Corporate Social Responsibility - Determination of net worth - ...

Companies Law

March 15, 2024

Corporate Social Responsibility - Determination of net worth - Company fall within the purview of section 135 of Companies Act or not - Exclusion of reserves created from amalgamation - The High court found that the petitioner company did not comply with the CSR obligations despite having a net worth exceeding the prescribed threshold. The court noted that the company failed to make CSR expenditures or provide reasons for not doing so in its Board's report, as required by the law. - The court disagreed with the petitioners’ interpretation of net worth. It held that the benefits of excluding reserves created from amalgamation from the net worth calculation do not extend beyond the year of amalgamation. Consequently, the petitioners could not continuously exclude these reserves to avoid CSR obligations in subsequent years. - There is thus sufficient materials on record making out a prima facie case against the petitioners in respect of the offences alleged.

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