Lok Sabha Question No. 169 (UNSTARRED), answered on 2024-07-22
Subject: Mandatory Spending of CSR Funds
Ministry: CORPORATE AFFAIRS
Asked by: Shri Hanuman Beniwal

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS

ANSWERED ON MONDAY, JULY 22, 2024/ASHADHA 31, 1946 (SAKA)

## LOK SABHA UNSTARRED QUESTION NO. 169 Mandatory Spending of CSR Fund

## QUESTION

169. SHRI HANUMAN BENIWAL:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

- (a) Whether only directive provisions have been made at present to spend the CSR funds of the companies on the development work of its area of operation;
- (b) Whether the Government proposes to formulate any mandatory provision making it necessary to spent the CSR funds of the companies in Gas, Refinery, Cement and Mining sector only in their areas of operation;
- (c) If so, the details thereof along with timeline and if not, the reasons therefor;
- (d) Whether the Government has received any complaints regarding forged expenditure or non-utilisation of CSR fund and if so, the details of the companies against which such complaints have been received; and
- (e)
- The action taken by the Government thereon?

## ANSWER

MINISTER OF STATE  IN  THE  MINISTRY  OF  CORPORATE  AFFAIRS  AND  MINISTER  OF

STATE IN THE MINISTRY OF ROAD TRANSPORT AND HIGHWAYS

[SHRI HARSH MALHOTRA]

(a):  The  broad  framework  for  Corporate  Social  Responsibility  (CSR)  has  been provided under Section 135 of the Companies Act, 2013 ('Act'), Schedule VII of the

Act and Companies (CSR Policy) Rules, 2014.

Under the Act, CSR is a Board driven process and the Board of the company is empowered to plan, decide, execute and monitor CSR activities of the company based on the recommendation of its CSR Committee. The Government does not issue  any  specific  direction  to  the  companies  to  spend  in  any  particular geographical area or activity.

Section 135 (5) of the Act provides that the company shall give preference to the local area and areas around where it operates. However, in order to ensure an all India spread of CSR expenditure, the emphasis on local area is only directory and not mandatory in nature and companies need to balance local area preference with national priorities. It has been further clarified that the activities mentioned in Schedule VII are broad based and can be interpreted liberally.

- (b) & (c): There is no such proposal.
- (d)  &  (e):    The  CSR  framework  is  disclosure  based  and  expenditure  on  CSR activities is required to be audited by the statutory auditors of the company. Further, Ministry has notified the Companies (Auditor's Report) Order, 2020, ('CARO, 2020') applicable from FY 2021 -22 which requires auditors to state details of any unspent CSR amount.

The Board of the company is also required to disclose the CSR Policy implemented by the company in its Board report. Under Rule 4(5) of the Companies (CSR Policy) Rules,  2014  the  Board  of  the  company  has  to  satisfy  itself  that  the  funds  so disbursed have been utilised for the purposes and in the manner as approved by it,  and  the  Chief  Financial  Officer  or  the  person  responsible  for  financial management  shall  certify to the effect. Thus,  the  corporate  governance framework along with the existing legal provisions such as mandatory disclosures, accountability of the CSR Committee and the Board, provisions for statutory audit of accounts of the company etc. provide adequate safeguards for CSR activities implemented by the companies.

The CSR related disclosures are filed by the companies in the MCA 21 portal. Whenever  violation  of  CSR  provisions  is  reported,  action  against  such  noncompliant  Companies  is  initiated  as  per  provisions  of  the  Act  after  due examination of records and following due process of law.

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