The Legal Meaning of "Social Impact Assessment" & The "Social Impact Assessor" In The Companies Act, 2013.


  *Birendra K Jha                            

Social Impact Assessment Audit Practitioner                       Email: birendrajha03@yahoo.com



This is skill gap in understanding the legal meaning of "Impact Assessment" in Company Act 2013. The gap is such huge that Company Law has been violated openly.   

Under Section 135 of Companies Act 2013 & Rule 8(3) of the Companies (CSR Policy) Rules, 2014, the CSR project needs "Impact Assessment". The meaning of "Impact Assessment Firm " and the qualification of "Impact Assessment Assessor", who can conduct the "Impact Assessment" is clearly defined under  Section 2, Sub Section 95 of The Companies Act, 2013. This Section states:  

"words and expressions used and not defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) shall have the meanings respectively assigned to them in those Acts".  

The Securities and Exchange Board of India Act, 1992, has defined "Social Impact Assessor" and "Social Impact Assessment Firm"  vide in terms of Regulation 292A of the Securities and Exchange Board of India (SEBI) (Issue of Capital and Disclosure Requirements) Regulations, 2018 ( amended as on December 21, 2023 ). This is stated below and mentioned in Regulation 292 A, in sub regulation "f" and "g" respectively : 

(f)  "Social Impact Assessor"  means  an  individual  registered  with  a  self-regulatory organization under the Institute of Chartered Accountants of India or such other agency,  as  may  be  specified  by  the  Board,  who  has  qualified  a  certification program  conducted  by  National  Institute  of  Securities  Market  and  holds  a  valid certificate;

(g)"Social Impact Assessment Firm" means any entity which has employed Social Impact Assessor  and has  a  track  record  of  minimum  three  years  for  conducting  social  impact assessment;

This is also required to be tested with the principle given by Hon'ble Supreme Court of India recently in the case of Renaissance Hotel Holdings INC Vs B Vijaya Sai (2022). The Hon'ble Supreme Court of India has ruled:

"that while interpreting the provisions of a statute, it is necessary that the textual interpretation should be matched with the contextual one.  The Act must be looked at as a whole and it must be discovered what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act." 

Thus the meaning of "Social Impact Assessment", "Social Impact Assessor" (who is eligible to conduct audit) and the "Social Impact Assessment Firm" in the Company Act 2013 is very clear. This is the same what is understood under the SEBI Act and SEBI Regulation. Needless to explain both Act and Regulation of SEBI Act 1992 have been passed by the Parliament, under Section 31 of SEBI Act 1992, which is the actual intention of the legislature. 

Thus, this  is seen in most of the CSR's Impact Assessment Audit, unqualified people are engaged for Impact Assessment Audit. This is clear violation of the Company Act 2013.   

Any violation of CSR Law in conducting Impact Assessment as specified in the Company Act 2013, automatically invokes the Section 450 of the Companies Act, 2013. This is   invoked against company and its officers who have contravened any provisions of the Company Act. The defaulters are punished with fine and any statement of Board of Directors or financial statement, based on such defective Impact Assessment Audit report are subjected to punishment. 

This is also the negligence of understanding the Company Act provision by the Company Secretary, the Board & the CSR professional who failed to apply correct mind. 


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