New Delhi, Feb 5 : Corporate Social Responsibility (CSR) funds, meant for social and developmental purposes, have increasingly become targets of fraudulent activities and regulatory violations. Recent investigations across India and internationally have exposed various schemes and misuses of these funds.
Fraudulent Schemes Targeting CSR Funds:
Kerala Two-Wheeler Scam:
- Modus Operandi: Anandu Krishnan, 26, from Idukki district, orchestrated a scam promising two-wheelers at half the market price, claiming the discount was facilitated through CSR funds from large corporations. Victims made advance payments, believing they were securing vehicles at reduced rates.
- Investigation and Arrest: The Ernakulam rural police arrested Krishnan following multiple complaints. Preliminary investigations revealed that he had conducted similar fraudulent activities across the state, amassing significant sums from unsuspecting individuals. Authorities are working to determine the total amount collected and identify any dealerships or other entities involved.
Bengaluru Scam:
- In April 2024, Bengaluru police arrested five individuals for running a scheme where they approached businesses and NGOs, offering substantial CSR funds from corporate entities in exchange for a 40% commission. The accused used fake currency-filled boxes during video calls to convince victims. Authorities seized ₹30 crore in counterfeit currency and ₹23.4 lakh in cash.
Thane District Fraud:
- In October 2024, three individuals from Andhra Pradesh were booked for allegedly defrauding a businessman in Maharashtra’s Thane district of ₹32 lakh. They promised to secure CSR funds worth ₹5 crore for an educational services firm, presenting forged documents from the Reserve Bank of India and a major automobile company. After collecting the money, they failed to deliver the funds or return the amount taken.
Regulatory Actions Against CSR Non-Compliance:
Stanley Black & Decker India Penalty:
- On August 1, 2024, the Ministry of Corporate Affairs imposed a penalty of ₹2.16 crore on Stanley Black & Decker India Private Limited for failing to transfer unspent CSR funds to a designated account, as required by the Companies Act, 2013. The company cited COVID-19-related delays but was found in violation of CSR provisions for FY 2020-21 and 2021-22.
Ganesh Green Bharat Limited Fine:
- In July 2024, the Registrar of Companies in Ahmedabad levied a penalty of ₹1.06 crore on Ganesh Green Bharat Limited and its director for not contributing the required CSR funds during FY 2021-22 and 2022-23, violating Section 135(5) of the Companies Act, 2013.
To ensure the right utilization of CSR funds, companies should adopt a transparent allocation process, prioritizing verified projects with clear objectives and measurable impact. Engaging local communities in decision-making helps address real needs while ensuring sustainability. Regular third-party audits and real-time tracking can prevent misuse and enhance accountability. Additionally, fostering collaborations with credible NGOs, government agencies, and industry experts can maximize the effectiveness of CSR initiatives and drive long-term positive change.
