The Karnataka High Court has ruled that having permanent registration under the Foreign Contribution (Regulation) Act (FCRA) 2010 is not sufficient grounds for an NGO to receive or utilise funds from abroad for any specific purposes. The single judge bench of Justice K S Hemalekha further underlined that the Union Home Ministry must grant clearance before any organization or nongovernmental organization (NGO) can accept foreign funding.
The ruling came as the court was hearing a plea filed by Manasa Centre for Development and Social Action, a non-profit organization headquarters in Bengaluru. In its petition field in 2014, the NGO asked the court to direct Development Credit Bank (DCB) to release over Rs 29.12 lakh, received from Denmark-based NGO ‘Dan Church Aid’ that were kept aside.
The NGO sought direction to the bank to compensate a sum of Rs 10 Lakhs, along with interest, for the damages caused to it.
After hearing the arguments, the bench of Justice K S Hemalekha ruled, “The object of the FCRA, 2010, is to consolidate the law to regulate the acceptance and utilisation of foreign contributions or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contributions or foreign hospitality for any activities detrimental to national interest and for matters connected therewith or incidental thereto.”
The petitioner claimed the bank’s decision to freeze the fund was highly arbitrary and showed high-handedness as money was received from other donors and not just ‘Dan Church Aid’.
The bank responded that it had been instructed not to credit the money received from “Dan Church Aid” into their account until further instructions came through from the Government of India, Ministry of Home Affairs’ FCRA unit. The bank had complied with the directive given pursuant to Section 46 of the FCR Act, 2010. The bank added that, in accordance with Regulation 35(A) of the Banking Regulation Act of 1949, the Reserve Bank of India had also instructed them to withhold the funds received from “Dan Church Aid” without the approval of the Ministry of Home Affairs and they had already withheld the credit amount.
A communication from the Director (Monitoring Unit), Foreigners Division (FCRA Wing), Ministry of Home Affairs was also presented by the Union government. It stated that “Dan Church Aid” had been classified as falling under the “Prior Reference/Permission Category” as a consequence of input from the field and security agencies.
The government then instructed all banks and their branches to notify the ministry for approval regarding funds flowing into Indian individuals or entities from “Dan Church Aid” before crediting the amount to the accounts of recipient NGOs or associations. This instruction came from the government to the Reserve Bank of India (RBI).
The bench stated that the MHA had specifically asked the bank in a letter dated October 31, 2013, not to credit the money received from “Dan Church Aid” to the petitioner’s account until further instructions were given.
The court emphasized that the Foreign Contribution Regulation Act was passed in 1976 after it became apparent that some foreign nations were providing financial support to individuals, associations, political parties, candidates for office, correspondence, columnists, editors, owners, printers, or publishers of newspapers as well as extending hospitality.
“The effects of such funding and hospitality were quite noticeable and to have control over such funding and hospitality and to regulate the acceptance and utilization of the foreign contribution or foreign hospitality, by certain persons or associations, with a view to ensure that parliamentary institutions, political associations and academic and other voluntary organisations, as well as individuals working in the important areas of national life, may function in a manner consistent with the values of a sovereign democratic republic,” the bench said.
The Karnataka High Court thus said that the petitioner’s claim that it had obtained permanent registration under the FCRA 2010 did not grant it the right to have money credited to the designated savings bank account; rather, it was always subject to approval by the Ministry of Home Affairs.
It maybe noted that last year in December, the Ministry of Home Affairs (MHA) told the Lok Sabha that the Foreign Contribution (Regulation) Act (FCRA) registration certificates of 1,811 associations had been cancelled from 2019 to 2021.
“During the last three years from 2019 to 2021, the FCRA Registration Certificates of 1,811 associations have been cancelled under section 14 of The Foreign Contribution (Regulation) Act, 2010 (FCRA, 2010) due to violation of provisions of the FCRA, 2010,” Union Minister of State for Home Nityanand Rai said.
Whenever any inputs pertaining to the use of foreign contributions to spread terror activities are received by the MHA, Rai said appropriate action under the FCRA, 2010 and other extant laws and rules is taken.
