Tribunal imposes Rs. 150,000 Compounding Fee for Companies Act CSR violation

The Tribunal imposed a Compounding Fee of Rs. 50,000 by the Company and Rs. 50,000 each by the two Directors, totaling Rs. 1,50,000 for violation of CSR provisions under the Companies Act, 2013. The fee was considered sufficient to deter future non-compliance. The Company rectified the default by transferring funds to a Trust for CSR activities. The Tribunal acknowledged the Company's commitment to CSR and disposed of the Compounding Application upon payment of the fee, directing the Registrar of Companies to take necessary action and submit a compliance report.

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Issues:
Violation of CSR provisions under Companies Act, 2013.

Analysis:
The Compounding Application was filed against the Registrar of Company, Goa for non-compliance with CSR expenditure requirements as per Section 134(3)(o) read with Section 135(5) of the Companies Act, 2013. The Company failed to disclose reasons for not spending the CSR amount in the Board Report for the Financial Year 2014-15.

The Directors of the Company were serious about CSR compliance and constituted a CSR committee. The Company decided to carry out CSR activities through a Trust named Anil Salgaocar Foundation. An amount of Rs. 30,43,162 was transferred to the Trust's Bank Account to fulfill the CSR obligations, rectifying the default.

The Registrar of Companies issued a Show Cause Notice to the Company for the violation. The Directors' Report for the relevant year did not contain reasons for non-disclosure, prompting the need for the compounding application.

After examining the submissions and circumstances, the Tribunal imposed a Compounding Fee of Rs. 50,000 by the Company and Rs. 50,000 each by the two Directors, totaling Rs. 1,50,000. This fee was deemed sufficient as a deterrent to prevent future non-compliance. The amount was to be paid to the RoC Mumbai within 30 days from the order's receipt.

The Trust established by the Company made donations to charitable causes, further demonstrating the Company's commitment to CSR activities. The Tribunal found the actions taken by the Company and Directors to rectify the default satisfactory, leading to the decision to impose the Compounding Fee as a penalty for the violation.

The judgment concluded by disposing of the Compounding Application, subject to the remittance of the imposed fee, and directed the RoC to take consequential action. Compliance with the order was required, and a compliance report was to be submitted for record-keeping purposes.

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