Corporate Social Responsibility (CSR) is not just a buzzword, it’s a legal obligation for qualifying companies under the Companies Act, 2013. Recently, the Registrar of Companies (ROC), Cuttack imposed a hefty penalty on Falcon Marine Exports Limited and its officers for failing to disclose CSR details in their Board Report for the financial year ending March 31, 2015.
This case is a stark reminder that non-compliance with CSR norms can lead to significant financial and reputational consequences, even years later.
What Went Wrong?
Under Section 134(3)(o) and Section 135 of the Companies Act, companies meeting CSR thresholds must:
- Form a CSR Committee
- Develop and implement a CSR policy
- Spend at least 2% of average net profits on CSR activities
- Disclose CSR policy, committee composition, and spending details in the Board Report
Falcon Marine Exports Limited failed to:
- Mention its CSR policy
- Disclose CSR Committee composition
- Provide reasons for not spending the mandatory CSR amount
This omission violated Section 134(3)(o) read with Section 135, triggering penalties under Section 134(8).
Penalty Imposed by ROC, Cuttack
The adjudicating officer ordered:
- Company: ₹3,00,000
- Each Officer in Default: ₹50,000
- Prava Ranjan Patnaik
- Tara Ranjan Patnaik
- Narayan Sahu
Total Penalty: ₹4,50,000
The company voluntarily sought adjudication and requested leniency, but the law mandates strict compliance.
Compliance Timeline
- Order Date: December 12, 2025
- Payment Deadline: 90 days from receipt of order
- Mode of Payment: MCA’s e-Adjudication portal
- Appeal: Can be filed with Regional Director, Kolkata within 60 days
Why This Matters for Businesses
CSR compliance is not optional. Failure to disclose CSR details, even if no CSR spending occurred, can result in:
- Financial penalties
- Personal liability for officers
- Damage to corporate reputation
This case also highlights that voluntary adjudication does not erase liability, it only helps avoid harsher consequences.
Legal References
- Section 134(3)(o): CSR policy disclosure in Board Report
- Section 135: CSR Committee and spending obligations
- Section 134(8): Penalty for non-compliance
- Section 454: Adjudication process
Action Points for Companies
- Review CSR obligations annually
- Ensure Board Reports include CSR policy, committee details, and spending reasons
- Use MCA’s e-Adjudication portal for penalty payments and compliance filings
Conclusion
This case underscores a critical lesson for all companies: CSR compliance is not just a statutory checkbox; it reflects corporate accountability and transparency.
Even if CSR spending is minimal or nil, disclosure in the Board Report is mandatory under the Companies Act, 2013. Failure to comply can lead to substantial penalties and personal liability for officers.
Businesses should proactively review their CSR obligations, maintain accurate records, and ensure timely disclosures to avoid costly repercussions.
References:
ROC Cuttack Penalty Order dated 12/12/2025