New Delhi, April 8, 2022: The Supreme Court of India has upheld the recent amendments in Foreign Contribution (Regulation) Act, affirming the changes which imposed new conditions on receipt and use of funds by NGOs, besides making it mandatory for them to receive foreign funds only in an SBI account.
Underlining that, foreign contributions “may tend to influence or impose political ideology”, the Supreme Court termed the FCRA changes as “essentially conceived in the interest of public order as the intent is to prevent misuse of donations coming from foreign sources, to safeguard the values of a sovereign democratic republic”.
The SC ruling came on a petition filed by a few NGOs which challenged the FCRA amendments terming it as part of the government’s larger offensive against certain NGOs.
The court, however, turned down objections by citing considerations of country’s sovereignty and integrity, and pointed out that earlier governments also had also placed curbs on NGOs that have been beneficiaries of contributions from abroad.
A three-judge bench of Judges AM Khanwilkar, Dinesh Maheshwari, and CT Ravi Kumar wrote in the order released on April 8, 2022 that "the strict regime had become essential because of the past experience of abuse and misutilisation of the ‘foreign contribution’ and cancellation of certificates of as many as 19,000 registered organisations on the ground of being grossly non-compliant.”
However, the bench read down Section 12A which made it mandatory for all office-bearers of NGOs to provide Aadhaar number, and held that producing Indian Passport for the purpose of their identification would be enough.
The Foreign Contribution (Regulation) Amendment Bill, 2020 was passed in both houses of Parliament in September 2020. It seeks to regulate the process involving acceptance and utilisation of foreign contributions by individuals, associations and companies.
SC Judgement on FCRA amendment: Key highlights
The SC bench also said that inflow of foreign contribution in the country ought to be at the minimum level given its pollical and social influence and implications.
The bench also said that “receiving foreign donations cannot be an absolute or even a vested right”, adding, “we say so because the theory of possibility of national polity being influenced by foreign contribution is globally recognised”. It noted that foreign contributions "can have a material impact in the matter of socio-economic structure and polity of the country".
The apex court said it’s open to a sovereign democratic nation to completely prohibit acceptance of foreign donations on the ground that it undermines the constitutional morality of the nation, as it’s indicative of the nation being incapable of looking after its affairs and the needs of its citizens.
“For, foreign contribution can have material impact on the socio-economic structure and polity of the country. The foreign aid can create presence of a foreign contributor and influence the policies of the country. It may tend to influence or impose political ideology,” said the court.
Such being the expanse of the effect of foreign contribution coupled with the tenet of constitutional morality of the nation, the presence/inflow of foreign contribution in the country ought to be at the minimum level, if not completely eschewed. The influence may manifest in different ways, including in destabilising the social order within the country,” it added.
The court in its 132-page verdict noted that the annual inflow of foreign funds into the country has been increasing consistently over the years and that many NGOs, which received the funds, did not utilise them for the purposes for which they were registered.
“There had been cases of successive transfers and creation of a layered trail of money, making it difficult to trace the flow and final utilisation. In this backdrop, to strengthen the compliance mechanism and enhancing transparency and accountability in the matter of acceptance and utilisation of foreign contribution, Parliament had to once again step in to restructure the dispensation, making it more meaningful and effective, so as to deal with the increasing impact of foreign contribution,” the bench said.
“To eradicate misuse and abuse of foreign contribution in the past, despite the firm regime in place in terms of the 2010 Act, Parliament in its wisdom has now (vide Amendment Act of 2020) adopted the path of moderation by making it mandatory for all to accept foreign contribution only through one channel and to utilise the same itself for the purposes for which permission has been accorded. Undeniably, the sovereignty and integrity of India ought to prevail and the rights enshrined in Part III of the Constitution (Fundamental Rights) must give way to the interests of the general public much less public order and the sovereignty and integrity of the nation. It must be borne in mind that the legislation under consideration must be understood in the context of the underlying intent of insulating the democratic polity from the adverse influence of foreign contribution remitted by foreign sources,” the bench said.
The bench further said: “We find force in the argument that it had become necessary for Parliament to step in and provide a stringent regime for effectively regulating the inflow and utilisation of foreign contribution”.
The court said a country can even completely prohibit acceptance of foreign donations on the ground that it undermines the constitutional morality of the nation, as it is indicative of the nation being incapable of looking after its own affairs and needs of its citizens.
“Philosophically, foreign contribution (donation) is akin to gratifying intoxicant replete with medicinal properties and (it) may work like a nectar. However, it serves as a medicine so long as it is consumed (utilised) moderately and discreetly, for serving the larger cause of humanity. Otherwise, this artifice has the capability of inflicting pain, suffering and turmoil as being caused by the toxic substance (potent tool) — across the nation. In that, free and uncontrolled flow of foreign contribution has the potential of impacting the sovereignty and integrity of the nation, its public order and also working against the interests of the general public,” it said.
Why this judgement on FCRA?
The judgment came on a batch of three writ petitions, two of which challenged the 2020 amendments, while the third one prayed for stricter enforcement of the amended and other provisions of the Act.
A bench of the Supreme Court had in November of last year reserved its judgement in the case.
Many of the NGOs who failed to adhere to statutory compliances, had lost their FCRA licences after the amendments.
Care and Share Charitable Trust chairman Noel Harper and Jeevan Jyoti Charitable Trust had challenged the amendment of FCRA for alleged violation of Articles 14, 19 and 21 of the Constitution. They had contended the compulsion to open an account with an SBI Branch was arbitrary and violated the right to equality and served no reasonable purpose and adversely impacted functioning of NGOs.
The petitions challenged the constitutional validity of the amendments made to the 2010 Act, in particular, sections 7, 12(1A), 12A and 17(1), contending that they were manifestly arbitrary, unreasonable and impinging upon the fundamental rights.
Section 7 prohibits transfer of any foreign contribution; Section 12A made it mandatory to produce Aadhar card details of the office-bearers/functionaries/directors of the societies/trusts as identification document for the purpose of seeking registration, and Section 12(1A) and Section 17 made it mandatory for recipients to open “FCRA Account” and receive foreign contribution only at the New Delhi main branch of the State Bank of India.
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