RHI MAGNESITA INDIA LTD WAS FINED ₹1 CRORE BY ROC MUMBAI FOR FAILING TO TRANSFER UNSPENT CSR FUNDS

 RHI MAGNESITA INDIA LTD WAS FINED ₹1 CRORE BY ROC MUMBAI FOR FAILING TO TRANSFER UNSPENT CSR FUNDS

RHI MAGNESITA INDIA LTD VS ROC MUMBAI 

Additionally, its top executives—including the Managing Director, Director, Company Secretary, and CFO—were each penalized ₹2 lakh.

BACKGROUND ON CSR LAW IN INDIA

•     Section 135 of the Companies Act, 2013 makes Corporate Social Responsibility (CSR) spending mandatory for certain companies.

•     Eligible companies must spend at least 2% of their average net profits from the preceding three years on CSR activities.

•     If CSR funds remain unspent, they must be transferred to specified government funds (such as PM Relief Fund or other Schedule VII funds) within 6 months of the financial year’s end.

·      This case highlights stricter enforcement of CSR compliance by regulators.

GOVERNMENT-APPROVED CSR FUNDS (SCHEDULE VII OF COMPANIES ACT, 2013)

If a company fails to spend its CSR allocation, the unspent amount must be transferred within 6 months of the financial year’s end to one of these funds:

 

FUND	PURPOSE
Prime Minister’s National Relief Fund (PMNRF)	Provides immediate relief to families of victims of natural disasters, major accidents, and riots.
PM CARES Fund	Supports emergency situations like pandemics, natural disasters, and public health crises.
Clean Ganga Fund	Dedicated to rejuvenation and conservation of the Ganga river ecosystem.
Swachh Bharat Kosh	Funds sanitation and cleanliness initiatives across India.
Any other fund set up by the Central Government for socio-economic development and relief	Covers broader welfare and development projects.

 

KEY COMPLIANCE RULES

•     Unspent CSR on ongoing projects → Must be transferred to a special Unspent CSR Account within 30 days, and spent within 3 years.

•     Unspent CSR not tied to projects → Must be transferred directly to one of the above government funds within 6 months.

•     Penalties: Heavy fines on both the company and its officers for non-compliance (like the ₹1 crore fine on RHI Magnesita India Ltd).

COMPANIES PENALISED FOR CSR NON-COMPLIANCE

COMPANY	VIOLATION	PENALTY
RHI Magnesita India Ltd	Failed to transfer unspent CSR funds of ₹1.03 crore	₹1 crore fine on company + ₹2 lakh each on MD, Director, CFO, and Company Secretary
Advance Steel Tubes	Did not meet CSR spending obligations	Penalty imposed under Companies Act
Toyota Tsusho Systems India	CSR non-compliance between 2019–2024	Penalty imposed
Wipro Pari	CSR spending shortfall	Penalty imposed

 

DETAILS OF COMPANIES THAT HAVE BEEN PENALIZED FOR NON-COMPLIANCE WITH THE CORPORATE SOCIAL RESPONSIBILITY (CSR) PROVISIONS OF THE COMPANIES ACT, 2013--- 2023-24

1	Toyota Tsusho Systems India Private Limited
2	Drishti-Soft Solutions Private Limited
3	Convergint India Private Limited
4	Ceratizit India Private Limited
5	Saankhya Labs Private Limited
6	Mukka Proteins Limited
7	Quest Global Engineering Services Private Limited
8	Aecom India Private Limited
9	Smith N Smith Chemicals Limited
10	Comviva Technologies Limited

CSR COMPLIANCE TRENDS

•     In FY2022-23, unspent CSR funds reached ₹1,475 crore, the highest in five years.

•     Many companies continue to fall short of CSR obligations despite clear legal mandates.

•     Regulators are increasingly imposing penalties to ensure compliance and accountability.

KEY TAKEAWAYS

MANDATORY SPENDING:

CSR is not optional—failure to comply can lead to heavy fines.

TIMELY TRANSFERS:

Unspent funds must be transferred to government-approved accounts within deadlines.

PERSONAL LIABILITY:

Directors and officers can face individual penalties, not just the company.

REPUTATION RISK:

 Non-compliance damages corporate credibility and investor trust.

 

YOUR COMPLIANCE PARTNER – R V - SECKAR , FCS, LLB 79047 19295