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New Delhi: The Supreme Court has upheld the amendments pushed by the government in 2020 to the Foreign Contribution (Regulation) Act 2010, which introduced restrictions on the inflow of foreign funds into India.
A bench comprising Justices A.M. Khanwilkar, Dinesh Maheswari and C.T. Ravikumar, setting aside the opposition to the amendments from NGOs and charity organisations, said that “receiving foreign donations cannot be an absolute or even a vested right”.
“… [F]ree 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 interest of the general public,” the court ruled, according to LiveLaw.
In November 2020, the Union government amended various sections of the FCRA, 2010. Among many things, the amendments essentially prevent a recipient of foreign contributions from transferring the same to any other entity, reduce the limit of usage of foreign contribution for administrative expenses from 50% to 20%, and empower the Union government to order an organisation to not utilise foreign contributions pending an inquiry on suspected violations.
Also read: ‘FCRA Being Used to Crack Down on NGOs, But Why No Transparency on PM-CARES?’
One of the amendments that has received widespread criticism is the mandatory provision that the foreign contributions must be deposited in the FCRA account created in the New Delhi branch of the State Bank of India.
On the other hand, the changes empower the Union government to obtain Aadhaar numbers of the key functionaries of an organisation for approval. While the court approved all the amendments, it read down the provision that makes submission of Aadhar numbers mandatory, saying that applicants should be allowed to produce Passports.
Upholding the amendments, the court reasoned that foreign aid “may tend to influence or impose political ideology” and said if need be must be “completely eschewed”.
“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 observed.
Petitioners’ arguments
Describing the amendments as “arbitrary” and “stringent”, the petitioners rued that they would make the functioning of NGOs and charity organisations in the country difficult.
Representative image. Photo: Eric Prouzet/Unsplash, (CC BY-SA)
The amended Section 7 of the FCRA 2010 prevents a recipient of foreign contribution from transferring the same to any other entity.
The petitioners said that absolute prohibition of transfer, as envisaged by the amendment, would prevent NGOs from engaging third-party agencies in relation to their charity work.
To this, the court said if the transfer of funds to a third-party is done for the purpose mentioned by the recipient before receiving the funds, then it would be a case of “utilisation”, and not “transfer”. Hence, the court said, it would not attract the provisions of Section 7 of the Act.
Also read: The Proposed FCRA Amendment Will Deal Another Blow to India’s Non-Profit Sector
The court clarified that the intention of Section 7 is to completely prevent the diversion of funds for purposes for which funds were not sought by the recipient.
On the issue of FCRA recipients mandatorily opening a bank account in SBI, New Delhi branch, the court said “inconvenience” cannot be a ground to challenge the constitutionality of the provision.
The court further added that the annual inflow of foreign contributions had almost doubled between the years 2010 and 2019 and many recipients of foreign contributions had not utilised for purposes for which they were granted permission.
“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,” it said.
The court also said that foreign aid can be completely prohibited if it “undermined constitutional morality of the nation”
“It is open to a sovereign democratic nation to completely prohibit acceptance of foreign donation 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.”
While the court may have upheld the amendments to FCRA 2010, NGOs and charity organisations have described them as a “death blow” to India’s non-profit sector. Writing in The Wire in September 2020, when the Bill for amendments was tabled in the parliament, Suvojit Chattopadhyay argued:
“Restraining non-profit organisations is equal to restraining democracy itself. But several elements of the FCRA rules and their vague definitions of national interest makes it hard to believe that the government sees this sector as an ally. The government has used the FCRA as an instrument for harassment of political rivals or activist organisations such as Amnesty International. Starting from environmental activism to religious activities – a wide range of organisations have come under the scanner of government authorities in recent years.”