Corporate Social Responsibility

• Section 135(1) read with Rule 3 of the Companies

(Corporate Social Responsibility Policy Rules, 2014,
mandates every company having:
• (a) Net worth of rupees 5 crores or more, or
• (b) Turnover of rupees 1000 crores or more, or
• (c) A net profit of rupees 5 crores or more During any
financial year to constitute a Corporate Social
Responsibility (CSR) Committee of the Board.
• Composition: Section 135 provides that CSR committee
shall be constituted with 3 or more directors, out of
which atleast one director shall be an independent
director.
• Function: The CSR Committee shall:
• (a) formulate and recommend to the Board, CSR Policy which shall
indicate the activities undertaken by the Company as specified in Schedule
VII.
• b) recommend the amount of expenditure to be incurred on the activities
referred to in clause (a)
• (c ) monitor the CSR policy from time to time
• CSR Expenses: The Board of every company refers in this Section, shall
ensure that Company spends, in every financial year, at least 2% of the
average net profits of the company made during the three immediately
proceeding financial years, in pursuance of its CSR Policy.
• Board’s Report: The Board’s Report of the company covered under this
Section, shall include an annual report on CSR. Moreover, if the company
fails to spend CSR expenses, Board’s report shall specify the reasons for
not spending amount.
• Eg : WIPRO , INFOSYS , RELAINCE
• SCHEDULE VII (See section 135)
• Activities which may be included by companies in their Corporate Social
Responsibility Policies Activities relating to:—
• (i) eradicating extreme hunger and poverty;
• (ii) promotion of education;
• (iii) promoting gender equality and empowering women;
• (iv) reducing child mortality and improving maternal health;
• (v) combating human immunodeficiency virus, acquired immune deficiency
syndrome, malaria and other diseases;
• (vi) ensuring environmental sustainability;
• (vii) employment enhancing vocational skills;
• (viii) social business projects;
• (ix) contribution to the Prime Minister's National Relief Fund or any other fund set
up by the Central Government or the State Governments for socio-economic
development and relief and funds for the welfare of the Scheduled Castes, the
Scheduled Tribes, other backward classes, minorities and women; and
• (x) such other matters as may be prescribed
 Corporate Criminal Liability
• The doctrine of corporate criminal liability is essentially the
doctrine of respondent superior which has been imported into
criminal law from tort law. This doctrine states that a
corporation can be made criminally liable and convicted for
the unlawful acts of any of its agents, provided those agents
were acting within the scope of their actual or apparent
authority.
 Situation In India
• The doctrine of corporate criminal liability in India was made crystal clear
in the recent case Standard Chartered Bank and Ors. etc. v. Directorate of
Enforcement and Ors , 2005

This case was related to the now defunct Foreign Exchange Regulation Act
(1973), otherwise known as FERA. The majority held that there is no
immunity to the companies from prosecution merely because the
prosecution is in respect of offences for which the punishment prescribed
is mandatory imprisonment. As the company cannot be sentenced to
imprisonment, the Court cannot impose that punishment, but when
imprisonment and fine is the prescribed punishment the Court can impose
the punishment of fine which could be enforced against the company.
Such a discretion is to be read into the Section viz., S. 56 of Foreign Exchange
Regulation Act (1973) (FERA) and Ss. 276-C and 278-B of Income-tax Act
(1961) so far as the juristic person is concerned. The Court cannot exercise
the same discretion as regards a natural person.
• As regards company, the Court can always impose a sentence of fine and the sentence of
imprisonment can be ignored as it is impossible to be carried out in respect of a company.
• It cannot be said that, there is a blanket immunity for any company from any prosecution for
serious offences merely because the prosecution would ultimately entail a sentence of mandatory
imprisonment.
• The bench by a majority of 3:2 held that a corporation can be punished and is criminally liable for
offences for which the mandatory punishment is both imprisonment and fine.
• In case the company is found guilty, the sentence of imprisonment cannot be imposed on the
company and then the sentence of fine is to be imposed and the court has got the judicial
discretion to do so.
• This course is open only in the case where the company is found guilty but if a natural person is so
found guilty, both sentence of imprisonment and fine are to be imposed on such person.

• This particular judgment in has further crystallized the Court’s interpretative power with regards to
a penal statute, by departing from the traditional view and endorsing that for the punishment of
the crime the court should go beyond the strict word, and not let offences go unpunished due to
application of too technical an interpretation that is restrictive, strict and constricting to the very
intent of the statute.
• If a corporate entity or juristic person is found to have breached the law, the Courts, though bound
to impose the sentence prescribed under law, now have the discretion to impose the sentence of
fine as a corporate entity cannot be subjected to imprisonment. However, if a natural person is
found to have committed a crime, the sentence of imprisonment is still applicable. There is no
blanket immunity for corporations just because prosecution would ultimately lead to the sentence
of mandatory imprisonment.

