The RoC, Mumbai has imposed a whopping amount of Rs 1 crore as penalty on a company for failing to utilise its CSR funds in the prescribed manner

The Registrar of Companies (“RoC”), Mumbai, in a recent case, has imposed the maximum penalty of Rs. 1 crore on  a leading high-grade refractory products supplier company (“the Company”) for non-compliance with the provisions of Companies Act, 2013 (“Act”) regarding unspent Corporate Social Responsibility (“CSR”) funds.

As per *Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 (“Amendment Rules”), the Company was required to transfer, within 6 months from the end of the financial year, its unspent CSR amount to any of the funds specified in Schedule VII of the Act which includes government-approved CSR activities, like eradicating hunger, poverty and malnutrition, promoting healthcare, education and gender equality. It also covers activities related to environment sustainability, art and culture, contribution to the Prime Minister’s National Relief Fund and disaster management. Failing to transfer the unspent CSR amount to the specified funds within the prescribed due date, the Company has committed a default and violated the provisions of Section 135 of the Act read with the Amendment Rules.

Apart from imposing penalty of Rs. 1 Crore on the Company as stated above, the RoC has further passed the orders for penalty of Rs 2 lakh each on four senior officials of Company as well “commensurate with the failure committed by every officer of the company”.

Source: Registrar of Companies