PETITION TO THE HON'BLE MEMBERS OF THE JOINT PARLIAMENTARY COMMITTEE (JPC) On the Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026)

 

PETITION TO THE HON'BLE MEMBERS OF THE JOINT PARLIAMENTARY COMMITTEE (JPC)

On the Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026)

 

Subject: Representation seeking amendments to Section 135 of the Companies Act, 2013 to strengthen Corporate Social Responsibility (CSR) governance, independence, transparency and accountability.

 

Respected Hon'ble Chairperson and Hon'ble Members,

 

I respectfully submit this representation for your kind consideration during the examination of The Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026).

India has emerged as the first country in the world to mandate Corporate Social Responsibility (CSR) through legislation. Every year, thousands of crores of rupees are deployed for education, healthcare, environment, livelihood generation and other social development programmes. The success of this unique legislation, however, depends not merely upon expenditure but upon independent governance, measurable social outcomes and credible oversight.

The present framework leaves two significant governance gaps that deserve legislative attention.

  

I. Need to Strengthen the Independence of the CSR Committee

Existing Provision:

Section 135(1) permits the CSR Committee to comprise directors of the company and provides relaxation to companies not required to appoint an Independent Director under Section 149(4).

Consequently, the CSR Committee may substantially comprise members of the company's own management, limiting institutional independence in the planning, implementation and oversight of CSR expenditure.

Accordingly, it is proposed that Section 135(1) be amended as :

Every CSR Committee shall consist of minimum three Directors. The Chairperson and at least one additional member shall be Independent Directors. Such Independent Directors should be selected from the Independent Directors Data Bank maintained by the Indian Institute of Corporate Affairs (IICA), Ministry of Corporate Affairs.

Even where a company is exempt from appointing an Independent Director under Section 149(4), the CSR Committee should nevertheless have three members, including two Independent Directors, with the Chairperson being an Independent Director.

Such a framework would substantially strengthen independence, reduce conflicts of interest, improve governance and enhance stakeholder confidence.

 

II. Introduction of Independent Social Impact Assessment

 

CSR is intended to generate measurable social impact rather than merely record financial expenditure. A governance framework is therefore required to independently verify whether CSR objectives have actually been achieved.

At present, the CSR framework does not prescribe a uniform professional qualification for persons conducting Social Impact Assessments. This may lead to variations in quality, methodology, independence and credibility.

In contrast, the SEBI framework governing the Social Stock Exchange prescribes a structured system under which only qualified Social Auditors and qualified Social Audit Firms are eligible to undertake Social Impact Assessment Audits. This framework establishes recognized standards of competence, independence and accountability.

The Companies Act may benefit from adopting a similar approach for CSR.

Proposed New Section 135(2):

It is respectfully proposed that a new sub-section be inserted as follows:

Section 135(2): Every company required to constitute a Corporate Social Responsibility Committee under this section shall cause an Independent Social Impact Assessment Audit of its Corporate Social Responsibility activities to be conducted annually by a qualified Social Audit Firm through a qualified Social Auditor meeting such qualifications and standards as prescribed by the Securities and Exchange Board of India for the Social Stock Exchange.

Benefits of the Proposed Amendments:

 

The proposed reforms would:

·       Strengthen independence of CSR governance.

·       Introduce effective checks and balances in utilization of CSR funds.

·       Improve transparency and accountability.

·       Ensure professional and credible measurement of social outcomes.

·       Reduce the risk of conflicts of interest and weak oversight.

·       Enhance public confidence in India's CSR framework.

·    Align CSR governance with internationally accepted principles of independent oversight and impact evaluation.

 

Prayer:

In view of the foregoing, it is most respectfully prayed that the Hon'ble Joint Parliamentary Committee may kindly recommend:

Amendment of Section 135 (1) to require an independent CSR Committee chaired by an Independent Director, with a majority of independent representation drawn from the Independent Directors Data Bank maintained by the Indian Institute of Corporate Affairs ( Ministry of Corporate Affairs ).

Insertion of a new Section 135(2) mandating annual Independent Social Impact Assessment Audits by qualified Social Audit Firm through a qualified Social Auditor as under a statutory framework comparable to that adopted for the Social Stock Exchange.

These amendments would significantly strengthen the governance architecture of CSR in India and help ensure that CSR resources achieve their intended public benefit through greater independence, transparency and accountability.

 

Respectfully submitted.

Birendra K Jha

Email: birendrajha03@yahoo.com