Recently, the Supreme Court of India drives its attention to the case requires an examination in an original lawsuit filed under Article 131 of the Constitution. This lawsuit was initiated by the State of Rajasthan, alleging discrimination in the treatment of the Chief Minister's Relief Fund for COVID-19 (CM Relief Fund) as compared to the Prime Minister's Citizen Assistance and Relief in Emergency Situation Fund (PM CARES Fund) in the context of Corporate Social Responsibility (CSR) activities.

The State of Rajashtan raised an issue over excluding the CM Cares Fund as a CSR activity under Schedule 7 of the Companies Act, 2013, while the PM Cares Fund enjoys such recognition.

Back in June 2020, the Supreme Court bench, headed by Chief Justice S.A. Bobde, issued a notice regarding this case.

The Court today noted that the following issues have arisen-

• Maintainability of the Suit
• Arbitrary and Discriminatory Exclusion
• Extension of CSR Benefit to CM Fund
• Discriminatory Nature of OM(Office Memorandum) by Corporate Ministry

The Court ordered “the suit shall be listed before registrar for recording admission and denial of documents. File documents relied upon within 1 week. Registrar to complete the exercise by the end of November 2023. List on 5th December”

Case Brief -

The division bench comprising Justices Abhay S Oka and Justice Pankaj Mithal was hearing an original suit filed by the State of Rajasthan under Art 131 of the Constitution challenging the Union of India challenging the exclusion of CM Relief Fund from CSR Activity.

Back in March, 2020, the Ministry of Corporate Affairs issued a circular, affirming that the utilization of Corporate Social Responsibility (CSR) funds is permissible for CSR activities. It is worth highlighting that a 21-day lockdown was implemented on March 24, 2020. Subsequently, on March 28, 2020, the Central Government issued a circular that explicitly specified contributions made to the PM CARES fund as eligible for CSR purposes under the Companies Act.

It stated “The PM-CARES Fund has been set up to provide relief to those affected by any kind of emergency or distress situation. Accordingly, it is clarified that any contribution made to the PM CARES Fund shall qualify as CSR expenditure under the Companies Act, 2013.”

On March 29, 2020, the plaintiff, the State of Rajasthan, formed separate "Rajasthan CMRF COVID-19 Mitigation Fund (CMRF)." This fund functioned as a specialized account within the Chief Minister Relief Fund, with a clear focus on addressing the negative consequences of COVID-19. Importantly, it had a separate account dedicated to managing the associated funds.

But on 10 April 2020, the Ministry of Corporate Affairs noted that:

1. The contribution made to the 'PMCARES Fund shall qualify as CSR expenditure under item no. (viii) of Schedule VII of the Companies Act, 2013.
2. 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 admissible CSR Expenditure.”

Later, the State of Rajasthan invoked Article 131 of the Indian Constitution to initiate the current legal action.

The plaintiff in his petition states “The object of this dedicated account (CMRF) squarely falls within the purview of enumerated clauses of the Schedule VII of Companies Act, 2013 ("the Act") to qualify as CSR Expenditure. The General Circular No. 15 of 2020 dated 10.04.2020 issued by the Ministry of Corporate Affairs has created an apprehension that the said CMRF won't qualify as CSR Expenditure. In order to ally such apprehension and to declare and hold that CMRF shall fall within the CSR Funds, the present suit under Article 131, Constitution of India, is preferred.”

The plaintiff sought a mandatory permanent injunction against Circular No. 15 of 2020, dated April 10, 2020, issued by the Ministry of Corporate Affairs. They argued that this circular is ultra vires Schedule VII of the Companies Act, 2013, and unconstitutional, as it allegedly violates the constitutional principles of equality as outlined in Article 14 of the Constitution of India.

Further, the plaintiff sought a directive stating that contributions made to the CMRF should be recognized as eligible activities specified in Schedule VII of the Companies Act, thereby qualifying as Corporate Social Responsibility (CSR) activities.

The plaintiff alsi highlighted that COVID-19 is also notified under the National Disaster Management Act, 2005, and that Schedule VII of the Companies Act includes provisions related to public and preventive healthcare as well as disaster management and relief, both of which they argue should encompass the CMRF.

Case Title: State of Rajasthan v. Union of India