ROC Delhi II Slaps CSR Penalty for Delay in Transferring Unspent CSR Amount

Background and Context

The Registrar of Companies, Delhi II has passed an adjudication order dated 17 July 2026 under Section 454 of the Companies Act, 2013, imposing penalties on VARINDERA CONSTRUCTIONS LIMITED and its officers for non-compliance with Section 135(7) relating to Corporate Social Responsibility (CSR).

The matter arose from a suo motu application filed by the company seeking adjudication of penalties for CSR-related defaults for the financial years 2020-21, 2021-22 and 2022-23. The core violation, however, pertained to the failure to transfer unspent CSR amount for FY 2020-21 to a fund specified in Schedule VII within the statutory timeline.

Appointment of Adjudicating Officer

The order notes that the Adjudicating Officer was appointed by the Ministry of Corporate Affairs through Gazette Notification No. S.O. 831(E) dated 24/03/2015. This appointment was made in exercise of powers under Section 454 of the Companies Act, 2013, read with the Companies (Adjudication of Penalties) Rules, 2014, authorising the officer to adjudge penalties for non-compliance with provisions of the Act.

Parties to the Proceedings

Company

The proceedings concern VARINDERA CONSTRUCTIONS LIMITED, CIN U45201DL1987PLC128579, a company registered under the Companies Act, 1956/2013, having its registered office at:

OFFICE NO. 613, 6TH FLOOR, PLOT NO. 4, JANAKPURI A-3, NEW DELHI, WEST DELHI, DELHI, INDIA 110058

Individuals (Officers in Default)

The order specifically names the following individuals in connection with the default:

  • SUSHMA GARG
  • SURBHI AGARWAL
  • VARINDER KUMAR GARG
  • VIVEK GARG
  • MAYANK GARG
  • NITIN KAUSHAL

These individuals are treated as officers in default for the purposes of penalty under Section 135(7).

CSR Non-compliance Consequences – Section 135(7)

The order recites the statutory framework under Section 135(7) of the Companies Act, 2013, which provides that:

If a company is in default in complying with the provisions of sub-section (5) or sub-section (6), the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.

In essence:

  • Company penalty:

    • 2 × the amount required to be transferred
    • OR ₹1 crore
    • Whichever is lower

  • Officer penalty:

    • 1/10th of the amount required to be transferred
    • OR ₹2 lakh
    • Whichever is lower

This framework was applied by ROC Delhi II to determine the penalty on the unspent CSR amount for FY 2020-21.

Facts and Compliance Failure

Triggering of CSR Obligations

  1. The company submitted in its application that for the financial year ending 31.03.2020, its net profit exceeded ₹5,00,00,000.
  2. Consequently, Section 135 became applicable, mandating the company to spend at least 2% of its average net profits of the three immediately preceding financial years on CSR activities, in every financial year.

CSR Requirement and Shortfall – FY 2020-21

For the financial year 2020-21 (ending 31.03.2021):

  • Required CSR expenditure: ₹27,19,853.06
  • Actual CSR spend: ₹22,00,000.00
  • Unspent CSR amount: ₹5,19,853.06

The company was therefore under a statutory obligation to transfer the unspent amount of ₹5,19,853.06 to a fund specified in Schedule VII within six months from the end of FY 2020-21, i.e., by 30.09.2021.

Failure to Transfer Unspent CSR Amount in Time

The company admitted that it did not transfer the unspent CSR amount within the prescribed six-month period to any Schedule VII fund. This constituted a breach of the requirements of Section 135(5) and Section 135(6) read with Section 135(7).