Explainer: Has SC Limited Centre's 'Misuse' of FCRA By Reading Down Rules?

The bench has held that support to public causes by resorting to legitimate means of dissent cannot be enough to deprive an organisation of foreign contributions. 

New Delhi: The Supreme Court’s judgment in Indian Social Action Forum (INSAF) v Union of India, delivered by the bench of Justices L. Nageswara Rao and Deepak Gupta on March 6, reads down Rule 3 (v) and (vi) of The Foreign Contribution (Regulation) Rules, 2011.

The bench has held that support to public causes by resorting to legitimate means of dissent like bandh, hartal etc. cannot be enough to deprive an organisation of its legitimate right to receiving foreign contributions.

The Wire breaks this judgment down to understand its implications.

The Court has read down the Foreign Contribution (Regulation) Rules, 2011, but not the Foreign Contribution (Regulation) Act, whose provisions were also under challenge in this case. What does that mean?

Section 5(1) of the Act confers power on the Centre to declare an organisation to be an organisation of a “political nature”, but not a political party. Section 3(1)(e) of the Act bans the receipt of foreign contribution by a political party or office-bearer thereof.

Section 3(1)(f) bans similar receipt of foreign contribution by an organisation of a political nature as may be specified under sub-section (1) of section 5 by the Centre. The Act stipulates that the Centre may do so, on looking into the activities of the organisation or the ideology propagated by the organisation or association of the organisation with the activities of any political party.

Section 5(1) also provides that the Centre may frame guidelines specifying the grounds on which an organisation shall be specified as an organisation of a political nature. The Supreme Court agreed with the Delhi high court, which had earlier dismissed the pleas of the petitioner, that Section 5(1) does not suffer from the vice of vagueness, inviting the wrath of Article 14.

The petitioners also assailed Section 5(4) of the Act on the ground that the authority to which a representation made by the aggrieved party is to be forwarded has not been specified. But the court has held that Section 5(4) cannot be declared as unconstitutional only on this ground.

The petitioners also assailed Rule 3(i), which has been left untouched by the court. What does that mean?

Rule 3 enables the Centre to specify an organisation as an ‘organisation of political nature’ on one or more of the specified grounds. Rule 3(i) deals with an organisation with political objectives in its Memorandum of Association or bylaws.

The appellant before the Supreme Court argued that Rule 3(i), like Rules 3(v) and 3(vi), also suffers from the vice of over-breadth and is liable to be declared as unconstitutional for violating Article 14. The Supreme Court held that as the intention of parliament is to prohibit foreign funds in “active politics”, an association with avowed political objectives cannot be permitted access to foreign funds. Therefore, it held that there is no ambiguity in this provision.

What do Rules 3(v) and (vi) say? Why did the Supreme Court read them down?

Rule 3(v) deals with organisations of farmers, workers, students or youth based on caste, community, religion, language or otherwise, which is not directly aligned to any political party, but whose objectives, as stated in the Memorandum of Association, or activities gathered through other material evidence, include steps towards advancement of political interests of such groups.

The Supreme Court agreed with the appellants that the words “political interests” in this rule are vague and are susceptible to misuse. However, as possible abuse of power is not a ground to declare a provision unconstitutional, the Supreme Court decided to read it down by holding that the expression ‘political interests’ in Rule 3(v) has to be construed to be in connection with active politics or party politics.

The court reasoned that prohibition from receiving foreign aid, either directly or indirectly, by those who are involved in active politics is to ensure that the values of a sovereign democratic republic are protected. Therefore, voluntary organisations which have absolutely no connection with either party politics or active politics cannot be denied access to foreign contributions, it held. Those organisations, which are working for the social and economic welfare, cannot be brought within the purview of the Act or the Rules by enlarging the scope of “political interests”, the court held.

Also read: Despite Kinks, Home Ministry’s New System Will Expand Efforts to Closely Monitor Foreign-Funded NGOs

Rule 3(vi) deals with any organisation which habitually engages itself in or employs common methods of political action like ‘bandh’ or ‘hartal’, ‘rasta roko’, ‘rail roko’ or ‘jail bharo’ in support of public causes. In line with its interpretation of Rule 3(v), the court held that only those organisations which have a connection with active politics or take part in party politics are covered by Rule 3(vi). The court made it clear that organisations used for channeling foreign funds by political parties cannot escape the rigour of the Act, provided there is concrete material.

In the Harsh Mander contempt case, the Supreme Court appears to be unhappy with his call for exercising the right to protest as a remedy in the controversy over the Citizenship (Amendment) Act.  Does this judgment not answer the concerns of the CJI-led bench in that case?

By specifically mentioning rasta roko and jail bharao as legitimate methods of political action, the judgment may come to the assistance of Harsh Mander, who can now argue that by appealing to the people to keep faith in the agitational methods, in contrast to the courts which disappointed them, he did not do anything wrong.

Also read: Why There is An Urgent Need to Bring Political Parties Under the RTI Ambit

But the court’s interpretation appears to have enabled the Centre to decide whether or when an organisation blurs the distinction between social and economic welfare, and political interests, right?

It appears so, but the Centre’s decision in such cases is judicially reviewable in the light of this judgment. By leaving the terms “active politics” and “party politics” undefined, the court has enabled the Centre to exercise discretion, which could defeat the judgment in practice.

While the FCRA is harsh on depriving organisations of a political nature from receiving foreign contributions, its bar on political parties from receiving foreign contributions has been largely diluted by subsequent amendments. 

That’s right. The Finance Act brought in a retrospective amendment to the FCRA, 2010 to change the definition of what constitutes a foreign company in such a way that key beneficiaries of the UK-based Vedanta group – the Bharatiya Janata Party and the Congress – could evade legal action for violating the law. Another amendment in 2018 made the 2016 amendment to the FCRA 2010 retrospectively operative from 1976. Both the amendments have been challenged by the Association for Democratic Reforms (ADR) in the Supreme Court.

The amendments have been assailed as attempts to overrun the Delhi high court’s judgment in March 2014 holding the two parties guilty of accepting foreign funding, and directing the Centre and the Election Commission to take action within six months.

Among other grounds, the appellant in this case also relied on Article 19 of the constitution, as the Rules violate freedom of speech and expression, and the right to form associations, protected by Articles 19(1)(a) and (c) respectively. But the Supreme Court rejected this contention.

The Supreme Court found force in the Centre’s objection that the appellant-organisation is not a citizen, and therefore not entitled to invoke Article 19. As no member of the appellant-organisation is arrayed as a party, the court concluded that the appellant, being an organisation, cannot be a citizen for the purpose of Article 19, which is applicable to only citizens.

Interestingly, the Delhi high court bench of then Chief Justice Dipak Misra and Justice Sanjiv Khanna (presently a judge of the Supreme Court) did not deny the right to invoke Article 19 to the petitioner organisation on the ground of its being a non-citizen. The high court bench had reasoned, however, that as Article 19 is not an absolute right and reasonable restrictions, as contemplated under the FCRA could be imposed. Besides, the bench underlined that what is restricted is acceptance of foreign contribution, and not the voicing the plight or grievances of the marginalised sections of people or to protest as permissible in a democratic polity under the framework of the constitution.

In any case, the Supreme Court could have lifted the veil of the organisation to identify whether its office-bearers are citizens.