Extending the Strategic Ambition for Corporate Social Responsibility

Reeva Gujral Singhal, Aryamann Oberoi and Sanskriti Mehta

Corporations have been attributed the personality of a legal person, distinct from its members and can thus be termed as legal, social, political, and economic institutions.[1] The question as to whether such legal entities, striving towards profit maximization, should operate in a socially responsible manner was heavily deliberated upon across several continents in as early as the twentieth century.[2] However, the contemporary situation has widened the obligations of corporations, as juristic persons, by bestowing upon them a duty towards society, akin to responsible corporate citizens. The notion of corporate social responsibility (hereinafter referred to as ‘CSR’) is in furtherance of public policy and is hence intrinsically linked with the law. One hand of the spectrum comprises participants having a direct nexus with the functioning and working of the corporation, while the other end consists of interests unassociated with the operations of the concern.[3] Since the regime of CSR is primarily concerned with the latter, it is often regarded as a reappraisal of the profit-making orientation of a company in order to incorporate broader social objectives within its purview.[4] The concept of CSR can thus be perceived as involving the utilization and mobilization of resources available with the corporates in recognizing social issues and evolving, devising and enforcing activities in order to redress the same.[5] In this regard, the accumulation of corporate knowledge and power in terms of capital and technological know-how is effectively employed in the development of novel solutions for the ultimate welfare of the community at large.[6]

CSR awareness and consciousness has augmented over the years and the recent developments with respect to the law pertaining to CSR in India exemplify an attempt by the government to align the CSR mandate with national priorities. Pursuant to the outbreak of Covid-19, and with a view to foster and stimulate corporations to observe and effectuate responsibility amidst the pandemic, the Ministry of Corporate Affairs issued several Circulars and notified amendments to the provisions in respect of CSR. The focus of this article is a close perusal of such developments effected by the Government and attempts to analyse and interpret pertinent questions that arise as a consequence thereof, such as, inter alia, the expenditure of funds falling within the purview of CSR activities, the intent of the government behind the amendment of Rule 4 and Rule 6 of the Companies (Corporate Social Responsibility Rules), 2014 in respect of the deletion of the phrase ‘excluding activities undertaken in pursuance of a company’s normal course of business’ from the provisions pertaining to CSR Activities and CSR Policy, respectively, and the applicability of the revised provisions upon corporates other than pharmaceutical companies and other companies working towards R&D for the development of vaccines, drugs and medical devices in furtherance of curbing and treating the novel coronavirus.

In pursuance of the aforementioned, the article aims at enunciating upon relevant provisions in respect of CSR in India and the impact of the novel coronavirus (Covid-19) upon such compliances thereof.

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NOTES

[1] Jerry L. Mashaw, Corporate Social Responsibility: Comments on the Legal and Economic Context of a Continuing Debate, 3:114 YALE LAW & POLICY REVIEW, 114, 114 (1984). In this context it implies that a corporation may be made socially responsible from the aforementioned perspectives. [2] See A Berle, Corporate Powers as Powers in Trust, 44 HARV L REW, 1049, (1931); See also CM Schmitthoff, Social Accountability in the Philosophy of Company Law Reform, 79, (1982). [3] Julia Tolmie, Corporate Social Responsibility, 15(1) UNIVERSITY OF NEW SOUTH WALES LAW JOURNAL, 268, 270, (1992). Therefore, it is submitted that stakeholders such as shareholders, employees, creditors, consumers belong to the former category whereas examples such as charitable gifts comprise the latter category. [4] Id. at 270. See the Company (Corporate Social Responsibility Policy) Rules, 2014, Rule 4(5) enunciates that activities undertaken to benefit the employees of an organization and their families shall not be considered as CSR activities. [5] Id. at 271. [6] See P Blumberg, Limited Liability and Corporate Groups, 11 JOURNAL OF CORPORATE LAW, 605, (1986).

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Authors

Ms. Reeva Gujral Singhal is Lawyer and Partner at JS Law Chambers.

Aryamann Oberoi is a fourth year law student, BBA-LLB (Hons.), School of Law, Bennett University, Greater Noida.

Sanskriti Mehta is a fourth year law student, BBA-LLB (Hons.), School of Law, Bennett University, Greater Noida.