CSR mandatory, not optional in crisis: Rights body to companies

Holding that companies’ failure to contribute their mandatory corporate social responsibility (CSR) share during Punjab's devastating floods amounts to a human rights violation, the Punjab and Chandigarh Human Rights Commission has directed the state's Chief Secretary to ensure all registered companies comply with CSR provisions.

The order was passed by a Bench comprising Chairperson Justice Sant Parkash and member Justice Gurbir Singh in response to a complaint from Dr Punditrao Dharenavar, a resident of Chandigarh. The complainant alleged that despite widespread loss of life, crops, livestock and property, no registered company in Punjab had taken steps to provide financial assistance to the victims.

He had prayed that directions be issued to companies and corporate houses to contribute at least 1 per cent of their net income to the Punjab CM’s Flood Relief Fund as part of their CSR obligations. The complainant had also annexed photographs of damaged houses, destroyed crops and affected livestock to highlight the urgency of the situation.

The commission observed that Section 135 of the Companies Act, 2013 mandated eligible companies to spend at least 2 per cent of their average net profits from the previous three financial years on CSR activities. Disaster management, including relief and rehabilitation, is a specified activity under the Act's Schedule VII.

The commission observed that CSR was a legal and ethical obligation to align corporate activities with societal welfare, especially during a crisis. By failing to contribute their mandatory CSR shares for disaster relief, companies not only violated the law but also undermined the human rights of victims entitled to timely aid and rehabilitation.

Concluding that this non-compliance constituted a serious human rights violation, the commission directed the Chief Secretary to immediately examine the matter, engage with competent authorities and ensure compliance from all registered companies in Punjab.

The matter has been adjourned to October 1 to await the Chief Secretary's report. Copies of the order have been sent to the Registrar of Companies in Chandigarh and other relevant authorities.