ROC Slaps Rs. 29.99 Lakh Penalty on Company and Its Directors for Not Spending Mandatory CSR Amount

The Registrar of Companies (ROC) Chennai under the Ministry of Finance (MCA), Government of India, has issued an Adjudication Order dated January 07, 2026, under Section 454 of the Companies Act, 2013, imposing a penalty on a company and its two directors for the contravention of Section 135(7) of the Act.

The case is related to a company, namely Airfloa Rail Technology Limited, with CIN U30204TN1998PLC041571, and its two directors named Dakshinamoorthy Venkatesan and Dakshna Moorthy Manikandan, with DIN 00232210 and 00232275, respectively.

In the present case, the company, AIRFLOA Rail Technology Limited, was required to spend Rs. 25.99 lakh on CSR activities for the financial year 2020-21 (Assessment Year 2021-22). This was because the company’s net profit as per the financial year 2019-20 was Rs. 17,931,687,8, which was above the statutory limit as prescribed under the provisions of Section 135 of the Companies Act, 2013. However, the company failed to comply with the provisions of Section 135 of the Companies Act, 2013. It did not spend the requisite amount of Rs. 25,99,631 towards CSR activities during the year in consideration, and also did not transfer the unspent CSR of Rs. 25,99,631 to a fund specified in Schedule VII of the Companies Act, 2013.

This negligence ultimately led to the contravention of Section 135(5) & (6) of the Companies Act, 2013, and made the company and its managing director liable for a penalty under Section 135(7) of the Companies Act, 2013. However, later, the company corrected the mistake voluntarily by depositing the full unspent CSR amount into the Prime Minister’s National Relief Fund in December 2024, before penalty proceedings started. Despite this, notices were issued for adjudication. The company requested leniency, stating the default was unintentional. However, no one appeared for the hearing, so the matter was decided ex parte.

As a result of the above findings, the ROC Chennai imposed a penalty of Rs. 25.99 lakh on the company and Rs. 2 lakh on each director. Also, directed the company to pay the entire penalty amount within the time period of 90 days from the date of receiving the order. Additionally, asserted that if the company is not satisfied with the order, it can further challenge it before the Regional Director, RD Chennai, within a period of sixty days from the date of receiving the order.