The Registrar of Companies (RoC) penalized RHI Magnesita India Ltd. for violation of Corporate Social Responsibility (CSR) regulations and failure to transfer unspent CSR funds of Rs. 1,03,40,799 to government-approved funds listed by the government within the stipulated deadline, according to sources.
The RoC has imposed a fine of Rs 1 crore on the company and penalties of Rs 2 lakh each on the Managing Director, Director, Company Secretary, and CFO for violating provisions under section 135 of the Companies Act.
As per the CSR rules, companies with a net worth of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more, or posting a net profit of Rs 5 crore or more in the preceding financial year are required to spend two per cent of their average net profit of the preceding three years on CSR.
The violation of CSR provisions has been brought under the purview of the adjudication mechanism of the corporate affairs ministry, and the government specifies activities to be undertaken by the company under CSR.
The company had deposited only Rs 32 lakh by March 2021, whereas it was required to transfer the unspent CSR funds to government-approved funds within six months. The penalty was imposed by the RoC after bringing the violation of CSR provisions under its purview.
The CSR activities include eradicating hunger, poverty, and malnutrition, promoting healthcare, education, and gender equality, and activities related to environmental sustainability, art, and culture, contribution to the Prime Minister’s National Relief Fund, and disaster management.
The company later deposited the remaining unspent CSR amount to the Prime Minister’s Citizen Assistance and Relief in Emergency Situation Fund.
During the adjudicating meeting with the Mumbai RoC, the company secretary, Sanjeev Kumar, cited the absence of employees due to the Covid-19 pandemic as the reason for the delay in spending the CSR funds. However, the adjudicating officers passed the order for penalty “commensurate with the failure committed by every officer of the company.” The company has been given 30 days to deposit the penalty amount.
Failure to spend allocated CSR funds, non-compliance in transferring unspent funds and delayed response to regulatory requirements made the Company liable to fine.
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