CSR Applicability in India

The article 'CSR Applicability in India' highlights evolution of CSR, CSR provision under Companies Act, 2013, role, scope and challenges of CSR and a few case laws.

Introduction

Give and take is the foundation of the Corporate Social Responsibility (CSR) idea. Corporate entities should serve as stewards of society and must contribute to the welfare of society because they use important resources from society, such as raw materials, human resources, etc., for their operations. CSR is a word that is frequently used to define the duties that the corporate world has towards society and the environment. Although the term "corporate social responsibility" (CSR) is not new in the business world, its scope and meaning have undergone significant changes since it was first viewed as a simple voluntary charitable activity in comparison to the obligations of the corporate world. Unfortunately, the number of large corporate groups that have actively participated in CSR activities is relatively low.

The Government of India has actually incorporated the idea of CSR in the new Companies Act 2013 in an effort to encourage more corporate organizations to participate in the process of societal development through CSR.

Evolution of CSR in India

India, a nation known for its principles, has the most extensive CSR history among all other nations. CSR is now a required component of business education, but it still has to be taught more extensively across the country. This purpose can only be met if businesses adopt beneficial practices, establish specific goals, and make possible investments. According to historical data on CSR that has been reviewed, there are four stages of CSR in India because it is an old idea.

In the early stages of CSR, the primary focal points of CSR measures were philanthropy and charity. Influential merchants constructed temples and provided food for others who couldn't afford it in the 18th century.

After independence, the next phase of CSR had a disastrous effect on the mixed economy. The state sector now has primary influence over the nation's economic and social development, with the private sector relegated to a supporting role. The public sector project made sure that the population as a whole received an equal distribution of the required resources.

The current phase of CSR in India, which started in the 1980s, altered the conventional CSR strategy for development. Economic liberalization and globalization were introduced, which greatly boosted the Indian economy. It enabled Indian businesses to expand quickly and brought them into compliance with all applicable foreign requirements.

CSR Activities covered under Schedule VII of the Companies Act 2013

What a company's corporate social responsibility policy may contain as activities involving:

• Fighting hunger, poverty, and malnutrition; promoting health care, particularly preventative health care; and promoting sanitation, including participation in the Swach Bharat Kosh initiative, which was established by the Central Government to promote sanitation and make safe drinking water available.
• Projects to improve livelihoods and promote education, including special education and employment-enhancing vocation skills, particularly among children, women, older people, and people with disabilities.
• Creating homes and hostels for women and orphans; old age homes, daycare centres, and other facilities for elderly citizens; promoting gender equality; empowering women; and taking steps to lessen the disparities experienced by underprivileged people.
• Maintaining the quality of soil, air, and water while ensuring environmental sustainability, ecological balance, the protection of flora and fauna, animal welfare, agroforestry, and natural resource conservation, including contributions to the Clean Ganga Fund established by the Central Government for the rejuvenation of the river Ganga.
• Protection of the nation's artistic, cultural, and historical heritage, including the restoration of works of art, historical places, and structures; construction of public libraries; and encouragement of the growth of traditional crafts and art forms;
• Training to promote rural sports, nationally recognised sports, paralympic sports, and olympic sports;
• Measures for the benefit of veterans of the armed forces, war widows and their dependents, veterans of the Central Armed Police Forces (CAPF), and veterans of the Central Paramilitary Forces (CPMF).
• Contribution to the prime minister's national relief fund, often known as the PM CARES Fund for Prime Ministerial Citizen Assistance and Relief in Emergency Situations. or any other fund established by the central government for the socioeconomic advancement, alleviation, and welfare of the scheduled castes, tribes, and other underprivileged groups,
• Projects for rural development,
• And slum area development.

CSR Amendments under the Companies Act 2013

The 2013 Act's provisions for the following have already been amended by the Ministry of Corporate Affairs (MCA):

• The Companies (Amendment) Act, 2019 (2019 Amendment Act), which was approved by the President of India on July 31, 2019, promotes corporate social responsibility (CSR). Except for the adjustments relating to CSR, the majority of the changes took effect on August 15, 2019.
• The Companies (Amendment) Act, 2020 (2020 Amendment Act) decriminalized some compoundable violations and streamlined penalties under the 2013 Act. Additionally, it contained revisions to the CSR provisions. The MCA did not also notify the public of these changes.
• MCA recently gave notice of revisions to the 2019 Amendment Act and the 2020 Amendment Act that are related to CSR. Additionally, changes have been made to the 2014 Companies (CSR Policy) Rules.

Role of CSR in Indian Context

Working with the government, civil society, and the community to make growth more inclusive will enhance people's lives.

However, even after ten years, India has continued to treat the policy goal of inclusive development as little more than an aspiration. Even though India's GDP per capita growth is among the top ten in the world, the 2017 World Economic Forum (WEF) Report finds that India lags behind in promoting inclusive development in the nation. It notes that enrolment rates in education are generally low at all levels and that this causes performance gaps between pupils from various socioeconomic backgrounds. Similarly to this, more money is needed for healthcare, essential services, and education than is currently budgeted.

