Linking CSR to Heritage Revival: Legal Options and Constraints

Introduction

India’s rich built heritage—palaces, forts, colonial mansions, temples, ghats—is under serious stress from neglect, institutional fragmentation and inadequate funding. As you outline, public-private partnerships (PPPs) and adaptive reuse have emerged as a possible route to reviving this heritage. The question arises: can the government mandate that eligible companies direct their statutory CSR (Corporate Social Responsibility) obligations under the Companies Act 2013 towards heritage revival projects? This article examines the statutory CSR regime, constitutional and jurisprudential constraints, and the feasibility of directing CSR funds specifically to heritage preservation.

The CSR Regime in India – Statute and Rules

Applicability and key features
Under section 135(1) of the Companies Act 2013, every company which, in the preceding financial year, satisfies any of the following criteria must comply with CSR obligations: net worth of ₹500 crore or more, or turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more.
Once applicable, the company must:

  • constitute a CSR Committee of the Board (unless exempted) to recommend policy, expenditure, etc.

  • ensure that the company spends in every financial year at least two per cent of the average net profits of the company made during the three immediately preceding financial years on CSR activities.

  • the CSR policy must specify the activities to be undertaken by the company, and must be disclosed in the Board’s report and on the company website if any.

  • If the company fails to spend the amount, the Board must disclose reasons in the report.

Permitted activities – Schedule VII
Schedule VII of the Act lists the activities which may be included by companies in their CSR policy. These include: eradicating hunger, poverty, promoting health care, education, rural development, environment sustainability, gender equality, protection of national heritage, art & culture, and others. Thus, heritage- and culture-related activities are indeed expressly recognised as eligible CSR activities.

Monitoring, non-compliance and penalties
The Ministry of Corporate Affairs (MCA) issues FAQs and clarifications (for example General Circular 14/2021) to clarify CSR applicability and compliance.
If a company fails to transfer unspent CSR amounts etc, section 135(7) provides for penalty: company may be fined (twice the amount required to be transferred or ₹1 crore, whichever is less), and every officer in default may be fined (one-tenth of unspent amount or ₹2 lakh whichever less).
Jurisprudence: In Charan Singh Meena v Union of India the court directed district collectors to verify genuine implementation of CSR activities and report non-compliance.
Recent example: The Registrar of Companies in Gujarat had criminal complaint quashed because offences were de-criminalised.

The Case for Heritage-Focused CSR

Given that heritage-revival (adaptive reuse, restoration, cultural hubs) falls under “protection of national heritage, art & culture” in Schedule VII, there is a clear statutory basis for companies to direct CSR funds to such projects. This means:

  • Companies could, in principle, choose to adopt heritage-conservation projects as their CSR focus.

  • If a heritage-project qualifies under “art & culture, protection of national heritage”, it is eligible.
    Therefore, what remains is whether government can go beyond eligibility and make heritage-directed CSR compulsory (or heavily incentivised).

Can Government Make CSR for Heritage Compulsory? – Legal and Practical Constraints

Statutory constraint: Board discretion and company policy
Although the Act mandates spending, it leaves the choice of which eligible activity under Schedule VII the company will undertake to the Board (via CSR Committee). The statutory language uses “shall ensure that the company spends … on CSR activities” (s. 135(5)), but does not mandate which category of Schedule VII activities must be selected. The Board proposes “the amount to be incurred” and monitors policy (s. 135(3)(a),(b)). Thus, the statute envisages company discretion among eligible activities.

Constitutional and corporate governance concerns

  • Companies are private legal persons; shifting CSR from simple discretionary philanthropic model to compulsory directed spending raises issues of intrusion on corporate autonomy and purpose of CSR (which, though mandatory, still leaves choice of project).

  • If the government imposes heritage-specific CSR behind statutory thresholds, one might argue such a move effectively imposes a sector-specific levy rather than CSR spending, and that may require legislative sanction or amendments.

  • There is also the question of reverse burden: forcing companies to invest only in heritage may reduce their freedom to respond to other pressing needs (education, health, environment) which are also part of Schedule VII.

Practical challenges

  • Heritage-projects often are complex, long-gestation, and may not lend themselves to 12-month cycle CSI interventions.

  • Companies may lack capacity/interest in heritage restoration compared to other CSR areas.

  • Monitoring and verifying conservation quality in heritage is more technical and demanding than many CSR programmes.

Possibility of targeted government policy rather than general CSR mandate
Rather than mandating all eligible companies to spend on heritage, the government could adopt a heritage-CSR incentive policy:

  • Encourage companies to spend CSR funds on heritage projects by matching grants, recognition, tax incentives or bonus credits.

