Committee to Suggest Monitoring Measures for CSR

Readers will
recall the debates in the lead up to the Companies Act, 2013 as to whether the
provisions relating to corporate social responsibility (CSR) ought to be mandatory
or voluntary. Finally, a compromise position was arrived at that largely
amounts to a “comply-or-explain” approach. Since the CSR provision (section
135) was brought into effect from April 1, 2014, its impact (particularly on
CSR spending) will be known only when companies begin reporting their
expenditure and other details in their annual reports for the financial year
ending March 31, 2015.
In the meanwhile, indications
from the Government are that the CSR compliance will be closely monitored, both
at the individual company level and also on an overall basis. Towards this end,
the Ministry of Corporate Affairs earlier this month constituted a
committee
to suggest measures for improved monitoring of the implementation
of the CSR policies by companies under section 135 of the Companies Act, 2013.
The terms of reference of the committee include suggesting measures for
adoption by companies for systematic monitoring of CSR initiatives, and also mechanisms
for providing feedback to the Government regarding efficacy of the CSR
expenditure and quality of compliance.
This step
indicates that the Government continues to place considerable importance on CSR
measures. Although structured largely on a “comply-or-explain” basis, the
intention seems to be to ensure maximum compliance.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

3 comments

  • OFFHAND : Looking back, attention may be drawn to comment earlier posted, besides elsewhere, @ "CSR in Government Companies". It is observed that, certain areas of doubt focused on therein are not gone into or fully taken care. Be that as not unexpected, The only comfort is that, as mentioned by the writer, measures as structured are largely on a “comply-or-explain” basis. Hoping that the companies would not fail to but take the obligation to comply with all seriousness, so that the ‘intention’ behind, to ensure maximum compliance, is translated into a reality and fructified.

  • To add spice: Ours is a country, as often claimed, standing out as a specimen for proving that, – unity (universality) in diversity is not a myth or misconceived ideology. Be that as it may, certainly, any social welfare idea such as CSR is found to have been subjected to widely divergent perceptions. However, in one’s longstanding conviction, the novel concept is not to be disregarded or treated with contempt as a stranger, and, in any view, not as a sworn enemy, to ethics and good governance in corporate sector. That means, apart from perceiving from a commercial or legal angle, CSR could be differently looked at from a purely social angle. To know how so, recommended to read the article by a social scientist HERE > "The search for an ethical firm" (-BL)

  • To dilate (own line of thinking):
    The intended measures for monitoring compliance could, as may be imagined, be of relevance hence be required, for providing the necessary direction, only at a posterior stage. That is at the point in time when the law – section 135 already ordained to take effect from April 1, 2014 and the rules framed there under, are considered complete, and foolproof enough, and substantially cover all other related aspects directly and indirectly impinging on the primary aspect of ‘compliance’.
    For examining / apprising whether there has been, in a given case, such compliance as intended/ envisaged, one has to necessarily keep focussed on/ do so with reference to inter alia two things: 1. The prescribed minimum for spending; and 2. The outermost time limit within which that has to be done. As independently viewed, however, the scheme of the law/rules do not seem to have taken care of the said two things. For, re. 1., the norms laid down, are so vague as to be amenable to more than one interpretation; hence is pregnant with scope for possible controversies. Re. 2., the expected time frame for compliance haxs been left untouched. For an appreciation, it may be worthwhile to have a look at and keep in mind how this aspect has been covered in a like instance; that is, the scheme of the provisions in the IT Act and the rules governing tax exemption of “Income from property held for charitable or religious purposes” (Section 11. etc.)

    Over to MCA in the expectation of the foregoing being duly looked into.

    NOTE: For an insightful study, recommend to look up the comparatively recent write-ups, – "An overview of CSR Rules under Companies Act, 2013" and "The MCA provides clarity on Corporate Social … – KPMG" .

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