Excerpt from India CSR Network Article, Published on Aug 12, 2024.
Stanley Black & Decker, the American industrial giant, has faced a significant penalty of Rs 2.16 crore imposed by the Ministry of Corporate Affairs in India. This fine, targeting the Indian subsidiary of Stanley Black & Decker and four of its key executives, was enforced by the Registrar of Companies (RoC) for Maharashtra due to breaches in Corporate Social Responsibility (CSR) regulations. The penalty underscores the growing scrutiny of CSR compliance among multinational corporations operating in India.
The RoC’s official order, dated August 1, revealed that Stanley Black & Decker India failed to transfer its unspent CSR funds to a designated account within the required timeframe. This violation of the Companies Act, 2013, highlights the critical importance of adhering to CSR fund transfer requirements. According to the Act, companies must transfer any unspent CSR amount to a special account within 30 days of the end of the relevant financial year. For the financial years 2020-21 and 2021-22, Stanley Black & Decker was required to transfer Rs 1.2 crore and Rs 1.28 crore respectively but failed to do so, resulting in the penalty under Section 135 (7) of the Companies Act.
In response, Stanley Black & Decker India argued that the delay was unintentional and requested a full waiver of the penalty, emphasizing that there was no willful default. The company has initiated a suo motu application and retains the right to appeal the order with the Regional Director (West) within 60 days.
Corporate Social Responsibility is a legal obligation for companies in India meeting certain financial thresholds. They must spend at least 2% of their average net profit from the previous three financial years on approved social initiatives. Failure to comply with these rules can result in significant penalties, as demonstrated by this case.
The penalty against Stanley Black & Decker India is part of a broader trend of increasing government oversight of CSR activities. Companies are now proactively addressing minor compliance issues to avoid larger penalties, reflecting the importance of maintaining clean corporate records.
In a related incident, the RoC for Karnataka fined managed home rental network Nestaway Rs 3.05 lakh for failing to notify authorities about a change in its registered office address in a timely manner. This highlights the stringent approach regulatory bodies are adopting towards corporate governance in India.
The penalty against Stanley Black & Decker India serves as a reminder of the critical importance of CSR compliance for companies operating in India. As the government continues to enforce these regulations rigorously, companies must ensure they meet all legal requirements to avoid financial penalties and protect their reputations.
To delve deeper into this topic, please read the full article on India CSR Network.
