Demo Case: In re Deccan Ceramics Ltd
What happens when a company fails to spend its CSR obligation and does not transfer the unspent amount on time?
- Forum
- Illustrative — Tribunal
- Published
- Reading time
- 4 min
This is an illustrative scenario with fictional parties, written to demonstrate the Case Law in 5 format. It does not describe a real judgment or holding.
01 The question
What happens when a company fails to spend its CSR obligation and does not transfer the unspent amount on time?
02 Facts
Deccan Ceramics (a fictional company) had a CSR obligation of ₹2 crore. It spent ₹1.2 crore and intended to spend the rest on a school-building project spanning three years.
The board approved the project as an ongoing project, but the company transferred the unspent ₹80 lakh to the Unspent CSR Account several weeks after the statutory deadline.
03 Issue
Whether delayed transfer of the unspent amount, without any intent to avoid the obligation, constitutes a contravention of Section 135(6) attracting penalty under Section 135(7).
04 Arguments / positions
Company’s position
The funds were always committed to the project and were eventually transferred. The delay was administrative and caused no loss to the CSR objective.
Registrar’s position
The statute prescribes a clear timeline. Compliance with deadlines is integral to the CSR framework, and penalties are designed to enforce it.
05 Decision
In this illustrative scenario, the tribunal finds that a contravention occurred, as the timeline is mandatory. However, it takes into account the company’s good faith and prompt rectification when determining the consequences.
06 Why it matters
CSR non-compliance is reported in board reports and by auditors, and can attract monetary penalties on the company and officers in default.
Ongoing projects need disciplined tracking of both spend and statutory timelines.
07 Key takeaway
Classify CSR projects correctly at the outset and calendar the transfer deadline for any unspent amount.