With the new law requiring certain class of companies to spend on CSR efforts, Union Minister Sachin Pilot on Saturday said neither the central nor state governments can tell corporates on how to spend money towards social welfare activities.
The new Companies Act, 2013, requires certain class of profitable entities to shell out at least three per cent of their three-year annual average net profit towards corporate social responsibility (CSR) activities.
Pilot, who is at the helm of Corporate Affairs Ministry, which is implementing the legislation, said the ultimate decision on how to spend money towards CSR activities would be with the board of the company.
"I am very clear that it cannot be the ministry or the secretary or the state government that will tell you on how to spend the (CSR) money," Pilot said at an event here.
"We don't want to be the judge and jury on how to spend the CSR money," he said. The government is in the process of finalising the new Companies Act. "We have made sure that environment, ecology, wildlife... all of these have been put as part of areas where companies can spend the money if they wish," the minister said.
Under the Companies Act, 2013, that replaces the nearly six-decade old legislation governing the way corporates function and are regulated in India, profitable companies with a sizeable business would have to spend every year at least two per cent of three-year average profit on CSR works. This would apply to the companies with a turnover of Rs 1,000 crore and more, or net worth of Rs 500 crore and more, or net profit of Rs 5 crore and more.
The new rules, which would be applicable from 2014-15 financial year, also require the companies to set up a CSR committee of their board members, including at least one independent director.
Emphasising that the priority is to protect the interest of investors, Pilot said all options are available before the government to deal with the NSEL crisis and its fall out. The Corporate Affairs Minister said the ministry is expected to receive the final report on the issue in the "next few days".
"All options are available in front of us... Like in company law there are many provisions that can be invoked depending on what the (final) report says," Pilot said.
National Spot Exchange Ltd (NSEL) promoted by Jignesh Shah-led Financial Technologies is grappling with Rs 5,600-crore payment crisis. The Exchange, Financial Technologies, Shah as well as some other group companies are already under the scanner of various authorities. On the NSEL crisis, Pilot said his ministry is also looking at "fit and proper aspects" of certain entities, adding the government has already taken "enough steps" in this regard.