Supreme Court on PM-CARES, NDRF and CSR
This is in continuation to my previous LinkedIn post on 'India's Legal Response to COVID - 19 PM CARES Fund' published on April 4, 2020 wherein I had analyzed that "there is no illegality or irregularity in the PM CARES Fund and contribution to this fund is fine to be categorized as CSR". I also did an hour long session with EBC Learning on the topic of CSR in Corona Times wherein a detailed explanation about the rationale and objectives of CSR was dealt with. However, the dust has not yet settled even after the Government came up with their website on PM CARES which provides the statement of receipts and payments.
Hon'ble Supreme Court of India (three-judge bench led by Hon'ble Justice Ashok Bhushan, R. Subhash Reddy, and MR Shah) has vindicated the aforesaid view in its latest decision given on August 19, 2020 wherein the plea to direct transfer of all funds from PM CARES to National Disaster Relief Fund (NDRF) has been rejected. The PIL was filed by Center for Public Interest Litigation led by Adv. Prashant Bhushan and Adv. Dushyant Dave (along with a bunch of other petitions). Adv. Prashant Bhusan's response to the decision was again a twitter stating "Unfortunate that the SC allows the non-transparent & unaccountable PM-Cares fund set up as a secret trust to garner money in the name of Covid relief, rather than transferring such funds to the Statutory NDRF which is accessible under RTI & audited by CAG." However, this is a different post on which contempt proceedings have been decided.
Supreme Court had already denied a petition seeking direction to the Center to include Chief Minister's Relief Fund under CSR. The challenge was made under Article 14 of the Constitution of India, however, the petition was later withdrawn (Mahua Moitra v. UOI, 2020). Adv. Prashant Bhushan then also tweeted "SC Tells MP Mahua Moitra To Take Up Issue Of Exclusion Of CM Relief Fund From CSR In Parliament. Direct Constitutional issues of violation of Art 14(equality)were raised. How can only the shady PM-Cares fund be allowed? Total abdication by SC. Disappointed."
Interestingly, CSR Fund appears to be a low-hanging fruit for everyone to eye upon, as could be noticed in a recent suggestion made by Discidium Internet Labs Pvt, Ltd (DILPL) in the Cryptocurrency Decision of the Supreme Court that "the VC Exchanges would transfer all proceeds earmarked towards their Corporate Social Responsibility (CSR) obligations under the Companies Act 2013" for setting up investor education and protection fund (page 168). There has been a lot of controversy around the misuse of CSR funds. As per the KPMG Report in 2018, the most backward districts got only 13 percent of that year's fund.
There is indeed a need for more accountability and transparency in utilization of CSR Funds, but the question is by whom? Here, most of the times people focus on target which appeals to to the political debate for or against government. In fact the focus shall be on 'corporate governance' and 'corporate accountability'. The onus of spending these funds legitimately lies on the whole chain of corporate accountability framework, the promoters, the directors, the auditors, the shareholders, and the investors. Government in this case has only provided an option as an entry in Schedule VII to qualify PM CARES as CSR Expenditure. however, the spending still remains in the hands of corporate and no one can force them to spend in a particular fund. The CSR investment has to be driven by the CSR policy of the organisation and the spends accordingly. Scrutiny of CSR funds under public law may not be a right standard. If one looks at the big picture, it would go against the basics of separate legal personality.
Requirement of the day is that the common man may be made aware of these issues who is the last mile investor in these companies so that they can take a conscious decision while investing and choosing a company which scores high in their CSR mandate.
.... to be continued.... with the pace of new cases and the tweets.... :)