Court Highlights Lapses in Disaster Management Efforts by State and Union in Utilizing CSR Funds
The Himachal Pradesh High Court, in a significant judgment, has expressed its discontent over the inadequate utilization and enforcement of Corporate Social Responsibility (CSR) obligations by the State and Union governments. The court, in its suo moto petition, highlighted the lack of proactive measures in leveraging CSR funds for disaster management, particularly in the wake of the unprecedented rainfall in 2025 that severely impacted infrastructure.
The bench, comprising Chief Justice G.S. Sandhawalia and Justice Jiya Lal Bhardwaj, noted the failure of the Union of India and the State of Himachal Pradesh to realize the potential benefits of Section 135 of the Companies Act, 2013. This section mandates eligible companies to allocate at least 2% of their average net profits for CSR activities, with a preference for local areas.
The court observed that despite the statutory requirements, many companies have not complied with their CSR obligations. The judgment criticized the State for not issuing necessary directives to companies, citing the State's reliance on advisories from the Ministry of Corporate Affairs that emphasized the independence of CSR committees. The court urged the State to file a fresh affidavit detailing proactive steps to ensure compliance by industries within its jurisdiction.
Furthermore, the court pointed out a contradiction in the affidavits filed by the Union and State governments. While the Union claimed there were no requests for CSR funding from the State for infrastructure repair post-rainfall, three central public sector enterprises had independently contributed to relief efforts.
The court also directed the State to identify industries falling under the CSR provisions and ensure effective implementation. The judgment underlined that CSR should align with national priorities but not substitute government spending.
The next hearing is scheduled for March 5, 2026, where the State is expected to present a detailed action plan addressing the court's concerns.
Bottom Line:
Corporate Social Responsibility (CSR) under Section 135 of the Companies Act, 2013 - State and Union of India have been remiss in their duties in ensuring compliance with statutory provisions for CSR obligations, particularly in disaster management and relief efforts.
Statutory provision(s): Companies Act, 2013 Section 135, Schedule VII(xii)
Court on its own motion v. Union of India, (Himachal Pradesh)(DB) : Law Finder Doc Id # 2828496
