One of the ways in which a prospering business benefits wider society is through Corporate Social Responsibility (“CSR”). India’s regulatory framework for CSR creates a distinctive compliance environment, particularly for companies operating in the tobacco sector. The need to navigate the interplay between CSR obligations and tobacco control laws, without one undermining the other, becomes a challenge for companies dealing in tobacco products.

The statutory foundation of this tension lies, first, in Section 135 of the Companies Act 2013, where qualifying companies are required to undertake and spend on CSR activities. At the same time, the Cigarettes and Other Tobacco Products Act, 2003 (“COTPA”) imposes broad prohibitions on tobacco advertising, promotion and sponsorship, including indirect promotion. The legal position that emerges from this is clear: while a company is under a statutory duty to spend on socially beneficial initiatives, the manner in which that expenditure is executed and communicated is subject to scrutiny. The solution lies not in an exemption from CSR, but in a disciplined “spend but do not publicise” model.

The Statutory Balance: An Effects-Based Prohibition

Under Section 135 of the Companies Act, 2013 the provision applies uniformly to companies that meet the prescribed financial thresholds. It requires constitution of a CSR committee, formulation of a CSR policy, approval of eligible projects, and expenditure on activities falling within Schedule VII of the Companies Act, 2013. However, the said section does not exclude tobacco companies. In that sense, tobacco companies are also subject to CSR obligations like any other qualifying company. In contrast, COTPA, specifically Section 5(1) prohibits advertising of tobacco products and participation in any advertisement that directly or indirectly suggests or promotes the use or consumption of cigarettes or other tobacco products. Section 5(3) goes further and prohibits the promotion of tobacco products, or of any trade mark or brand name of tobacco products, in exchange for a sponsorship, gift, prize or scholarship.

COTPA does not expressly prohibit CSR for tobacco companies but operates through broadly drafted provisions. The statute is not aimed at philanthropic expenditure as such. Its concern is with the legal character and effect of the activity. Where a CSR initiative is capable of being characterised as advertising, promotion or sponsorship, or where it uses the company’s brand or identifiers in a way that falls within the prohibition, the activity may attract regulatory scrutiny notwithstanding its charitable or social purpose. That distinction is critical. The focus is not the act of spending. It is whether the activity, in its design, execution or communication, takes on the character of prohibited promotion.

The Influence of the WHO FCTC

India’s domestic position is also shaped by its obligations under the World Health Organization Framework Convention on Tobacco Control (“WHO FCTC”), which India ratified in 2004. Article 5.3 of WHO FCTC requires parties to protect public health policies relating to tobacco control from the commercial and other vested interests of the tobacco industry. Article 13 requires parties to implement a comprehensive ban on all forms of tobacco advertising, promotion and sponsorship. While India has not enacted a single, dedicated statute to operationalise these obligations post-ratification, their underlying principles are embedded within the existing legal framework and regulatory practice. Article 13 is substantially mirrored in Section 5 of COTPA, subject to limited statutory exceptions such as on-pack and point-of-sale displays regulated by subordinate rules. Additionally, the Cable Television Networks (Regulation) Act, 1995, read with the Advertising Code framed thereunder prohibits advertisements that directly or indirectly promote the production, sale or consumption of tobacco products.

Article 5.3 has been operationalised in a more diffuse manner, through state and district level notifications (such as Maharashtra, West Bengal, Bihar, Mizoram, Punjab, Tamil Nadu and Meghalaya) that restrict governmental engagement with the tobacco industry and treat tobacco industry support, sponsorship and CSR-linked interaction with caution. The practical significance of Article 5.3 lies less in its direct enforceability and more in its effect on regulatory posture. Across several jurisdictions within India, state and district authorities have adopted measures intended to prevent tobacco industry interference in public health administration. These include restrictions on acceptance of direct, indirect or in-kind sponsorship or support from tobacco companies, the constitution of committees to implement Article 5.3 principles, and controls on official interaction with the industry. At the central level, the Ministry of Health and Family Welfare’s 2020 Code of Conduct for its officials, departments and autonomous institutions reflects the same concern, i.e., shielding public health decision-making from industry influence and conflicts of interest. Consequently, even where CSR is not expressly prohibited under central law, it is examined through a regulatory lens informed by the WHO FCTC’s concern with promotion and policy interference.

The Regulatory Bridge: The MCA's 2016 Clarification

The Ministry of Corporate Affairs (“MCA”) addressed this position directly in its General Circular No. 05/2016 dated May 16, 2016 (“MCA 2016 Notification”). The Circular makes clear that companies, while undertaking CSR activities under the Companies Act, 2013, shall not contravene any other prevailing law of the land, including COTPA.

This clarification is the linchpin of the Indian position. It confirms, first, that tobacco companies are not released from the CSR framework merely because they operate in a highly regulated sector. At the same time, it makes clear that Section 135 is not a statutory override. The Companies Act, 2013 may impose a CSR obligation, but it does not authorise a company to undertake conduct that would otherwise be impermissible under tobacco control law.

Accordingly, the tobacco companies must comply with Section 135, but they must do so in a manner that does not undermine COTPA. This is why the Indian position is best understood not as a prohibition on CSR, but as a prohibition on promotional CSR. Further, in this regard, the Hon’ble Madras High Court’s judgment in S. Cyril Alexander vs. Union of India (CONT P-2535/2015) is significant because it rejected the argument that tobacco companies should be completely barred from undertaking CSR on the ground that CSR generates goodwill.

