Failure to Spend CSR Funds Leads to Over Rs. 20 Lakh Penalty on Company and Directors:

Failure to Spend CSR Funds Leads to Over Rs. 20 Lakh Penalty on Company and Directors The Registrar of Companies (ROC) Chennai, under the Ministry of Corporate Affairs (MCA), has issued an adjudication order dated January 20, 2026, imposing penalty amounting to Rs. 17.27 lakh on a company, named Airfloa Rail Technology Limited, and Rs. 3.45 lakh on its directors named Dakshinamoorthy Venkatesan and Dakshna Moorthy Manikandan (about Rs. 1.72 lakh on each), for non-compliance with Corporate Social Responsibility (CSR) provisions under the Companies Act, 2013. The penalty has been levied under Section 454 of the Companies Act, 2013, for violations under Sections 135(5) and 135(6) of the Act. The company in dispute, having sufficient net profits of the preceding three financial years, was legally required to spend a total of Rs. 17,27,343 on Corporate Social Responsibility (CSR) activities for the Assessment Year 2020-21. However, the company neither spent this amount on CSR activities nor transferred the unspent amount to any fund specified in Schedule VII within the statutory time limit. This resulted in a legal default under the provisions of CSR.

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The default was later rectified by the company; the entire unspent amount was sent to the Prime Minister’s National Relief Fund on December 16, 2024, before the adjudication proceedings formally began. The Adjudicating Officer had issued several notices addressing the disputed company, and e-hearings were also scheduled; however, no one attended the hearing from the company's side. As a result, the matter was decided ex parte. When the ROC examined the facts of the case, it found the company and its directors to be violators of Sections 135(5) and 135(6) and hence, liable for penal action under Section 135(7).

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Now, the company has been directed to pay the imposed penalty amount and rectify the default within the time period of 90 days through the MCA e-adjudication portal. The directors must pay their penalties from personal funds. The order is appealable before the Regional Director, Chennai, within 60 days.