CSR violation no longer a criminal offence

Putting an end to industry concerns, Nirmala Sitharam on Friday made a few key changes to the laws pertaining to Corporate Social Responsibility (CSR) violation. During her address to the press, she rolled out the ‘Measures to Achieve Higher Economic Growth’. Sitharaman clarified that CSR violation under company law would be treated as civil liability and not as a criminal offence.

Over the past few weeks, the industry had raised concerns about the changes to the CSR norms. Since the amendments to the company law earlier this month, there has been a fair amount of debate around the criminality of violating CSR norms. Some experts have even the criticised the move as they feel criminalising it would take India away from its ‘ease of doing business’ narrative.

Recently, the Injeti Srinivas committee also presented its recommendation on the same issue. The committee was not in favour of criminalising the CSR violations and even suggested that expenses towards it should be eligible for deductions in the computation of taxable income.

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The ministry also debated the possibility of including such a provision. However, so far, the only outcome has been the change in the treatment of the CSR violation. Whether other recommendations by the committee will see the light can only be revealed in the coming months.

Post the committee’s recommendations and the concerns raised by various segments of the industry, the ministry of corporate affairs reviewed the concerned sections under the Companies Act and decriminalised it.

Sitharaman, while addressing the media, also stated that the government respects and honour the wealth creators of the country.
The government has given companies more time for completing ongoing projects as part of their CSR obligations.

As per the Companies Act, profitable companies are required to donate at least two per cent of their three-year annual average net profit towards CSR activities.