding Fee of Rs 1,00,000/- on the Company and

Rs. 1,00,000/- each on the Directors of the Company that the Compounding fee should be

paid within a period of three weeks from the date of order in the account of “Prime Minis-

ter’s National Relief Fund.”