SC refuses to entertain Mahua Moitra’s plea on CSR funds

Mahua Moitra has challenged the validity of the MCA circular for excluding relief funds of chief ministers from receiving contribution by companies under CSR to deal with COVID-19.

Mahua Moitra
Mahua Moitra has challenged the validity of MCA circular for extending relief funds to ministers (PTI image)

The Supreme Court has refused to entertain Trinamool Congress MP Mahua Moitra’s plea challenging the validity of the MCA circular for excluding relief funds of chief ministers from receiving contribution by companies under Corporate Social Responsibility (CSR) to deal with the COVID-19 pandemic.

The top court said the petitioner being a Member of Parliament can debate it in the House whether the state should get the CSR benefit or not, as she has not challenged the law in her plea. A bench of Justices Ashok Bhushan, Sanjay Kishan Kaul and B R Gavai, hearing the plea through video conferencing, said there was no merit in the petition and was allowed to withdraw the petition.

Moitra had challenged the validity of the circular issued by the Ministry of Corporate Affairs (MCA) of April 10, which had said contributions to Chief Ministers Relief Fund and State Relief Fund for Covid-19 cannot be claimed as CSR spending by the corporate. Senior advocate C A Sundaram, appearing for Moitra, said that contribution given by firms under the Companies Act will be treated as CSR if given to the central government. He said the provision is not in the Companies Act but has been clarified by the MCA through a circular.

The bench, said that the petitioner has not challenged the law. Sundaram said that he has no problem with regard to the deposit of the CSR with the central government but why it should not be with the state, as it should be used for the development of the local area.

The bench said that there is no aggrieved company before us and the petitioner is an MP. Sundaram replied that her state, West Bengal, cannot accept the contribution under the CSR. The bench said that unless covered under schedule VII of the Companies Act of 2013, the state cannot claim it. Sundaram said that it is covered under schedule VII as the Covid-19 pandemic has been notified as disaster.

The bench said that it is a legislative scheme and the petitioner has not challenged the Act. It further said that whether the state should get the benefit out of the CSR or not, the petitioner can debate it in the Parliament. Sundaram said it is the duty under the Companies Act that the contribution should be for the local area and if you are allowing a company to contribute to the Central fund and not to the state fund for the same very purpose, then it attracts Article 14 of the Constitution.

The bench said that the petitioner has challenged a clarification order, issued under the statute and there is no corporate entity before us. The issues raised in the petition can be debated in Parliament, the bench said, adding that it does not find any merits in the matter. It told Sundaram that the court would dismiss the petition or he can withdraw it after which the senior lawyer agreed to withdraw it.

Moitra had claimed in her petition that the MCA circular is not only in violation of Article 14 of the Constitution of India, but is also ultra vires the provisions of the Companies Act of 2013. She had contended that schedule VII includes CM Relief Funds as eligible recipient of the CSR but despite the express provisions in law, the MCA circular has said that contribution in state Relief Funds set up to deal with Covid-19 pandemic will not qualify for CSR.

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The circular states that only donations made towards the PM CARES Fund will attract CSR. On March 28, the government had announced the setting up of public charitable Prime Ministers Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) with the “primary objective of dealing with any kind of emergency or distress situation, like posed by Covid-19 pandemic and provide relief to the affected. The plea said the unfair treatment of identical contribution to the State Relief funds is against public interest and public policy, in so far as it disincentivises corporate contributions under the law.

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