M.K. Ranjitsinh v. Union of India

Para 35

• CSR to include Corporate Environmental Responsibility. The legal formation of Corporate Social Responsibility (CSR) in India is intended to mark a paradigm shift from voluntary philanthropy to statutory obligation. Under Section 135 of the Companies Act, 2013, Parliament institutionalized this duty by mandating companies to meet specific financial thresholds espousing social responsibility. This provision effectively codifies the principle that corporate profit is not solely the private property of shareholders but is partly owed to the society that enables its generation. The magic of legitimacy is in the perspective that private property is a trust.

Para 36

• This statutory mandate redefines the traditional role of corporate governance. Historically, a director’s primary duty was to maximize value for shareholders. However, Section 166(2) of the Companies Act, 2013 dismantled this narrow view by imposing a broader fiduciary duty. Directors are now legally mandated to act in good faith not just for members, but for the “best interests of the company, its employees, the shareholders, the community, and for the protection of environment.” This crucial expansion recognizes that a corporation is an organ of society, and its “social” responsibility extends to the wider community impacted by its operations.

Para 37

• The definition of “community” within the CSR framework has been expanded to explicitly include the natural world, cementing the link between social welfare and environmental health. Schedule VII of the Companies Act, 2013 enumerates permissible CSR activities, specifically listing “ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, and conservation of natural resources.” By categorizing these ecological activities as “social” responsibility, the law acknowledges that as human beings, we cannot “own” or “use” environment for “our purpose”. The corporate duty must evolve from merely protecting the shareholders to protecting the ecosystem that we all inhabit.

Para 38

• Therefore, the corporate definition of “Social Responsibility” must inherently include “Environmental Responsibility.” Companies cannot assert to be socially responsible while ignoring equal claims of the environment and other beings of the ecosystem. The Constitution of India, under Article 51A(g), imposes a fundamental duty on every citizen “to protect and improve the natural environment including forests, lakes, rivers and wildlife, and to have compassion for living creatures.” A corporation, as a legal person and a key organ of society, shares this fundamental duty. CSR funds are the tangible expression of this duty. Consequently, allocating funds for the protection of environment is not a voluntary act of charity but a fulfilment of a constitutional obligation.

Para 39

• The obligation to protect endangered species is paramount. In Centre for Environmental Law, World Wide Fund-India (supra), this Court emphasized the “Species Best Interest” standard, prioritizing the survival of endangered species over commercial or industrial interests. Where corporate activities such as mining, power generation, or infrastructure threaten the habitat of endangered species, the “Polluter Pays” principle mandates that the company bears the cost of species recovery. CSR funds must, therefore, be directed towards ex-situ and in-situ conservation efforts to prevent extinction.

Para 40

• The non-renewable power generators operating in the priority as well as non-priority areas in Rajasthan and Gujarat must always remember that they share the environment with the Godawan, the Great Indian Bustard and must undertake their activities as if they are guests in its abode.