Companies Act 2013 — CSR Quiz
Case Scenario I — Aarohan Industries Ltd.
Aarohan Industries Ltd. is a public limited company manufacturing electrical equipment, with over fifteen years of continuous operations and steady growth driven by strong market presence and efficient management.
During the financial year 2024-25, the company recorded a turnover of ₹ 1,150 crore, reflecting its robust operational performance. The company is mandatorily required to appoint independent directors as per Rule 4 of Companies (Appointment of Directors) Rules, read with Section 149 of the Companies Act, 2013.
The net profit of the company, as computed in accordance with the provisions of Section 198 of the Companies Act, 2013, amounted to ₹ 12 crore. Further, the company's net worth as at the end of the financial year stood at ₹ 620 crore.
The net profits of the company for the immediately preceding three financial years were: for 2021-22 — ₹ 8 crore, for 2022-23 — ₹ 10 crore and for 2023-24 — ₹ 12 crore.
In view of the above financial parameters, Aarohan Industries Ltd. satisfied the criteria prescribed under Section 135 of the Companies Act, 2013 relating to Corporate Social Responsibility (CSR). Accordingly, the company constituted a Corporate Social Responsibility Committee consisting of three directors, including one independent director. Consequently, the company was under an obligation to spend the prescribed percentage of net profits towards CSR activities during the financial year 2024-25.
Based on the recommendations of the CSR Committee, the Board of Directors approved a CSR budget of ₹ 20 lakh for the financial year 2024-25. However, due to delay in the implementation of the identified projects, the company could spend only ₹ 14 lakh on CSR activities during the year. The remaining unspent amount did not relate to any ongoing project.
The company duly disclosed the reasons for not spending the entire prescribed CSR amount in the Board's Report. One of the directors was of the view that the unspent funds are needed to be transferred to a special bank account maintained with a scheduled bank. However, no separate bank account was opened for the unspent CSR amount.
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