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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Corporate Social Responsibility (CSR)

Kaveri Pharma Ltd plans its CSR spend for the year. Its factories are in Sanand (Gujarat), but the Board is considering a project in a distant State where no company operations exist. What does section 135 say about where the company should spend?

Under the first proviso to section 135(5), the company must give preference to the local area and areas around it where it operates when spending its CSR amount. This is a preference, not a ban on other locations, so the Act is not silent on it.

  1. AThe company must spend only within the district of its registered office, with no exceptions
  2. BThe company must give preference to the local area and areas around it where it operatesCorrect
  3. CThe company must spend only outside areas where it operates, to avoid benefiting itself
  4. DThe company may ignore location since the Act is silent on it

Explanation

The first proviso to section 135(5) says the company shall give preference to the local area and areas around it where it operates. It is a preference, not an absolute bar, so distant projects are not prohibited. Option 1 wrongly makes it an exclusive rule.

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