Non-compliance of CSR Provisions will attract penalty under section 135 of the Companies Act, 2013.

Facts of the Case : M/s Comviva Technologies Limited was incorporated in 1999 having its registered office in Haryana. The company is engaged in the business of courier services nationally and as well internationally. During the financial year 2020-21, the company was required to spent a total amount of Rs. 2,88,65,811/- towards the CSR activities. However, the company has spent only Rs. 2,83,15,689/- thereby leaving a balance of an unspent amount of Rs. 5,50,122/-. During the end of the financial 2020-2021, the company was required to transfer the unspent amount of Rs. 5,50,122/- to the fund specified in schedule VII of the Companies Act 2013, as per the provisions of section 135 (5) of the Companies Act 2013 read with Rule 10 of the Companies (Corporate Social Responsibility Policy) Rules 2014.?

The company, accordingly transferred the unspent amount of Rs. 5,50,122/- to PM Relief Fund on 22nd April 2021. However due to some technical error, the said amount came back into the company's bank account on the same day and the same remained unnoticed by the company officials. However, the default was made good by the company and its officers by depositing the said unspent amount to the Prime Minister's National Relief Fund on 30th March 2022. The company admitted its non-compliance towards section 135(5) of the Companies Act 2013 by filing an application with the Registrar of Companies on 26th of July, 2022.?

The Registrar of Companies issues a show cause notice to the company and its officers on 7th September 2022 directing the company to provide the requisite information on this matter. The company in response to the show cause notice issued by the Registrar submitted all the required details and also admitted the non-compliance of section 135(5) of the Companies Act 2013 on 16th September 2022.

?The Registrar of Companies concluded that the company, its directors and officers have made the default in complying with the provisions of section 135(5) of the Companies Act 2013, by not transferring the unspent CSR amount to a fund specified in schedule VII of the Companies Act 2013, within a period of 6 months from the expiry of the financial year and therefore, are liable for penalties under section 135(7) of the Companies Act 2013.?

Decision: The Registrar of Companies has imposed a total penalty of Rs. 15, 40,341.60 on the company and its directors / officers in default for violation of section 135(5) of the Companies Act 2013 read with Rule 10 of the Companies (Corporate Social Responsibility Policy) Rules 2014. Penalty of Rs. 55,012.20 was imposed on each of the directors, MD, CFO and CS. Whereas the penalty of Rs. 11, 00,244.00/- was imposed on the company. The company and the directors were ordered to make the penalty payment through online by using the website www.mca.gov.in (Misc. head) in favour of "Pay and Accounts Officer," Ministry of Corporate Affairs, New Delhi, payable at Delhi, within 90 days from the receipt of this order and also intimate to the officer of Registrar of Companies with proof of penalty paid.

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