company law

Adjudication Order Summary: CLAIRVOYANT INDIA's CSR Non-Compliance Penalties

Summary of Adjudication Order Against CLAIRVOYANT INDIA PRIVATE LIMITED

This summary outlines the adjudication order issued by the Office of the Registrar of Companies, Maharashtra, Pune, concerning CLAIRVOYANT INDIA PRIVATE LIMITED (CIN: U72200PN2014FTC153250). The company has been found in violation of Sections 135(1) and 135(5) of the Companies Act, 2013, which govern Corporate Social Responsibility (CSR) obligations. The order includes the imposition of penalties under Section 454(3) of the Companies Act, 2013.

Background Details

  • Company Name: CLAIRVOYANT INDIA PRIVATE LIMITED
  • Registered Office Address: Sr. No. 35/1/2, Plot No. 6, Office No. 1 & 2, First Floor, Kshitij Heights, Baner, Pune, Maharashtra 411045.

Appointment of Adjudicating Officer

The Ministry of Corporate Affairs (MCA) appointed the undersigned as the Adjudicating Officer under Section 454(1) of the Companies Act, 2013, as per its Gazette Notification dated 24.03.2015, to assess penalties related to CSR non-compliance.

Case Facts

CSR Committee Requirement

  • According to Section 135(1) of the Companies Act, 2013, companies that meet specific financial criteria must establish a CSR Committee.
  • CLAIRVOYANT INDIA recorded a net profit of ₹6,57,30,409.89 for the financial year ending 31-03-2020, triggering the requirement to form a CSR Committee.

CSR Spending Obligation

  • Section 135(5) mandates that eligible companies spend at least 2% of their average net profits from the preceding three years on CSR activities.
  • CLAIRVOYANT INDIA was required to spend ₹8,93,311 on CSR by 31-03-2021.

Identified Violations

  1. Non-Establishment of CSR Committee: Despite meeting the financial thresholds, CLAIRVOYANT INDIA did not form a CSR Committee as mandated by Section 135(1) of the Companies Act, 2013.
  2. Inadequate CSR Spending: The company failed to spend the requisite CSR amount of ₹8,93,311 by the deadline of 31-03-2021 and did not transfer the unspent funds to specified accounts by the deadline of 30-09-2021.

Proceedings and Findings

  1. Suo Moto Application: CLAIRVOYANT INDIA acknowledged its non-compliance with CSR requirements through a suo moto application dated 08.05.2023.
  2. Adjudication Notice: A notice was issued on 01.12.2023, indicating violations of Sections 135(1) and 135(5).
  3. Company's Defense: The company contended that amendments to Section 135(9), effective from 22.01.2021, exempted them from establishing a CSR Committee since their CSR spending was less than ₹50 lakhs. They claimed the CSR amount was transferred on 14.09.2022.
  4. Hearing of the Adjudication Officer: A hearing took place on 30.01.2024, during which the company’s representative presented their arguments and supporting documents.

Legal Provisions and Interpretation

  1. Sections 135(1) and 135(5): Stipulate the necessity for establishing a CSR Committee and ensure CSR spending by qualifying companies.
  2. Section 135(7): Specifies penalties for CSR non-compliance. The penalty includes twice the unspent CSR amount for the company and one-tenth of that amount for each officer in default.

Penalties Imposed

  1. On the Company: The total penalty imposed on CLAIRVOYANT INDIA amounted to ₹19,86,622, which includes ₹17,86,622 (twice the unspent CSR amount) and an additional ₹2,00,000.

  2. On Officers in Default: Each officer found in default was penalized ₹89,311.

Conclusion

CLAIRVOYANT INDIA PRIVATE LIMITED was penalized for contravening CSR obligations under the Companies Act, 2013. Although the company recognized the violations and took corrective measures after the fact, the adjudicating officer enforced penalties to reinforce the importance of adhering to CSR stipulations.