Delay in Transfer of Unspent CSR Funds Triggers Penalty Proceedings under Companies Act

M/s Acuity Knowledge Centre Private Limited has filed a suo motu application in Form GNL-1 before the adjudicating authority for adjudication of penalties for non-compliance under Section 135(6) read with Section 135(7) of the Companies Act, 2013. This relates to the company’s obligation to carry out Corporate Social Responsibility (CSR) activities for the financial year 2022-23.

The provisions also provided that the company should transfer any unspent CSR amount to the specified fund within six months from the end of the financial year. However, the company did not transfer the unspent CSR amount of Rs. 18,63,122 as of 30th September 2023 and transferred the same on 14 August 2024, which was delayed and not in accordance with the statutory timeline.

The matter was heard in which the company was represented by its authorised representative, CA Lalitha Bisale of M/s PK Narendra & Co. The representative admitted the breach and accepted the proposed penalty. But she wanted to keep one director, Mr Anupam Tyagi, out of the liability.

It was argued that Mr Tyagi was a non-executive director at the time of default and had not attended any board meetings where the CSR default was discussed. In support of its claim, the company produced the minutes of the board meetings and an affidavit of Mr Tyagi as per MCA General Circular.

The ROC, therefore, imposed a total penalty of Rs 37,26,244 on the company and Rs 1,86,312 each on the defaulting officers except Mr Tyagi, on whom no penalty was imposed.