CSR funding for “HAR GHAR TIRANGA” and the responsibility of CSR Committee and Board thereof

The Central Government launched the "Har Ghar Tiranga" campaign as part of the Azadi Ka Amrit Mahotsav as we draw closer to Independence Day (August 15, 2022) with the aim of instilling a sense of patriotism in the populace by encouraging individuals to host national flags at their homes. From August 13–15, the Centre has urged the citizens to hoist?the flag in their residences as a part of the Azadi Ka Amrit Mahotsav festivities commemorating the 75th anniversary of India's Independence, hoping to have the tricolour flown over more than 20 million houses around the nation during these three days.

This effort aims to include all Indians in the celebrations of 75th anniversary of India’s Independence. The Ministry of Corporate Affairs has issued a circular permitting company to allocate money connected to corporate social responsibility (CSR) on this initiative as part of the campaign. Corporate participation as partners in social development is the goal of CSR provisions. The cornerstone of how businesses adopt CSR is the use of corporate innovations and managerial abilities in the provision of "public goods."

As stated in the circular dated 26th July 2022, the campaign's main goals are to instil a sense of patriotism in people and to raise awareness of the Indian national flag. The circular also specifies that “Spending of CSR funds for the activities related to this campaign such as mass scale production and supply of the national flag, outreach and amplification efforts and other related activities are eligible CSR activities”. The requirements of Schedule VII, item number (ii) of the Companies Act on the promotion of education linked to culture make the activities eligible for CSR funds.

According to current regulations, companies that have a net worth of Rs 500 crore or more, a turnover of Rs 1,000 crore or higher, or a net profit of Rs 5 crore or more are required to invest 2% of their average net profit over the last three years in CSR initiatives.

A CSR Committee must be established by every corporation in order to create and carry out a plan for the use of CSR funds. The necessity for the formation of the CSR Committee is not obligatory in instances when the required expenditure by a firm for CSR does not exceed fifty lakh rupees; in these circumstances, the Board of Directors of the company must perform the duties of the CSR Committee.

The Corporate Social Responsibility Committee shall perform the following activities which are to be monitored by the Board of Directors: —

(i)?????????????formulate and recommend the CSR policy to the Board;

(ii)???????????recommend the amount of expenditure to be incurred on CSR activities;

(iii)?????????monitor the CSR policy of the company from time to time; and

(iv)??????????formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy.

CSR is a Board-driven process. The responsibilities of the Board of a CSR-eligible company, inter-alia, include the following —

(i)?????????????approve the CSR policy;

(ii)???????????disclose contents of such policy in its report and also place it on the company's website, if any;

(iii)?????????ensure that the activities included in the CSR policy are undertaken by the company;

(iv)??????????ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years;

(v)????????????satisfy itself regarding the utilisation of the disbursed CSR funds; and

(vi)??????????if the company fails to spend at least two per cent of the average net profits of the company, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount and transfer the unspent CSR amount as per provisions of sections 135(5) and 135(6) of the Act.

Thus, the corporations allocating funds to mass scale production and supply of the national flag, outreach and amplification efforts shall be treated as a CSR Compliance under Schedule VII provided, as they fall under the eligible category. This initiative by the Government has significantly led to the achievement of the motive for the “Har Ghar Tiranga” Campaign.

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