  • Issue guidelines under CSR Rules that give “heritage-revival” higher preference or weight.

  • Mandate that a percentage of CSR funds in certain sectors (e.g., tourism, infrastructure) must go to heritage, if such sectoral regulation is possible.

Need for legislative amendment if mandate goes beyond discretion
If the policy seeks to require all covered companies to allocate a fixed percentage of their CSR spending exclusively to heritage-projects, that likely requires an amendment to section 135 or the CSR Rules, to specify heritage as a mandatory category (or allocate quotas). Absent that, compelling companies may lead to legal challenge.

Linking Heritage Revival and CSR in PPP Context

In the context of your opening narrative — the heritage crisis, the example of adaptive reuse (palaces turned cultural hubs), PPPs being essential — combining CSR funds and PPP heritage projects can be a viable strategy. The statutory CSR regime can support heritage revival by:

  • enabling companies to select heritage projects under eligible activity – “protection of national heritage, art & culture”.

  • incentivising companies through recognition if they partner in PPPs for adaptive reuse (for example partnering with state regulatory bodies, heritage trusts).

  • channeling CSR funds via agencies like the National Culture Fund (which funnels private/philanthropic funds for heritage) and aligning CSR spending with heritage conservation missions.

Government policy can strengthen this link by:

  • issuing heritage-CSR guidelines clarifying that heritage partners (NGOs, trusts, PPPs) are eligible CSR implementers.

  • ensuring implementing agencies for heritage projects are registered under CSR rules and recognised by MCA (for example via CSR-1/CSR-2 registration).

  • offering PPP arrangements for heritage sites (as your narrative on leasing historic buildings shows) and inviting CSR funding as part of the private partner contribution.

Thus, while the CSR statute does not currently force heritage-specific spending, the regime provides space for such alignment and government policy can actively promote this connection.

Judicial and Policy Precedents

  • Charan Singh Meena (supra) emphasised verification of actual CSR implementation and that CSR obligations under Section 135 are enforceable.

  • Hemani Industries Ltd v PCIT ruled that CSR spending is not a business expenditure and lacks the voluntariness required for deduction under tax law (so indicates CSR is a separate mandated category).

  • Recent MCA statistics note companies being penalised for non-compliance: 30 companies penalised over three years for failure to comply CSR rules.

  • Government FAQ Circular (General Circular 14/2021) clarifies applicability and compliance, showing the regulatory architecture.

These demonstrate courts and regulators treat CSR obligations as legally binding (in terms of process, disclosure and spending) though they leave choice of activities to companies.

Recommendations & Way Forward

For your intended audience (legal, policy, heritage sector) I highlight practical recommendations:

  1. Government (Centre/States) should proactively issue heritage-CSR guidelines: define criteria for heritage-projects (adaptive reuse, conservation, community participation) eligible under CSR, and publish lists of recognised implementing agencies.

  2. Amendment or notification could designate heritage-revival (especially adaptive reuse of historic buildings) as an explicit sub-category under Schedule VII (if not done) or in CSR Rules to ensure clarity and facilitate spending.

  3. Companies should be encouraged via incentives (tax credits, matching grants, publicity) to direct CSR to heritage PPPs, rather than through mandatory quotas alone.

  4. Heritage agencies and PPP projects must setup implementing-agency registration with MCA CSR portal (CSR-1/CSR-2) to be eligible for CSR funds.

  5. Monitor and publish impact assessments of heritage-CSR projects (especially for large spend) to ensure credibility and scale-up potential (consistent with CSR Rules amendments 2021).

  6. Ensure that PPP arrangements for heritage sites integrate private CSR contributions as part of the ‘private partner’ share, linking conservation funding and business participation.

  7. Build capacity in heritage partner organisations (NGOs/trusts) so that they can interact effectively with corporate CSR units and meet reporting and audit requirements.

Conclusion

In conclusion, the statutory CSR framework in India (Section 135 Companies Act 2013 + Rules + Schedule VII) already provides companies with a legal avenue to contribute to heritage-conservation (art & culture, protection of heritage). However, the government cannot at present unilaterally force every eligible company to spend exclusively on heritage projects without legislative amendment or policy direction that re-allocates the corporate discretion of project-choice. That said, through targeted policy, incentives and guidance, government can channel significant CSR resources into heritage revival, thereby bridging the funding gap for adaptive reuse and PPP-based restoration of India’s built legacy.

Given India’s vast heritage crisis and the limitations of public funds, aligning CSR with heritage-PPPs is a pragmatic approach. When companies, heritage agencies and government align in mission and compliance, the promise of heritage revival can move beyond rhetoric.


Location: Pune, Maharashtra, India

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