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Corporate Social Responsibility in India

Introduction​

Corporate Social Responsibility (CSR) has become an integral part of modern business practices in India. It refers to the voluntary efforts made by companies to improve society beyond its economic interests. In this guide, we'll explore the concept of CSR as per the Companies Act 2013 and its implications for businesses operating in India.

Section 135 of the Companies Act 2013​

Section 135 mandates that certain classes of public companies must spend at least 2% of their average net profits towards CSR activities. This provision came into effect on April 1, 2021.

Key Points:​

  • Applies to companies having a net worth of ₹500 crore or more, or turnover of ₹1000 crore or more, or a net profit of ₹5 crore or more during any financial year.
  • The amount spent on CSR should be set out in a Board Resolution passed before the end of the financial year in which the profit and loss account is prepared and not later than September 30th of each financial year.
  • The CSR Committee must formulate a CSR Policy for the company.

Section 134(8)(d) of the Companies Act 2013​

This section requires companies to disclose their CSR initiatives in their annual report.

Key Points:​

  • The disclosure should include details of CSR activities undertaken during the financial year.
  • It should also mention the amount of money spent on CSR activities.
  • Any unspent amounts should be disclosed along with reasons for non-spending.

Case Studies​

Tata Steel Ltd vs. State of Odisha (2019)​

In this landmark case, the Supreme Court of India upheld the constitutional validity of Section 135 of the Companies Act 2013.

Key points:

  • The court ruled that CSR spending was not unconstitutional and did not violate Article 19(6) of the Constitution.
  • The judgment emphasized the importance of CSR in promoting sustainable development and reducing inequality.

Hindustan Construction Co. Ltd vs. Union of India (2020)​

This case dealt with the interpretation of "net profit" under Section 135 of the Companies Act 2013.

Key points:

  • The court held that "net profit" means the standalone net profit of the company, not the consolidated net profit.
  • This ruling clarified the ambiguity surrounding the calculation of CSR expenditure for group companies.

Illustrations​

Example 1: CSR Initiative by Infosys Foundation​

Infosys Foundation, the philanthropic arm of Infosys Limited, launched a CSR initiative called "Nipman" to promote education among underprivileged children.

Illustration:

  • The program aims to provide quality education to over 10,000 underprivileged children across India.
  • It includes setting up schools, providing educational materials, and training teachers.
  • Infosys Foundation has committed to spending ₹50 crores over five years on this initiative.

Example 2: CSR Efforts by Tata Consultancy Services (TCS)​

TCS has been actively involved in various CSR initiatives, particularly in the area of digital inclusion.

Illustration:

  • TCS launched the "Digital Saksham" program to train rural youth in digital skills.
  • The program aims to benefit 1 million youth over three years.
  • TCS has partnered with government organizations and NGOs to implement this initiative.

Conclusion​

Corporate Social Responsibility is not just a compliance requirement but a strategic imperative for businesses operating in India. As the legal framework continues to evolve, companies must stay informed about the latest developments and best practices in CSR implementation.

By adhering to the provisions of the Companies Act 2013 and engaging in meaningful CSR activities, companies can contribute positively to society while enhancing their reputation and long-term sustainability.

Remember, effective CSR implementation requires careful planning, execution, and monitoring. Companies should regularly assess their CSR policies and programs to ensure they align with the changing needs of society and the environment.

For further reading and updates on CSR regulations in India, please refer to the official website of the Ministry of Corporate Affairs and other authoritative sources.