NEW DELHI (India CSR): The Ministry of Corporate Affairs (MCA) has imposed a penalty of Rs. 92 lahks on Kony India Private Limited and its Directors for delaying the transfer of unspent Corporate Social Responsibility (CSR) funds. The company was required to transfer Rs. 42,09,263 to the CSR fund, but it failed to do so within the stipulated time period.
MCA has imposed a penalty of Rs. 2 lakh each on the directors of Kony India Private Limited, an IT company, for violating the provisions of the Companies Act, 2013, related to Corporate Social Responsibility (CSR).
The MCA has also directed the company to transfer the unspent CSR funds to the CSR fund within 30 days of the date of the order. If the company fails to do so, the MCA will take further action against the company.
According to an order issued by the Registrar of Companies (ROC), Hyderabad, on February 22, 2023, Kony India had failed to transfer an unspent amount of Rs. 42,09,263/- to a special account called the Unspent Corporate Social Responsibility Account within 30 days from the end of the financial year 2019-20, as required by Section 135 (6) of the Act.
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Directors at Kony India
Shakunthala, Parameswaren Jayanthan (Director), Pradeep Kanakath (Ex-Director), Kaliyakudi Viswanathan (Director), and Suresh Bharathan (Director), are each subject to financial responsibilities, resulting in individual liabilities.
Section 135 (6) mandates that if a company fails to spend the prescribed amount on CSR activities in a financial year, it shall transfer the such unspent amount to a fund specified in Schedule VII of the Act within six months of the expiry of the financial year or to the Unspent Corporate Social Responsibility Account within 30 days from the end of the financial year.
As per the Companies Act, 2013, companies with a net worth of more than Rs. 500 crore or a turnover of more than Rs. 1,000 crore are required to spend at least 2% of their net profit on CSR activities. The CSR funds must be transferred to a separate bank account within three months of the end of the financial year.
In the case of Kony India Private Limited, the company had not transferred the unspent CSR funds by the end of March 2022. The MCA issued a show-cause notice to the company, asking for an explanation for the delay. The company responded to the notice, but the MCA was not satisfied with the explanation.
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The ROC observed that Kony India had prima facie committed fraud on its shareholders and stakeholders by not complying with the statutory obligation of transferring the unspent CSR amount within the specified time frame.
Therefore, the ROC held that every officer of Kony India who was in default was liable to a penalty of one-tenth of the amount required to be transferred by the company to such fund or account or Rs. 2 lakh, whichever is less.
The ROC also imposed a penalty of Rs. 84,18,526/- or one crore rupees, whichever is less, on Kony India for violating Section 135 (6) of the Act.
The ROC directed that the penalties shall be paid within 30 days from the date of this order and that Kony India may file an appeal against this order within 60 days from the date of this order.
The ROC also cautioned other directors of companies to adhere to the provisions of Section 135 (6) of the Act and to ensure that their companies transfer the unspent CSR amount to the specified fund or account within the prescribed time limit. The ROC further advised the directors to be transparent and accountable in their CSR activities and reporting.