• The judgment of the Supreme Court in Iridium India Telecom Ltd. v. Motorola Inc. on 20 October
2010 merely reiterated the principles laid down previously in the Standard Chartered Bank case.
This was a case in which Iridium India Limited filed a criminal complaint against Motorola Inc.
alleging offences under section 420 (cheating) read with section 120B (conspiracy) of the Indian
Penal Code (IPC). The complaint alleged that Motorola Inc. had floated a private placement
memorandum (PPM) to obtain funds/investments to finance the ‘Iridium project’.
• The project was represented as being “… the world’s first commercial system designed to provide
global digital hand held telephone data … and it was intended to be a wireless communication
system through a constellation of 66 satellites in low orbit to provide digital service to mobile
phones and other subscriber equipment locally.”
• On the basis of the information contained in and representations made through the PPM, several
financial institutions invested in the project. The project turned out to be unviable and resulted in
massive losses to the investors which was alleged by Iridium India Limited to have been caused as a
result of Motorola Inc.’s false representations in the PPM.
• The question of punishing a corporation came up recently in the Supreme Court in a criminal
case filed by Iridium India Telecom Ltd against Motorola Incorporated. The allegations were
cheating and criminal conspiracy. The magistrate in Pune started proceedings against
Motorola. It moved the Bombay High Court against the prosecution. The high court quashed
the proceedings giving several reasons, one of them being that a corporation was incapable
of committing the offence of cheating as it has no mind. According to the high court,
although a company can be a victim of deception, it cannot be the perpetrator of deception.
Only a natural person is capable of having a guilty mind to commit an offence.
• However, the Supreme Court set aside the high court’s finding and asserted that a corporate
body can be prosecuted for cheating and conspiracy under the Indian Penal Code. The
offences for which companies can be criminally prosecuted are not limited only to the
specific provisions made in the Income Tax Act, the Essential Commodities Act, and the
Prevention of Food Adulteration Act. Several other statutes also make a company liable for
prosecution, conviction and sentence.
• The court allowed the prosecution to go on, stating that companies and corporate houses
can no longer claim immunity from criminal prosecution on the ground that they are
incapable of possessing the necessary mens rea for the commission of criminal offences. The
legal position in England and the United States has now crystallised to leave no manner of
doubt that a corporation would be liable for crimes of intent.
 Corporate Environmental Liability
• Environmental aspect of CSR is the duty of the
corporate to cover the environmental effects
of the company's products operations and
facilities; remove waste and emissions;
increase the productivity and efficiency of its
resources; and decrease practices that may
adversely affect the enjoyment of resources
by future generations .
Environment regulations for corporate
affairs
• Environmental Clearance
• Environmental impact assessment
• Environment (Siting for Industrial Projects)
Rules, 1999 (1999 Rules)
• Wild Life Protection Act
• The Forest Conservation Act
• The Biological Diversity Act
 Disclosure of In formation
• There exist three categories of environmental disclosure viz.
involuntary disclosure, voluntary disclosure and mandatory
disclosure
• Involuntary disclosure is the disclosure of information of a
company's environmental activities without its prior permission as
well as against its will.
• Voluntary disclosure is the disclosure of information of a company's
environmental activities voluntarily by the company itself.
• Mandatory disclosure is the disclosure of information of a
company's environmental activities as per the requirements of law
e.g.Chemical Accidents (Emergency Planning, Preparedness and
Response) Rules, 1996
e.g.manufacture, storage and import of hazardous chemicals in
exercise of the powers conferred on it by Sections 6, 8 and 25 of the
EP Act, 1986
 Assistance to Authority
• It is essential for the corporate entities to
provide assistance to the authorities with
respect to giving information about industrial
operations, assisting during inspection and
investigation and taking of samples, filing
returns and providing co-operation.
 Environmental Management System
(EMS)
• Environmental Management System (EMS) is a framework that helps a
company achieve its environmental goals through consistent control of its
operations.
• ISO( International Organization for Standardization)launched its
environmental management system standard, ISO 14000 in 1996,. The
standard provides tools for companies and organizations to help them
identify as well as control their environmental impact. ISO 14000 is based
on a set of principles which are as follows (Starkey, 1999: 90):
• Principle 1- An organization should define its policy and ensure
commitment to EMS.
• Principle 2- An organization should formulate a plan to fulfil its
environmental policy.
• Principle 3- An organization should develop the capabilities and support
mechanisms to achieve its environmental policy, objectives and targets.
• Principle 4- An organization should measure, monitor and evaluate its
environmental performance.
 Criminal liability of corporate entities
• In Uttar Pradesh Pollution Control Board vs.Mohan
Meakins Ltd.
The matter was related to the discharge of trade effluents
by an industrial unit in river Gomathi, and the directors
of that company were accused of an offence under
Section 43 of the Water (Prevention and Control of
Pollution) Act, 1974. The counsel for the directors
submitted that they should be discharged on the
ground that a long time has lapsed. The Supreme Court
held that lapse of a long period of time cannot be
reason enough to absolve the directors from trial.
• In Haryana State Board vs. Jai Bharat Woollen Finishing Works

The Haryana State Board for Prevention and Control of

Water Pollution, through its Assistant Environmental
Engineer, filed a complaint under Sections 43 and 44 of
the Water (Prevention and Control of Pollution) Act,
1974, against the partnership concern known as Jai
Bharat Woollen Finishing Works, its manager,
SubhashChander, and partner, Phoola Devi. The accused
were tried by the Sub-Divisional Judicial Magistrate,
Panipat, and were acquitted and consequently, the Board
had preferred this appeal against the acquittal.
• The Court held that Section 47 of the Water Act
relating to offences by companies which includes a
partnership firm, lays down that, where an offence
under the Act is committed by any company, every
person who, at the time the offence was committed,
was in charge of, and was responsible to the company
for the conduct of the business of the company, as well
as the company shall be deemed to be guilty of the
offence and shall be liable to be proceeded against and
punished accordingly. Since Phoola Devi was a sleeping
partner, her acquittal was upheld.