MCA Imposes Penalty for Delay in Transfer ofUnspent CSR Amount
Order of Penalty under Section 454 of the Companies Act, 2013 read with Rule 3 of Companies (Adjudication of Penalties) Rules, 2014 for non-compliance of section 135 of The Companies Act, 2013 in the matter of Quest Global Engineering Services Pvt. Ltd.
Provisions Involved:
Section 135(1) of Companies Act, 2013 states that all companies having turnover of Rs. 1000 crore or more or Net profit of Rs. 5 crore or more or Net worth of Rs. 500 crore or more in immediately preceding financial year shall spend, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years. and If the company has any unspent amount out of the prescribed CSR expenditure in a financial year, it shall transfer such amount to either of the following accounts within the specified time limit:
Unspent Corporate Social Responsibility Account, or
Fund specified in Schedule VII
Facts of the Case –
The Subject Company (Quest Global Engineering Services Pvt. Ltd.) for the financial year 2021-22 is obligated to allocate Rs. 3,50,42,538.39 towards CSR activities. Despite contributing Rs. 2,29,34,000.39 and identifying an ongoing project, the company delayed transferring the unspent amount of Rs. 1,23,39,138 to a special account, violating the mandated 30-days transfer period post the financial year-end.
Decision on Violation –
The Noticees are imposed with monetary penalties under Sections 454 of The Companies Act, 2013 as per the details mentioned below:
Quest Global Engineering Services Private Limited (Company): Penalty calculated at Rs. 2,46,78,276 (twice the unspent CSR amount), with a maximum penalty of Rs. 1,00,00,000. The imposed penalty is Rs. 1,00,00,000.
Company Secretary Mr. Praveen Hegde and Directors Mr. Kishore Rao, Mr. Raman Subramanian, and Mr. Shrikant Durga Naik were each penalized Rs. 2,00,000, which was the maximum limit set against the calculated penalty of Rs. 12,33,914 for each.
SW Point of View:This penalty serves as a reminder of the stringent enforcement of CSR regulations and the importance of timely compliance with statutory obligations. Companies must diligently adhere to the CSR provisions to avoid substantial penalties and legal repercussions.
