Supreme Court upholds FCRA amendment which imposes conditions on use of funds by NGOs
NEW DELHI: The Supreme Court on Friday upheld the Foreign Contribution (Regulation) Amendment Act 2020 which imposes certain conditions on the receipt and use of funds by non-governmental organisations (NGOs).
“To sum up, we declare that the amended provisions...the 2020 Act, namely, Sections 7, 12(1A), 12A and 17 of the 2010 Act are intra vires the Constitution and the Principal Act...As regards Section 12A, we have read down the said provision and construed it as permitting the key functionaries/office bearers of the applicant (associations/NGOs) who are Indian nationals, to produce Indian passport for the purpose of their identification. That shall be regarded as substantial compliance of the mandate in Section 12A concerning identification,” the top court said.
"...Accepting the argument of the registered associations would not only be undermining the legislative intent, but also disregarding the object sought to be achieved by the Principal Act...these provisions are only for effective regulatory measures concerning and limited to foreign contribution, in the larger public interests, public order, and more particularly for safeguarding the sovereignty and integrity of the country. Taking any other view would entail undermining the legislative intent and cannot be countenanced," it added.
The court has said the statement of objects and reasons of the Amendment Act are testimony to the past experience of abuse of foreign contribution receipts and spending on activities not connected with the purposes for which they were permitted. "... had been noticed that the inflow of foreign contribution had almost doubled between the years 2010 and 2019 and many of the registered associations had failed to comply with basic statutory formalities necessitating cancellation of certificates of registration of more than 19,000 registered organisations. This is a staggering (substantial) number indicative of gross violations by a large number of registered associations," it said.
"... It is a law made by the Parliament which is competent to make such a law concerning the activities related to foreign donations and more particularly about its acceptance in prescribed manner and utilisation for the purposes defined in the certificate/permission granted by the competent authority,” the bench said.
The amended Section 12(1A) envisages that every person who makes an application under Section 12(1) is required to open an FCRA account in the manner specified in Section 17 and mention details of such account in his application. Section 17, in particular sub-Section (1) as amended, mandates that every person who has been granted certificate or prior permission under Section 12 shall receive foreign contribution only in an account designated as FCRA account in the specified bank (State Bank of India). The unamended Sections 12 and 17 did not impose such restrictions.
The top court said that the provision Section 12A’s underlying purpose is merely to identify the key functionaries of the registered association so that they can be made accountable for violations, if any.
However, the bench has watered down the condition that Aadhaar numbers should be given for FCRA clearance and said that applicants should be allowed to produce Indian passports when foreign nationals are allowed to do so.
The petitioner NGOs had contended that in the amendments effected in 2020 to the provisions of the 2010 Act, a new dispensation has been set forth that is manifestly arbitrary as it entails cancellation of certificate of the trust permitting receipt of foreign contributions for being utilised towards the activities of the concerned trust.
“Similarly, the operational “FCRA account” will be barred from receiving foreign contributions. The petitioner-trusts and similarly placed persons (individuals/non-profit organizations) shall mandatorily have to shift to a new regime and open FCRA account(s) in the specified branch on or before the designated date. There is no tangible justification forthcoming for introducing such a change in the dispensation,” the petitioners had said.
The petitioners had challenged the validity of Section 12A, whereby it is made mandatory to produce Aadhaar card details of the office bearers/functionaries/directors of the societies/trusts as identification document for the purpose of seeking registration, even though they are expected to file application for grant of certificate under Section 12 or get their certificate renewed under Section 16. The petitioners had also challenged the validity of Sections 17(1) and 12(1A) on the ground that the same suffer from the vice of manifest unreasonableness, ambiguity, over breadth and impose unreasonable restrictions. The petitioners had submitted that Section 17 of the Act is in violation of Articles 14, 19(1) (c), 19(1) (g) and 21 of the Constitution of India insofar as it requires opening of primary FCRA account in State Bank of India (SBI), NDMB only.