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SC upholds new restrictions on receiving foreign funds

  • Category
    Polity & Governance
  • Published
    18th Apr, 2022

Context

The Supreme Court upheld amendments introducing restrictions in the Foreign Contribution Regulation Act (FCRA) while holding that no one has a fundamental or absolute right to receive foreign contributions.

Background

  • A petition was filed in the Supreme Court challenging the Foreign Contribution (Regulation) Amendment Act, 2020 or FCRA Act.
  • The FCRA amendment lays down certain conditions for NGOs such as:
  • Mandatory production of the Aadhaar card for registration under the FCRA,
  • NGOs and recipients to open a new FCRA account at a specified branch of the State Bank of India in New Delhi as a “one-point entry” for foreign donations,
  • Limit of usable foreign contribution for administrative expenses from 50% to 20% and
  • Prevents the transfer of foreign funding to any other person.

Analysis

What is the FCRA?

Foreign contribution

A donation, delivery or transfer or any article, currency or foreign security by any person who has received it from any foreign source, either directly or through one or more persons refers to foreign contribution.

  • The FCRA was enacted during the Emergency in 1976 in an atmosphere of apprehension that foreign powers were interfering in India’s affairs by pumping in funds through independent organisations.
  • These concerns had been expressed in Parliament as early as in 1969.
  • The law sought to regulate foreign donations to individuals and associations so that they functioned “in a manner consistent with the values of a sovereign democratic republic”.
  • An amended FCRA was enacted under the UPA government in 2010 to “consolidate the law” on utilisation of foreign funds, and “to prohibit” their use for “any activities detrimental to national interest”.
  • The law was amended again by the current government in 2020, giving the government tighter control and scrutiny over the receipt and utilisation of foreign funds by NGOs.
  • Broadly, the FCRA requires every person or NGO wishing to receive foreign donations to be registered under the Act, to open a bank account for the receipt of the foreign funds in State Bank of India, Delhi, and to utilise those funds only for the purpose for which they have been received and as stipulated in the Act.
  • They are also required to file annual returns, and they must not transfer the funds to another NGO.
  • The Act prohibits receipt of foreign funds by candidates for elections, journalists or newspaper and media broadcast companies, judges and government servants, members of legislature and political parties or their office-bearers, and organisations of a political nature.

 What is the process of granting of FCRA registrations?

  • Online application:NGOs that want to receive foreign funds must apply online in a prescribed format with the required documentation.
    • FCRA registrations are granted to individuals or associations that have definite cultural, economic, educational, religious, and social programmes.
  • Inquiry through IB:Following the application, the MHA makes inquiries through the Intelligence Bureau (IB) into the antecedents of the applicant, and accordingly processes the application.
  • Under the FCRA, the applicant (should not):
    • should not be fictitious or benami
    • should not have been prosecuted or convicted for indulging in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another
    • should not have been prosecuted for or convicted of creating communal tension or disharmony
    • should not have been found guilty of diversion or mis-utilisation of funds
    • should not be engaged or likely to be engaged in the propagation of sedition
  • Approval or rejection:The MHA is required to approve or reject the application within 90 days.
  • In case of failure to process the application in the given time, the MHA is expected to inform the NGO of the reasons for the same.

Supreme Court’s Ruling:

The Supreme Court upheld the constitutional validity of the Foreign Contribution (Regulation) Amendment Act, 2020 or FCRA Act on following grounds:

  • No one has a fundamental or absolute right to receive foreign contributions.
  • Amendments only provide a strict regulatory framework to moderate the inflow of foreign funds into the country.
  • Free and uncontrolled inflow of foreign funds has the potential to impact the socio-economic structure and polity of the country.
  • Permitting the inflow of foreign funds is a matter of policy of the State-backed by law. Hence, it is open for a state to have a regime that may completely prohibit receipt of foreign donations, as there are no absolute rights to receive foreign donations. 
  • Inconvenience to a party is not a ground to challenge the constitutionality of a provision that mandates the opening of FCRA accounts in the designated bank.

However, the court read down one of the provisions of the 2020 FCRA Amendment Act, which mandated the production of Aadhaar card for registration. The court allowed the office-bearers of NGOs to use their Indian passports as an identification documents.

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