Volte face on CSR penal provisions?

KR Srivats New Delhi | Updated on August 15, 2019 Published on August 15, 2019

File photo   -  KSL

Govt may soften the blow on Corporate India for CSR non-compliance

Even before the ink could dry on the amendments to the Companies Act 2013 treating CSR non-compliance as a criminal offence, the government is likely to go in for a change in position on this count.

The High level committee on CSR — appointed in September 2018 — recommendation of doing away with the penal provision of imprisonment for non-compliance may find favour with the government. The Committee report was submitted to Finance Minister Nirmala Sitharaman here on Tuesday.

While Corporate India is thrilled about this recommendation, many economy watchers wonder whether the government did a rush job in going in for legal amendments in July 2019 to declare stiff penalties and jail term for CSR non-compliance.

Having appointed a High Level committee under the chairmanship of Corporate Affairs Secretary, the government could have done well to wait for the final report to be submitted, they said

Some critics even see it as a government’s faux pas in handling a delicate subject like CSR. So was the current Corporate Affairs Minister Nirmala Sitharaman, who assumed office this May, not fully briefed about the existence of a high-level committee and the work in progress? they asked.

It is difficult to come to any such conclusion, but the messaging to stakeholders from governance point of view is quite baffling.

It now looks as if the government is having a change of heart because of India Inc’s opposition to the CSR amendments on penal provisions at the recent meeting that the Finance Minister had with captains of Indian industry. India Inc is understood to have done some plain speaking on the harshness of the provisions relating to jail terms for company officials for CSR non-compliance.

The government had in the just concluded Budget session gone in for several amendments to the CSR provisions under the company law including the aspect of making CSR spend mandatory for Corporate India.

One thing is for sure — CSR spend will continue to be mandatory in India, but may only be treated as civil offence in case of non-compliance.

Now all eyes are on the Corporate Affairs Ministry to see how it would provide legal relief to India Inc and make such non-compliance related offences as a civil offence. Will the government go in for an ordinance or wait for the next Parliament session to effect changes in the CSR penal provisions under the company law? Only time will tell.

Published on August 15, 2019
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