Author: Khushi Thakkar

In the wake of the COVID-19 pandemic witnessed throughout the world, a need was felt to establish a fund for combating and providing effective relief to the victims of the virus. It was established on 27th March, 2020 as a Public Charitable Trust, it’s deed was registered under the Registration Act,1908 and was named as Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund).However, fighting Covid was not the sole aim of the fund, it’s other objects include:

  • To undertake and support relief or assistance of any kind relating to a public health emergency or any other kind of emergency, calamity or distress, either man-made or natural, including the creation or upgradation of healthcare or pharmaceutical facilities, other necessary infrastructure, funding relevant research or any other type of support.

  • To render financial assistance, provide grants of payments of money or take such other steps as may be deemed necessary by the Board of Trustees to the affected population.

  • To undertake any other activity, which is not inconsistent with the above Objects.

PM CARES is totally a voluntary public base fund, i.e. it receives all its funds from the public donations and not from any budgetary allocation. Therefore, all the individuals, institutions and organisations, domestic or foreign, are the contributors to this fund. The fund stands on a very similar footing as the PRIME MINISTER’S NATIONAL RELIEF FUND(PMNRF), which was established in January 1948 with the main aim of assisting displaced persons from Pakistan. The fund wasn’t closed up after its purpose was accomplished and it is still in existence with aims/objects similar to that of PM CARES FUND. The major benefit to individuals and the common feature between the two is that contributions to both the funds, are exempt from Income Tax under section 80(G) of the Income Tax Act,1961. 

There were major criticisms on the following points in relation to the Fund:

  1. The fund is not covered under the Right to Information Act,2005(RTI) and claims that it is not a ‘public authority’ defined under section 2(h). The point of criticism is that according to the definition of section 2(h) of the act, the trust shall come under the ambit of the section as the fund is in the form of trust that is ‘substantially controlled by the government’. We come to this conclusion by looking at the composition of the trust, which consists of the Prime Minister is the ex-officio Chairman of the PM CARES Fund and Minister of Defence, Minister of Home Affairs and Minister of Finance, Government of India are ex-officio Trustees of the Fund and any members nominated by the Prime Minister.

Section 2(h)-“public authority” means any authority or body or institution of self-government established or constituted,—

(a) by or under the Constitution;

(b) by any other law made by Parliament;

(c) by any other law made by State Legislature;

(d) by notification issued or order made by the appropriate Government, and includes any—

(i) body owned, controlled or substantially financed;

(ii) non-Government Organisation substantially financed, directly or indirectly by funds provided by the appropriate Government;

The interesting fact to note here is that PMNRF is also not covered under the act. A Divisional Bench of The Delhi High Court in the Prime Minister National Relief Fund v. Aseem Takyar (MANU/DE/1960/20180) gave a split decision and the matter is still pending with The Supreme Court.

  1. This has raised the issue of transparency of use of funds that have been collected. As it is not covered under the RTI act, the public are concerned with the fund operation/ activities. Although, the government countered this argument by saying that the fund was audited by an Independent Auditor. The Comptroller and Auditor General (CAG) is not entrusted with the audit of the fund stating that the fund is not allocated an amount out of the Government Budget hence, CAG is not eligible to audit the fund. This is in consonance with Article 149 which states the Duties and Powers of CAG.

149. Duties and powers of the Comptroller and Auditor General the Comptroller and Auditor General shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliament…… 

As it can be seen , that the fund is neither the Union or State and surely isn’t formed under the law of the Parliament. Thus, CAG rightly has no jurisdiction over the fund.

  1. There wasn't much need for a new fund to be formed; the funds needed for the fight against Covid-19 could easily have been accommodated in the PMNRF as one of the aims of PMNRF is ‘to render immediate relief to families of those killed in natural calamities’ and the magnitude of Covid is same and much more as the magnitude of a natural calamity. 

 However, if we look at the government’s point of view, it was in their full right and there is no bar under any law in force to constitute a fund when need be or when the government deems fit. When PILs were filed before the Supreme Court in relation to the formation of the fund, the pleas were dismissed.

In the same way, to fight Covid at the state level, most of the states formed the Chief Minister’s Relief Fund (CMRF) under their respective state acts. E.g. The CMRF for the state of Maharashtra was formed under the Bombay Public Trusts Act,1950. This was made possible through the Schedule Seven of the Constitution. Clause 10 of List Three (Concurrent List) of the Constitution gives the right both to the centre and the state to form Trusts under Central and State Acts respectively. The CMRFs are very similar to the PM CARES fund. However, the one major difference that can be made out was that the donations made to the CMNRF, did not qualify as CSR under section 135 of the Companies Act, 2013, this subject matter will be dealt with in detail later.

Corporate Social Responsibility (CSR) under the Companies Act,2013

Section 135 of the erstwhile Companies Act deals with the CSR provisions.

Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall 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, in pursuance of its Corporate Social Responsibility Policy on activities as mentioned under Schedule VII.

Clause (ix) of Schedule VII already includes PMNRF. This means that the funds donated in PMNRF can be written off as CSR under section 135. Owing to the similarity between PM CARES and PMNRF, the donations to PM CARES should also have been considered as CSR. In relation to this, the Ministry of Corporate Affairs on the very next day issued a notification “Clarification on contribution to PM CARES Fund as eligible CSR activity under item no. (viii) of the Schedule VII of Companies Act, 2013”. However, the Companies Act itself was retrospectively amended two months later on May 26, effectively nullifying the MCA’s stated position on the PM-CARES Fund.

This is not similar to the National Disaster Relief Fund and State Disaster Relief Fund formed under the Disaster Management Act,2005. Ministry of Corporate Affairs (MCA) notification dated 30th May,2019 amended clause (xii) of Schedule VII and added ‘disaster management, including relief, rehabilitation and reconstruction activities’ thus bringing SDRF and NDRF under the purview of CSR.

If we give a closer look to the Schedule and the notification of the MCA, there was no mention of the CMRFs. Interestingly, in the past too, just to donations to PMNRF were accounted as CSR, the same did not apply to CMNRFs. A petition was filed by MP Mahua Moitra against this notification of MCA excluding CMNRF from CSR, however this was later withdrawn (Mahua Moitra v. Union of India). Hence, the donations to National funds are only counted as CSR contributions unlike donations to state funds. This is an arbitrary move and seems to have no rationale behind it. This move has swayed many of the corporate donors toward the National Funds. Individuals are not much influenced by this move as they can claim exemption irrespective of the fund they donate. 

Thus, we can see that amendments were made and all the funds except CMNRFs were covered under CSR. One cannot see any rationale as such behind this. 

Looking at this from a positive lens, conclusions that can be drawn from this move of the authorities is that the Union wanted to hold the majority of the funds so that they could allocate it more effectively as funds flowing from one authority can be better utilized than funds flowing from various authorities. Also, the amount of donations and the expenditure in various states could be varied depending upon population and positive Covid cases, thus if the Union held adequate funds, the states could be assisted. 

One interesting thing to note is that the statement of objects of any of the funds doesn’t include ‘pandemic’ explicitly. Thus, if PM CARES was formed with the sole aim of fighting a pandemic, it should mention so. Looking at this from a negative lens, the union is not giving states their due and acting as such to assume greater power. Hence, we can just hope that in the future we get to known the justification of this move by the government. Until then, we can just guess why is the way it is.

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