Failure To Contribute CSR Fund: Registrar of Companies Imposes Rs. 1.06 Crore Penalty On Ganesh Green Bharat Limited And Its Director

The Registrar of Companies, Ahmedabad has imposed a penalty of Rs. 1.06 Crore on Ganesh Green Bharat Limited and its director failing to contribute Corporate Social Responsibility (CSR) funds during the financial years 2021-22 and 2022-23. Section 135(5) of the Companies Act, 2013 mandates that every company meeting certain financial thresholds must spend at least two percent of its average net profits from the preceding three financial years on CSR activities. This spending is required annually and is governed by the company's CSR policy. If a company has not completed three financial years since its incorporation, the calculation is based on the immediately preceding financial years. Brief Facts: Ganesh Green Bharat Limited and its directors, Ketanbhai Narsingbhai Patel, Rajendrakumar Narsinhbhai Patel, and Niravkumar Sureshbhai Patel approached the Registrar of Companies and filed an application stating non-compliance with Section 135 of the Companies Act, 2013. It was related to the company's failure to transfer unspent amounts of Rs. 19,36,064.00/- for the financial year 2021-22 and Rs. 23,31,842.00/- for the financial year 2022-23 to a Fund specified in Schedule VII of the Companies Act within six months of each financial year's expiry. The company rectified these defaults by contributing Rs. 42,67,906.00/- to the Shree Brahmani Charitable Trust. Schedule VII to the Companies Act lists the activities that qualify as Corporate Social Responsibility (CSR) activities. These activities are considered socially and environmentally beneficial contributions that companies can make using their resources. The Company argued that the non-compliance was unintentional and resulted from oversight, without any malicious intent or gain to the company or its directors. It argued that the nature of the offense did not harm public interest and requested adjudication under Section 454 of the Companies Act in good faith and in the interest of justice. Observations by the RoC: The RoC referred to Section 135(5) of the Companies Act, 2013 which mandates that companies allocate at least two percent of their average net profits from the preceding three financial years towards CSR activities. It further requires companies to report any unspent CSR funds and transfer them to specified funds within six months of the financial year's end unless allocated to ongoing projects. The presenting officer highlighted discrepancies in the company's CSR obligations for the financial year 2021-22 which noted an unspent amount of Rs. 27,91,932 instead of the lower figure of Rs. 19,36,064 initially cited by the company. The company subsequently transferred Rs. 19,36,064 and Rs. 23,31,842 for the financial years 2021-22 and 2022-23. However, the RoC held that Rajendrakumar Narsinhbhai Patel having consented to the charge under Section 2(60) of the Companies Act, 2013 was personally liable for non-compliance from 01.10.2022 to 05.12.2023. Consequently, the RoC imposed penalties were imposed penalty of Rs. 1,02,47,548/- on the company and Rs. 4,00,000/- on Rajendrakumar Narsinhbhai Patel. Click Here To Read/Download Order

Failure To Contribute CSR Fund: Registrar of Companies Imposes Rs. 1.06 Crore Penalty On Ganesh Green Bharat Limited And Its Director

Rajesh Kumar

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