SC Uphelds FCRA Amendments

In News

• 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.

What is the FCRA?

• Regulate foreign donations: It is a slew of new measures to regulate foreign donations.
  • The Act, first enacted in 1976 was amended in the year 2010 and then 2020.
• Application: The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations.
  • It is mandatory for all such NGOs to register themselves under the FCRA.
• Validity: The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
• Purpose: Registered associations can receive foreign contribution for social, educational, religious, economic and cultural purposes.
• Mandatory IT filing: Filing of annual returns, on the lines of Income Tax, is compulsory.
• Internal security: The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.

New guidelines to banks on Foreign Contribution (Regulation) Act rules

• State Bank of India’s New Delhi branch: A new provision that makes it mandatory for all NGOs to receive foreign funds in a designated bank account at the State Bank of India’s New Delhi branch was inserted.
• Designated FCRA account: All NGOs seeking foreign donations have to open a designated FCRA account at the SBI branch.
  • The NGOs can retain their existing FCRA account in any other bank but it will have to be mandatorily linked to the SBI branch in New Delhi.
• Only banking channels allowed: Foreign contribution has to be received only through banking channels and it has to be accounted for in the manner prescribed.
• OCI or PIO: Donations given in Indian rupees by any foreign source including foreigners of Indian origin like OCI or PIO cardholders” should also be treated as foreign contribution.
• Sovereignty and integrity: It requires NGOs to give an undertaking that the acceptance of foreign funds is not likely to prejudicially affect the sovereignty and integrity of India or impact friendly relations with any foreign state and does not disrupt communal harmony.

Need of such steps

• Unnecessary International Criticism:
  • Significantly all the NGOs on the latest list work on climate change and environmental projects and/or child rights and slavery projects.
  • These are the subjects where the government has been sensitive to international criticism.
• International Pressure regarding Law Making and over-compliance:
  •  Despite India’s record in complying with the Paris agreement, global pressures are intensifying on India to raise the Nationally Determined Contributions.
  • It is detrimental to the Indian image and poverty reduction plans.
• NGOs involved in violation of FCRA:
  • Several pro­climate NGOs are focusing on advocacy against coal in the media.
  • It is considered a violation of FCRA provisions. 
• Biased data and poor ranking on several Indices:
  • In 2017, the International Labour Organisation’s Global Slavery Index ranked India 53rd of 167 countries where 
    • “modern slavery” was prevalent, and 
    • as the country with the highest number of people in forced labour.
  • MHA questioned the credibility of the data.
• Internal Security:
  • 3 US non-governmental organizations were found to be fuelling protests at the Kudankulam Nuclear Project Site after strained Indo-US relations.

What is the criticism against the amendments?

• NGOs questioning the law consider the prohibition on transfer arbitrary and too heavy a restriction.
  •  One of its consequences is that recipients cannot fund other organizations. 

• Lawyers have argued that there is no rational link between designating a particular branch of a bank with the objective of preserving national interest. 
• It is also inconvenient as the NGOs might be operating elsewhere. 
• It prohibits the receipt of foreign contributions “for any activities detrimental to the national interest”. 
  • The government can refuse permission if it believes that the donation to the NGO will adversely affect “public interest” or the “economic interest of the state”.
  • However, there is no clear guidance on what constitutes “public interest”. 
• The restrictions also have serious consequences on both the rights to free speech and freedom of association under Articles 19(1)(a) and 19(1)(c) of the Constitution. 
  • Freedom is based on the idea that individuals can form voluntary groups and pursue various interests. 
• They have also cited the recent Supreme Court judgment on the alleged use of Pegasus spyware to argue that ‘national security cannot be cited as a reason without adequate justification.

Governments Stand 

• The Government has contended that the amendments were necessary to prevent foreign state and non-state actors from interfering with the country’s polity and internal matters. 
• The changes are also needed to prevent malpractices by NGOs and the diversion of foreign funds. Preventing the possible diversion of funds is also the reason cited for reducing the administrative expense component, as some organizations tended to inflate the actual expenditure incurred.
• The provision of having one designated bank for receiving foreign funds is aimed at making it easier to monitor the flow of funds. 
• The Government clarified that there was no need for anyone to come to Delhi to open the account as it can be done remotely.

 Who cannot receive foreign donations?

• Prohibition: Members of the legislature and political parties, government officials, judges and media persons are prohibited from receiving any foreign contribution.
• Political parties: However, in 2017 the MHA, through the Finance Bill route, amended the 1976-repealed FCRA law paving the way for political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company in which an Indian holds 50% or more shares.

 How else can one receive foreign funding?

• Prior permission: The other way to receive foreign contributions is by applying for prior permission.
  • A letter of commitment from the foreign donor specifying the amount and purpose is also required.
• Specific activities or projects: It is granted for receipt of a specific amount from a specific donor for carrying out specific activities or projects.
• Registration: But the association should be registered under statutes such as the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or Section 25 of the Companies Act, 1956.

When is a registration suspended or canceled?

• The MHA: on inspection of accounts and on receiving any adverse input against the functioning of an association can suspend the FCRA registration initially for 180 days.
  • The MHA can cancel the registration of an organization which will not be eligible for registration or grant of ‘prior permission’ for three years from the date of cancellation.
• 25% of the amount available: Until a decision is taken, the association cannot receive any fresh donation and cannot utilize more than 25% of the amount available in the designated bank account without permission of the MHA.

Source: TH