Reliance may have diverted Rs 1.7k cr CSR funds to its own businesses

New Delhi: The Ministry of Corporate Affairs (MCA) has served a notice to Reliance Industries Ltd (RIL) for diverting funds to the tune of Rs 1,740 crores, earmarked for Corporate Social Responsibility (CSR), on its own existing businesses, thereby violating CSR norms. An official investigation of Reliance's CSR projects may follow, a report published in DNA said.

The action comes after a complaint was made by a whistle-blower to the Department of Economic Affairs of the Finance Ministry.

Which are the projects under scanner?

The three CSR projects of RIL which are now set to come under the scanner include Sir HN Reliance Foundation Hospital and Research Centre (Mumbai), Reliance University (Jio University, Navi Mumbai), and Lodhivali Hospital and Art Clinic (Dhirubhai Ambani Hospital, Lodhivali).

A notice sent by the ministry to RIL under Section 206 of the Companies Act, 2013 said, "Prima facie, you appear to be in violation of provisions of Companies Act, 2013 as use of CSR as a source of funding an existing business is not permissible.
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"

The ministry has asked Reliance to furnish details about funding, operations and revenues for each of the three CSR projects for all financial years, starting 2014-15 till date.

Reliance spent CSR funds on its own subsidiaries

In the years from 2014 to 2018, Reliance reported expenditure of Rs 2,816 crores as against the prescribed amount of Rs 2,414 crores. Out of this, Rs 1,141 crores was spent on Sir HN Reliance Foundation Hospital and Research Centre, Rs 590 crore on Reliance University and Rs 8 crore on Lodhivali Hospital and Art Clinic in three years. These three companies will be under investigation.

What is CSR?

The Companies Act, 2013 mandates all firms with a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more to spend 2 percent of their average three-year annual net profit towards CSR activities in a financial year.

Ministry has asked RIL's top officials to appear before it

The MCA has also asked RIL's top officials to appear before it in person. "A final opportunity is being accorded to you to explain your compliance of CSR provisions… and are requested to appear for a hearing on the matter, in person, to demonstrate through legal documents how the prescribed CSR amount has been spent and CSR compliance has been made," the notice said.

"In case compliance of CSR provisions can't be demonstrated, formal inspection under Companies Act shall follow," it added. The ministry said that the company's reply to its earlier letter was "not satisfactory."