New Delhi: The validity of a central government circular that excludes the Chief Minister’s Relief Fund (CMRF) from the purview of CSR (corporate social responsibility) has come under judicial scrutiny. The CMRF was created to receive donations as part of the CSR scheme to mitigate the impact of Covid-19.
On a petition filed by the Congress-led Rajasthan government, the Supreme Court has sought a response from the Centre on why the 10 April circular allows PM CARES Fund to receive such donations, but disallows the CMRF.
The Rajasthan government set up the fund on 29 March, a day after the Centre notified the PM CARES Fund.
On 16 June, a bench led by Chief Justice of India S.A. Bobde issued a notice to the central government on Rajasthan’s assertion that such a distinction between the two funds was unconstitutional and went against the principle of cooperative federalism. Senior advocate Manish Singhvi appeared for the state.
This is not the first time someone has moved the top court to declare the circular unconstitutional. In May, Trinamool Congress MP Mahua Moitra had assailed it in her public interest litigation. She highlighted the disparities between PM CARES and CMRF, with the corporate donations to only the former being allowed as CSR spends.
However, that time, the Supreme Court had refused to entertain her, asking the Lok Sabha MP to raise her contention and debate it in the Parliament instead of contesting it in the court.
The Rajasthan Government has preferred a suit under Article 131 of the Constitution against the impugned circular. Article 131 allows the top court, as the federal court of India, to decide disputes arising between different units of the Indian Federation such as state and Centre or between two states.
Rajasthan seeks permanent injunction against circular
Released in response to “frequently asked questions”, the circular issued by the Ministry of Corporate Affairs states: “Chief Minister’s Relief Fund or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not qualify as CSR expenditure.”
Schedule VII of the Companies Act enumerates the public and preventive healthcare activities that are eligible for donations under the CSR fund. One such pertains to disaster management and relief. According to Rajasthan, since Covid-19 is officially declared a disaster under the Disaster Management Act, the state circular on the special relief fund should fall within the purview of the Companies Act.
Rajasthan has sought permanent injunction against the Centre’s circular on the grounds it violates the principles of equality as enshrined in Article 14 of the Indian Constitution. In its plea, the Ashok Gehlot government said it created a special Rajasthan CRMF Covid-19 Mitigation Fund on 29 March to combat the pandemic.
But the Centre’s circular, it added, has caused apprehensions over CSR expenditure. The court must allay such apprehensions and declare to hold that CMRF shall fall within CSR funds, it said.
‘Centre’s circular frustrates the objective to combat Covid’
Elaborating its reasons for the creation of the Covid-19 mitigation fund, the state said its aim was to make the funds available at grassroots level to cope with emergencies.
“State Governments such as the Plaintiff (Rajasthan) set up their own individual State and / or Chief Minister’s Relief Funds to organise funds for fighting the coronavirus pandemic, by encouraging corporate firms to contribute by qualifying the donations as valid CSR spends,” read Rajasthan’s suit.
Donations received would have been utilised to provide laboratory testing, ventilators, protective equipment, masks, sanitiser,medical and non-medical essential equipment and medicines. Additionally, the fund was to provide for rations, food packets, transportation, medicines and maintenance of people affected by the pandemic.
The central government circular, however, frustrated the main objective to fight the coronavirus pandemic, Rajasthan submitted.
“This is manifestly irrational and frustrates the main objective i.e. alleviation of Covid-19. It would not only be violative of equal protection of laws enshrined under Article 14 of the Constitution, but also unjust and palpably arbitrary,” it said.