The Law of Giving Back: A Deep Dive into CSR in Indian Corporates

In Contemporary Business Environment, CSR or Corporate Social Responsibility is an essential aspect of business ethics to practice. It includes an initiative taken by a corporation to formulate long-term goals that mutually benefits the company together with society. Unlike in the past when profit was the companies prime concern, there is now a shift in expectation that businesses will contribute towards, and promote, social and environmental development. In India, CSR has received legal recognition under the Companies Act of 2013, making it one of the few countries in the world where corporate philanthropy is obligatory by legislation. This article examines the scope/jurisdiction of CSR in Indian Company Law, its implementation, and its effects.

Ravi Shankar, 3rd year BA LLb Hons

5/1/20253 min read

Legal Provisions Relating to CSR under the Companies Act, 2013

1. In India, the foundation of CSR is traced back to the Companies Act, 2013, particularly in Section 135, Schedule VII, and the corresponding Companies (CSR Policy) Rules, 2014. As per Section 135(1), applicability As stated in the Act, the rules concerning CSR applies to every company, including its holding or subsidiary and a foreign company with a branch or project office in India, if it fulfills any of the following criteria during the preceding financial year: Net worth of Rs. 500 crores or more, Revenue of Rs. 1,000 crores or more, Net profit of Rs. 5 crores or more.

2. Constitution of the CSR Committee. Every business fulfilling the above criteria needs to constitute a CSR committee at the level of the board of directors, which should comprise at least three members including one independent director. In case the company is private or qualifies as a non-listed company having no independent directors, the CSR Committee may have two or more directors. Among the Committee's responsibilities are: drafting and presenting to the Board a CSR policy; recommending what the CSR expenditure should be; and assessing the implementation of the CSR policy.

3. Spending on CSR (Section 135(5)) The qualifying companies must spend on CSR within the parameters of at least 2% of their net profit, averaged over the period of last three fiscal years. The corporation must provide reasons within the board report if this sum is not expended. Section 135(7) has given authority to impose fines for lack of compliance.

4. CSR-Permitted Activities (Schedule VII) The Act requires compliance with Schedule VII of the Act’s prescribed activities when defining the company's CSR policy. These include but are not limited to: alleviating poverty, starvation, and malnutrition; promoting Gender equality as well as Education; ensuring Environmental protection and sustainability; protecting and preserving cultural heritage; supporting actions for the relief of members of the armed forces at the end of their service; charitable contributions to the PM CARES Fund or other notified funds.

5. Relevant Alterations and Other Important Matters

Unused funds for CSR activities not linked to any ongoing initiatives must be transferred to a fund specified in Schedule VII within six months after the end of the financial year as per Companies (Amendment) Act 2020. Within a month, the funds for current activities must be placed in a designated CSR account. Another major change is the inclusion of having an impact assessment done for those companies whose average CSR expenditure is equal to or greater than Rs. 10 crore over the preceding three years. This aims to make certain that there is reasonable and transparent

Judicial and Corporate Examples

Although litigation involving CSR remains almost nonexistent in India, courts have managed to protect the essence of CSR. Furthermore, Tata Group, Reliance Industries, and Infosys go above and beyond the set standards, making substantial expenditures in health care, education, rural development, and sustainability.

Conclusion

CSR is Indian company law is indicative of the shift from voluntary goodwill responsibility to accountability. While the law provides a solid foundation for compliance through CSR, its impact relies on its execution and intention. And in this context, businesses are encouraged to view CSR not as a regulatory hurdle, but as an opportunity for driving inclusive, sustainable growth. When business strategies are aligned with social objectives, it is possible to create a win-win scenario for businesses, communities, and the nation. CSR will continue to be relevant in the context of balancing business earnings with social wellbeing in the course of India’s evolution.

REFERENCES

1.Companies Act, 2013

Section 135: Corporate Social Responsibility

Schedule VII: Activities eligible under CSR https://www.mca.gov.in

2.Companies (Corporate Social Responsibility Policy) Rules, https://www.mca.gov.in/content/mca/global/en/rules/acts.html

3.Companies (Amendment) Act, 2020

4.Tata Group CSR Initiatives https://www.tata.com/community