Scrapping an existing law and bringing in something new holds the scope for new inclusions and making better the existing legal picture. That’s what happened with the 1956 Companies Law which was revamped through the Companies Act 2013. The most applauded feature of the new laws were the inclusion of Corporate Social Responsibility (CSR). The provisions require big corporate entities to give back to the society. Case Laws on CSR further clarify what a corporate entity owes to the society. Hereunder, Judgments on Corporate Social Responsibility as decided by various High Courts have been compiled, to bring some clarity on CSR Funds, obligations of corporations, scope of CSR Rules, etc.
Video Explaining CSR – Corporate Social Responsibility in India
Case Laws on CSR – Corporate Social Responsibility
Gujarat High Court
KHS Machinery Pvt Ltd v. Registrar of Companies (2025)
In this case, a criminal complaint was filed against the petitioner company for non compliance of Corporate Social Responsibility as mandated under Section 135 of Companies Act, 2013 during FY 2014-15. It was prayed that the benefit of Companies Amendment Act of 2020 should be ex post facto applied seeking reduction of punishment from criminal prosecution to fine.
The Supreme Court observed that “the benefit of decriminalization of the offence ought to enure to the benefit of the petitioner, inasmuch as the Amendment Act passed by the Central Government has decriminalized the punishment in cases pertaining to Corporate Social Responsibility (CSR) violations and reduced the consequences to imposition of fine only.” Therefore, the Apex Court quashed and set aside the criminal complaint and proceedings thereunder. The matter was directed to be transferred to the Adjudicating Authority so concerned.
Adani Power Rajasthan Ltd. v. ACIT (2023)
The matter pertains to income tax return filed by the Petitioner for Assessment year 2017-18 declaring a loss. While the loss was accepted as per Section 143(3) of Income Tax Act, ACIT issued a notice seeking reopening of IT return. While CSR amount was said to be not allowable (under Section 37 of IT Act) by the ACIT leading to escape of assessment, petitioner claimed that it was exclusively for the purpose of business and thus no income was escaped.
The High Court found ACIT’s claims erroneous. The petitioner explained that since the petitioner made an average net worth loss of Rs 187.67 crores during three preceding FYs, they were not obliged to spend anything towards Corporate Social Responsibility. The Court accepted the petitioner’s stance, referring to another similar case of Adani Power wherein a similar notice was quashed and set aside. The Court allowed the instant petition to quash and set aside the impugned notice. The case law on CSR confirms that CSR obligations are directly proportional to the requirements under Section 135 of Companies Act regarding net worth or profits made.
Jharkhand High Court
ACIT v. Mecon Ltd. (2024)
The matter pertained to the Assessment Year 2012-13 wherein the Assessing Officer deleted the CSR expenses. It was highlighted that Section 135 of Companies Act came into effect on August 29, 2013, while the matter here pertained to the year ending on March 31, 2013. The Court clarified that the financial year will be said to be concluded on March 31, 2013, and corporate social responsibility will have prospective application. Thus, the Court found the Tribunal’s reference erroneous to be quashed and sent the matter back to the Tribunal. The CSR judgment affirms prospective application of the rules.
Madhya Pradesh High Court
Charan Singh Meena v. Ministry of Corporate Affairs (2018)
The instant case was a Public Interest Litigation highlighting the petitioner’s failure to discharge statutory obligation under Section 135 of Companies Act. The PIL sought directions from the Union to ensure strict compliance of CSR for development of nearby villages. It was alleged that the work was shown to be done on papers, while no work was carried out on the field. It was complained that the Union had not specified any mechanism to ensure carrying out of actual work of corporate social responsibility.
Since it was admitted on behalf of the Union that there was no such mechanism, the High Court expressed that there was possibility of Corporate Social Responsibility remaining only on paper rather than being executed on field. Therefore, weighing upon the allegations and contentions of the Union, the High Court directed District Collectors in the State to assess the situation as to whether companies were actually discharging their responsibilities under Section 135 of Companies Act. If found otherwise, not up to the percentage warranted under Section 135, the High Court sought them to be directed to the Registrar of Companies for appropriate action.
Calcutta High Court
Brabourne Commerce Pvt. Ltd. v. State of West Bengal (2024)
The petitioner company prayed for quashing criminal proceedings under Section 135 of Companies Act. While the Company claimed that they were not subject to CSR activities under Section 135, the Court noted that the company continued filing balance sheets for subsequent years. While this seems to be done to take the benefit of amalgamation in order to avoid corporate social responsibility, the Court expressed that the company was not entitled to take the said benefit after the year of amalgamation. The Court found prima facie evidence for the offences alleged against the company, and permitted the trial to proceed.
Kerala High Court
Adani Vizhinjam Port Pvt. Ltd. v. Nagaroor Grama Panchayat (2023)
The matter pertained to Panchayat imposing conditions on the company regarding CSR expenditures. The High Court upheld voluntary decision making of companies in this regard. The Court expressed that “Corporate Social responsibility (CSR) implies a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. It is a concept whereby the Companies integrate social concerns in their business operations for the betterment of their stakeholders and society in general in a voluntary way. The Companies Act, 2013 makes CSR a statutory compulsion and requirement for certain categories of incorporated companies.”
Looking at the specific provisions of Companies Act regarding CSR, the Court clarified that the CSR Committees constituted under Section 135(1) are responsible for formulating policies and plan CSR activities, and 135(5) mandates preference to local area for such expenditure. The Court looked at the scheme and confirmed that framing CSR policy, executing CSR projects/programs/activities, all fall within the domain of the companies, which should be executed through CSR committees. As decided by the Court, Gram Panchayat “cannot impose any conditions while issuing licenses and permissions” and that it would go against Section 135 provisions.
Madras High Court
Unknown (M/s.Sundaram Fasteners Ltd.) v. Registrar of Companies (2023)
This judgment on Corporate Social Responsibility particularly focused on the question of whether unspent amount of CSR activities could be carried forward to the subsequent years. The Court was of the view that it was not necessary for the company to carry forward the unspent CSR amount to next year as per the then existing rules. The Court did not find any intentional negligence, breach of duty, misfeasance or breach of trust, since everything was disclosed by the company in terms of Companies Act, CSR Policy and Rules.
Case Laws on Corporate Social Responsibility – Two Words
While looking at the various judgments on CSR, it can be understood that the legislation obliges companies to spend some part of profits on welfare of the society, and empowers them to decide where they wish to spend. It remains a company affair unless the legal requirements are playfully interfered with. That’s when the Courts have to interfere through CSR case laws so that the purpose of social responsibility of corporations is upheld.