Notably, the Court did not impose a blanket exclusion on tobacco companies from the CSR framework. Instead, it recognised that CSR obligations under Section 135 of the Companies Act, 2013 remain applicable to such entities. At the same time, the Court proceeded on the footing that such CSR must comply with prevailing law, including COTPA, relying on the MCA 2016 Notification. Importantly, the said decision does not endorse CSR as a permissible tool for enhancing reputation. Instead, it affirms only that CSR activities are not inherently impermissible, so long as they adhere to the governing legal framework on tobacco control.

The Compliance Model that Has Emerged in Practice

Indian tobacco companies have broadly adapted to this regulatory position. Their CSR programmes are typically directed toward conventional Schedule VII activities: education, sanitation, drinking water, preventive healthcare, livelihood enhancement, rural development, women’s empowerment and environmental sustainability. As a matter of subject matter, these are plainly within the recognised statutory heads of CSR.

The more significant point is how these activities are structured. First, tobacco companies appear to anchor CSR firmly within the language of Section 135 and Schedule VII, rather than treat it as a broader public-facing social engagement exercise. This has an obvious compliance benefit. The closer the project remains to the formal CSR framework, the easier it is to present it as statutory expenditure rather than discretionary image-building.

Second, the implementation of CSR activities is generally routed through formal governance structures. The CSR regime under the Companies Act, 2013 and the Companies (CSR Policy) Rules, 2014 is company-centric. It requires board oversight, committee approval, reporting and utilisation controls. Rule 4 of the Companies (CSR Policy) Rules, 2014 permits implementation either directly by the company or through specified categories of eligible entities, including Section 8 companies, registered trusts, registered societies, statutory bodies and certain experienced implementing agencies (“Rule 4 Structure”).

Third, and most importantly, the prevailing model appears to be one of restrained external communication. The companies making CSR contributions in accordance with the Companies Act, 2013 are required to comply with the CSR reporting framework prescribed under the Companies (CSR Policy) Rules, 2014. In particular, Rule 8 of Companies (CSR Policy) Rules, 2014 requires preparation of an annual CSR report in the prescribed format and its inclusion in the board’s report for the relevant financial year. Further, Rule 9 of Companies (CSR Policy) Rules, 2014 mandates disclosure of board-approved CSR projects on the company’s website, where applicable. In addition, companies are required to file the prescribed CSR return (Form CSR-2), inter alia, detailing CSR expenditure incurred during the financial year. The MCA has reiterated this position in General Circular No. 14/2021 dated August 25, 2021 (“2021 Circular”), clarifying that, in accordance with Rule 8, the board’s report of a CSR-eligible company must contain the prescribed annual CSR disclosures in the relevant annexures to the said Rules. At paragraph 2.5 of the 2021 Circular, the MCA further clarifies that the CSR framework is disclosure-based, and that CSR-mandated companies are required to annually file details of their CSR activities on the MCA21 portal, along with appropriate disclosures in their financial statements, including disclosures relating to any non-compliance. Further, Paragraph 10.4 of the 2021 Circular reiterates the requirement under Rule 9 that all CSR projects approved by the board must be disclosed on the company’s website, where such a website exists.

Therefore, the statutory framework mandates a comprehensive disclosure in board reports, website disclosures where applicable, and statutory filings under the CSR framework. What the law does not require is public-facing promotion. For tobacco companies, the most sustainable approach is therefore to confine visibility to what the Companies Act, 2013 and rules made thereunder require and avoid turning CSR into an exercise in publicity, sponsorship or public association. This cautious approach is also reflected in past regulatory scrutiny faced by tobacco companies in India, including Philip Morris, in relation to alleged consumer-facing promotional activities under India’s tobacco-control framework.

This is particularly evident in the preference for contributions to government-administered funds recognised under Schedule VII, including the PM CARES Fund. Such contributions are explicitly treated as eligible CSR expenditure, reduce the company’s proximity to on-ground execution and lower the risk of the activity being characterised as sponsorship or indirect promotion. The underlying legal trade-off, however, remains the same: disclosure should stay within the statutory framework rather than move into voluntary public amplification.

The Real Principle: Compliance Without Promotion

The Indian position is therefore best captured in a simple proposition. Tobacco companies are not prohibited from undertaking CSR. They are prohibited from using CSR in a way that amounts to advertising, promotion or sponsorship of tobacco products, or in a manner that undermines the policy concerns reflected in Article 5.3 of the WHO FCTC. That is why the most robust compliance model is not abstinence from CSR, but discipline in execution. For tobacco companies, lawful CSR in India is likely to have the following characteristics:

  • Substantive Alignment: The activity falls squarely within the categories listed in Schedule VII of the Companies Act, 2013.
  • Procedural Rigor: It is approved and monitored through the statutory CSR framework.
  • Structural Separation: It is implemented directly or through a permitted Rule 4 Structure.
  • Restricted Disclosure: It is disclosed only to the extent required by law, without any public-facing amplification.
  • No Brand Association: It avoids any use of corporate branding, sponsorship-style attribution, or tobacco product identifiers.

The further the activity moves away from these features, particularly into public-facing visibility, sponsorship or reputational positioning, the greater the regulatory concern.

Authors:

Namita Das, Partner

Yash Gangwani, Associate

Disclaimer:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.