This paper provides a critical legal appraisal of the Host Communities Development Trust (HCDT) established under Chapter 3, Sections 235-257 of the Petroleum Industry Act (PIA) 2021. The Act represents a paradigm shift from discretionary Corporate Social Responsibility to a statutory obligation requiring settlors to contribute 3% of annual operating expenditure for the development of host communities. While Sections 235-244 constitute a developmental gift, Section 257(2) and (3) which provides for forfeiture of host community entitlements to the extent of costs of repairs arising from vandalism, sabotage or civil unrest, fundamentally undermines that gift and transforms it into collective punishment. Adopting doctrinal and comparative methodologies, this study interrogates the constitutionality of Section 257 under Sections 36 (fair hearing and presumption of innocence) and 44 (compulsory acquisition without compensation) of the 1999 Constitution (as amended). It argues that the provision violates the prohibition against collective punishment established in Aoko v Fagbemi and Centre for Oil Pollution Watch v NNPC, creates an evidentiary trap by relying on the flawed Joint Investigation Visit (JIV) process, and contradicts principles of environmental and distributive justice and Social License to Operate. Comparative insights from Ghana's Petroleum Revenue Management Act 2011, Norway's Petroleum Act 1996 and Canada's Impact Benefit Agreements demonstrate that no serious petroleum jurisdiction deducts community development funds for asset vandalism. The paper further identifies structural defects including narrow definition of host communities excluding pipeline and spill-impacted communities, inadequacy of the 3% funding formula, and risks of elite capture and inter-agency duplication. The paper concludes that Section 257 should be repealed or amended to require judicial determination, caps on deductions, and separation of security from development through a dedicated security levy, thereby restoring the HCDT as a genuine right rather than a conditional privilege.