**3. Companies Act 2013**

CSR has always been closely embedded in some Indian companies; from more than over a century ago, several Indian corporate groups have been involved voluntarily in charitable and other activities that benefited society [7]. In 2009, the Indian government introduced voluntary guidelines that required companies to establish CSR policies, allocate specific amounts for CSR expenditure and to disseminate information on these to stakeholders [8]. The government hoped that these voluntary guidelines would be applied on a 'comply or explain' basis, whereby companies who were unable to comply would provide an explanation for non-compliance. However, not many companies adopted the voluntary requirement for CSR [7].

The main impetus towards recognising CSR and stakeholder interests came from the Parliamentary Standing Committee on Finance [9], which lead to the Companies Bill 2011 and eventually the Companies Act 2013. The 2013 Act expressly recognised that companies must take into account stakeholders. This is evident in Section 166 (2) of the Companies Act which recognises that directors

#### *Corporate Social Responsibility in India: The Saga Continues DOI: http://dx.doi.org/10.5772/intechopen.94480*

must take into account certain stakeholder interests. This Section can in many ways be seen as a doorway towards the introduction of Section 135 of the Act [10].

Section 135 of the 2013 Act along with Schedule VII and the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014 which came into effect on April 1, 2014 regulate CSR in Indian companies. The application of the Section is triggered by not by the nature of the company (public, private, listed) but rather the financial strength of the company. Hence any company with a net worth of Rs 500 crore or a turnover of Rs 1000 crore or net profit of Rs 5 crore needs to constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director. It is then the responsibility of this CSR Committee to ensure that in every financial year the company spends at least 2 percent of the average net profit of past three financial years on certain specified CSR activities. If the company fails to spend such amount, the Board shall specify the reasons for not spending the amount in its report [11].

The provision must be read in conjunction with the Companies (Corporate Social Responsibility Policy) Rules 2014 which provide for the some of the procedural aspects of the CSR requirement. They provide that the CSR activities of a business should not be undertaken in the 'normal course of business' and must be with respect to any of the activities mentioned in Schedule VII of the 2013 Act [12]. These activities include eradicating hunger, poverty and malnutrition; promoting preventive health care; promoting education and livelihood enhancement projects and contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief, amongst others. This list is merely indicative and not exhaustive of the activities that the company might define as CSR. Although CSR activities must be relatable to Schedule VII, 'the entries in the said Schedule VII must be interpreted liberally so as to capture the essence of the subjects' [13]. An instance of this is evidenced in a recent circular that has declared that the liberal interpretation of Schedule VII would mean that spending of CSR funds for COVID-19 would be eligible CSR activity relating to promotion of health care and sanitation, and disaster management [14].
