Penalty of Rs.36,25,000 levied on company for non-compliance of CSR Policy

The Ministry of Corporate Affairs(MCA) in the matter of M/s TAKRAF INDIA PRIVATE LIMITED has imposed Penalty of Rs.36,25,000 levied on company for non-compliance of Corporate Social Responsibility.

The Company was required to Spend Rs.16,33,276 in the year 2020-21 as part of its Corporate Social Responsibility requirements under section 135 of the Companies Act, 2013. But the Company had spent Rs.1,83,276 in the year 2020-21 on an ongoing project, duly identified by the Board, and could not spend the balance amount of Rs.14,50.000 on or before 3lst March 2021. In this regard the Company required under section 135(6) to transfer its Unspent CSR Obligation of Rs.14.50.000 for the financial year 2020-21 to a Special Account to be opened in any scheduled bank to be called the Unspent Corporate Social Responsibility Account within a period of 30 days from the end of the Financial Year. However, the Company could not comply with the requirements of Section 135(6) of Opening a special bank account and transfer the unspent CSR Obligation within the timelines as prescribed therein. And its pertinent to place on record that the Company had subsequently in year 2021-22, spent the entire balance CSR Obligation of the year 2020-21 in the Ongoing Project. Since the Company had failed to comply with the requirement of opening a Special Bank Account and transfer the unspent CSR Obligation within 30 days, the company is in violation of Section 135(6) of the Companies Act, 2013 and therefore attracting the penal provisions of prescribed under section 135(7) of the Companies Act 2013.

Whereas this office had issued Adjudication Hearing Notice to the Company and its Directors on 15.06.2023 fixing the hearing date as 23/06/2023 on the basis of the Suo-motto application submitted by the company and its officers on 28/02/2023. The Company and its Directors appeared before the undersigned on 23.06.2023.

Pursuant to hearing notice issued to the company and its directors vide letter dated 15.06.2023, Shri. Jayanth Vishwanathan (Practicing Company Secretary), Authorized Representative appeared on behalf of company and Shri. Shirish Raghuvir Shirvaikar, Director, Shri Rajagopalan, Managing Director, Shir. Kalyanakrishna Gopal, Managing Director, Shri. Sankar Rant, Company Secretary, Smt. Andrea Biagio Pisco. Director, Shri. Heiko Teuber, Director, Shri. Hubrich Frank Rudolf, Director. The representative of the company appeared in person and admitted the violation and further averred in their reply letter stated that out of 7 director 3 directors resigned and one director is Non-executive director and further requested for three directors who are not liable for the said violation to take a lenient view.

Whereas the notice was served to all the directors of the company. In that Shri. Ramesh Mahadevan and Shri. Ramesh Karur Raghavendran have not attended the hearing. Hence they have been set ex-parte and legal proceedings be initiated against the said directors. In respect of the remaining Seven (7) directors out of which Four (4) Directors namely Smt. Andrea Biagio Prisco, Shri. Shirish Raghuvir Shirvaikar Shri. Heiko Teuber and Shri. Hubrich Frank Rudolf have stated that, they are not liable the aforesaid Violation. It is observed from the records of the Company that Shri. Shirish Raghuvir Shirvaikar, Shri. Heiko Teuber and Smt. Andrea Biagio Pisco were in the Board of Directors till the period of violation so, they are liable under the Section and Shri. Hubrich Frank Rudolf had ceased on 31.08.2020, and is not liable for the violation of Section 135(6) of the Companies Act, 2013 and Shri. Heiko Teuber is an Non-executive Director as per records available in the MCA records he is also not liable for the violation under section 135 (6) of the Companies Act 2013.

As per section 135(7) of the Companies Act, 2013, which read as under:-

“If a company is in default in complying with the provisions of sub-section (5) or sub-section (6), the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Accoant, as the case may be, or one Crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.”

Therefore in view of the above said non-compliance for the violation of Section 135(6) of the Companies Act, 2013 the penal provision provided for the Company and the director’s under Section 135(7) of the Act, the Company is liable for penalty of twice the amount required to be transferred by the company to the Unspent Corporate Social Responsibility Account i.e.Rs.29,00,000 and each director’s required to transfer the one-tenth of the Unspent Corporate Social Responsibility Account i.e. Rs.1,45,000 hereby impose a penalty. Totaling Rs.36,25,000 as penalty amount for non compliance of Section 135(6) of the Companies Act, 2013.

Whereas sub-section (5) of section 454 of the Companies Act, 2013 provides that, “Any person aggrieved by an order made by the adjudicating officer under sub-section (3) may prefer an appeal to the Regional Director having jurisdiction in the matter.” Further sub-section(6) provides that, “Every appeal under sub-section(5) shall be filed within sixty days form the date on which the copy of the order made by the adjudicating officer is received by the aggrieved person and shall be in such form, manner and be accompanied by such fees as may be prescribed.”

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