135. Corporate Social Responsibility.— (1) Every company having net worth of rupees five
hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five
crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of
the Board consisting of three or more directors, out of which at least one director shall be an independent
director.
(2) The Board’s report under sub-section (3) of section 134 shall disclose the composition of the
Corporate Social Responsibility Committee.
(3) The Corporate Social Responsibility Committee shall,—
(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall
indicate the activities to be undertaken by the company as specified in Schedule VII;
(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a);
and
(c) monitor the Corporate Social Responsibility Policy of the company from time to time.
(4) The Board of every company referred to in sub-section (1) shall,—
(a) after taking into account the recommendations made by the Corporate Social Responsibility
Committee, approve the Corporate Social Responsibility Policy for the company and disclose
contents of such Policy in its report and also place it on the company’s website, if any, in such manner
as may be prescribed; and
(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the
company are undertaken by the company.
(5) The Board of every company referred to in sub-section (1), shall ensure that the company spends,
in every financial year, at least two per cent. of the average net profits of the company made during the
three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:
Provided that the company shall give preference to the local area and areas around it where it
operates, for spending the amount earmarked for Corporate Social Responsibility activities:
Provided further that if the company fails to spend such amount, the Board shall, in its report made
under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.
Explanation.—For the purposes of this section ―average net profit‖ shall be calculated in accordance
with the provisions of section 198.
