CSR norms to be tightened, Companies to face penalties for violation- FM Sitharaman

Tightening the Corporate Social Responsibility (CSR) norms further, the Modi government has passed amendments to the Companies Act of 2013. With this, the companies which are not spending the mandatory 2 per cent of net profits will no longer be able to cheat the government and will be compelled to pay the legitimate profit earning.

This has been stated by Union Finance minister Nirmala Sitharaman that there will be no more scope for the private organizations to get away and do not meet the CSR norms. She said, “It was easy for people to interpret that either we comply or we give an explanation and get away with it. Now that is not happening because Section 135 (of the Companies Act) is being amended to provide specific penal provision in case of non-compliance.”

She has also added that the companies will be given directives by the corporate affairs ministry to make sure that the companies comply with CSR norms.

Adding to the fines charged on the companies violating CSR norms, the minister said that defaulting companies and officers will be fined an amount ranging from Rs 50,000 to Rs 25 lakh in addition to liable for imprisonment of up to 3 years. This has been mentioned in the Companies Amendment Bill, 2019 which received the parliament approval on Tuesday.

She added, “Gandhiji’s trusteeship principle is that legitimate profit-earning cannot be devoid of social responsibility.”

While replying to a debate taking place in the Rajya Sabha, the Finance Minister made it sure that the CSR norms are tightened in order make the Companies Act far more effective and make the companies follow the rules.

Now, this is mandatory for all companies with a net worth of Rs 500 crore or more to spend 2% of their average profit of the previous three years. with the tightened norms, it is now expected that the companies will learn to follow the rules in India.

Also read: Tata Motors releases its annual Corporate Social Responsibility (CSR) report