India's record in raising education and health indicators offers a bleak image despite its ranking in the indicator. Infant Mortality Rate (41) and Maternal Mortality Rate (174), both of which are marginally lower than Bangladesh's (176) but fall below those of Nepal (29) and Bangladesh (31) in terms of health metrics. India is ranked 97th out of 118 developing nations in 2016 according to the Global Hunger Index. Thus, persistent hunger, undernourishment, and child mortality continue to be major problems in the nation. This demonstrates that there is still more work to be done to guarantee that the nation adopts an inclusive growth approach. To achieve equitable growth in the nation, innovative policy solutions are required.

There are examples of CSR successfully assisting in ensuring opportunities for those who are less fortunate.

1. Education: Mahindra & Mahindra's Project Nanhi Kali funded the education of almost 11 lakh disadvantaged girls across ten States in 2015. The project's main results include a rise in the number of females enrolled in school and a reduction in dropout rates to under ten percent. Mahindra Pride Schools, a different programme, helped 13,000 young people from socially and economically underprivileged neighbourhoods by teaching them how to make a living.

2. Health: To lower child and newborn mortality, Tata Steel launched the Maternal and Newborn Survival Initiative (MANSI) in Jharkhand. As of 2015, the study showed improvement in health metrics, including a 32.7 percent decrease in newborn mortality, a 26.5 percent decrease in infant mortality (up to the age of one), and an increase in institutional delivery from 58 to 81 percent. It was suggested that the scheme be expanded to 1500 additional communities within the same districts.

3. Hunger: The largest mid-day food initiative in the world, Akshaya Patra Foundation, was financed by the Infosys Foundation. Over 1.6 million children from 13,526 schools in eleven States of India are served wholesome food by it. Another illustration of a collaboration between industry, civic society, and governments is the Akshaya Patra Foundation.

These instances demonstrate how a CSR programme can have beneficial, scalable effects that encourage more equitable growth and provide everyone, especially the impoverished, with access to economic opportunity.

Scope of CSR:

• Activities carried out as part of daily operations are not considered CSR activities.
• The company should carry out CSR initiatives in the region in which it operates or in the neighbourhood that is close to the company.
• The enterprise's CSR initiatives shall encompass the activities listed in Schedule VII of the 2013 Act.
• CSR activities shall only be those that are not solely performed for the benefit of the business or its personnel.
• The company may engage in CSR activities directly, through any registered body or society that has been established in accordance with Section 8 of the Companies Act of 2013, through a holding company, a subsidiary company, or in other ways, provided that the conditions outlined therein are met, with a cap of no more than 5% of the company's overall CSR expenditure for the financial year.
• CSR initiatives can also be carried out by businesses working together.
• Any surplus that results from CSR efforts won't be viewed as a result of corporate operations.

Challenges of CSR

1. Only responsibilities to shareholders

People conflate a company's mission statement with the idea of corporate social responsibility. Some business owners contend that the interests of the stakeholders should be the business's only goal. Anything done to achieve this objective violates the organization's core values and is also unrecognized by the community.

2. The Public's failure to acknowledge organizations through CSR

Even though the organization's actions are beneficial to society, the community views the benefit as being completely insignificant. Businesses that work in this direction are never given credit where credit is due.

3. Input and output are not equal

The organizations in the business give much less to the community than they receive in return. However, if they use the same input for commercial purposes, the company will ultimately generate enormous profits for itself. The public consistently misses out on witnessing the positive contributions an organization makes to society. They are never given the proper credit for their labour or recognition for it.

4. Consumers' mindset

Numerous organizations work to protect the environment and the community. However, customers always believe that the company is acting in their best interests and working towards some covert goal. As a result, the organization's efforts go unappreciated. Therefore, there is no point in working nonstop for the good of society. Even if the organization actively participates in socially responsible projects, it never escapes criticism from the public.

Case Laws

• Technicolor India (P.) Ltd. v. Registrar of Companies

In the most recent instance, the company satisfied the requirements for net profit under Section 135 of the Companies Act of 2013, had a CSR committee, and spent money in accordance with its CSR policy during the fiscal year 2017–18; however, this spending fell short of the amount required by Section 135(5) of the Act, for which the company duly provided justification in its director's report. However, it was discovered that the Director's report incorrectly recorded the amount spent on the CSR and related information; as a result, the company submitted an application to NCLT Bangalore. The tribunal granted the company's request to amend its report, enabling it to submit a request for compounding under Section 441 of the Act.

• Pan Asia Logistics India Private Limited v. K. Anantha Padmanabha Swamy

Given this, an application for the compounding of offences under Section 135 as well as Schedule VII and Rule 3 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been submitted by the Petitioner(s) to the Registrar of Companies, Tamil Nadu and Andaman & Nicobar Islands, Chennai. These rules went into effect on April 1st, 2014. The Application was sent to the Registry of this Bench by the Deputy Registrar of Companies together with his Report dated August 7, 2017.

Conclusion:

CSR legislation was passed in India in the hope that it would transform corporate institutions' attitudes and inspire them to give back significantly to the community as it was the communities need that made them successful in the first place. Similar to how the government's efforts to assist the local populace have been repeatedly found to fall short, it was believed that society would likewise receive assistance. Despite its best efforts, the CSR act has fallen short in many areas.

References

[1] Corporate Social Responsibility in India, Available Here

[2] CSR Provisions and Schedule VII of Companies Act, 2013, Available Here

[3]  Technicolor India (P.) Ltd. v. Registrar Of Companies, C.P.No.124 of 2019

[4] Pan Asia Logistics India Private Limited v. K. Anantha Padmanabha Swamy, CA/80/(441)/CB/2018

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