“Indian industry consists of numerous small and medium industries whose capacity to manage CSR projects needs to be built up slowly,” she added.
“To announce penal provisions of this sort are like handing out a sledgehammer which indicates a greater focus on spends rather than on outcomes and in a sense, defeats the purpose for which the CSR regulation was brought in the first place,” she further stated.
However Nirmala Sitharaman, Finance Minister said that we are giving a three years window, after which companies will have to move the CSR money in an escrow account if they don’t spend it.
“It was easy for people to interpret that either we comply or we give an explanation and get away with it. Now that is not happening because Section 135 (of the Companies Act) is being amended to provide specific penal provision in case of non-compliance,” she added.
The penal provision bounds all the corporates to perform Corporate Social Responsibility (CSR) and define the penalties and imprisonment for the violation of the CSR norms.
Violation of CSR norms implies fines for the companies and default officers ranging from Rs 50 thousand to Rs 25 lakh, with officers also liable for imprisonment of up to three years, as per the provisions.
The new amendments of the act says that any amount remaining unspent under sub-section 5, pursuant to any ongoing project fulfilling such conditions, undertaken by a company in pursuance of its Corporate Social Responsibility (CSR) Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company.