FCRA registration rejected over foreign contribution receipt/transfer claims; compounding and lack of notice led to reconsideration ordered

Rejection of an application for registration under the FCRA was challenged on the grounds of alleged receipt and transfer of foreign contribution (FC). The HC held that receipt of FC without prior permission could not sustain rejection because the authority had offered compounding, the applicant compounded the offence, and the Ministry formally compounded it, creating a legitimate expectation that compounding would not be treated as a disqualification without prior warning; consequently, rejection on that ground was set aside. The HC further held that the new allegation of transfer of FC to another organization was introduced without notice and without particulars, violating natural justice and suffering from vagueness; the order was set aside and remitted for fresh notice and reconsideration. The HC also held that prior recognition as a charitable entity under the IT Act was relevant and had to be considered under Section 52 FCRA; non-consideration showed non-application of mind.

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ISSUES PRESENTED AND CONSIDERED

1) Whether rejection of registration could be sustained on the ground of prior receipt (and alleged transfer) of foreign contribution when the prior receipt had been formally compounded, and the alleged transfer was introduced for the first time in the rejection order without prior notice or particulars.

2) Whether rejection on the ground that the applicant "appears to be religious" satisfied the statutory standard requiring a definite conclusion as to the nature of the applicant's programme/activities, and whether the authority failed to consider relevant material bearing on the applicant's character.

3) Whether the writ petition was maintainable despite availability of a statutory appeal, in view of the Court's findings of fundamental breach of natural justice and other vitiating defects in the impugned order.

ISSUE-WISE DETAILED ANALYSIS

1) Effect of compounding and legality of relying on unnotified/vague allegations of transfer of foreign contribution

Legal framework: The Court examined the statutory scheme concerning compounding of offences and the eligibility condition that an applicant should not have contravened the Act, and treated compounding as a relevant statutory event that must be considered while deciding registration.

Interpretation and reasoning: The authority's clarification initially concerned only receipt of foreign contribution without permission. The applicant admitted the lapse, was offered compounding, paid the amount, and a formal compounding order was passed. The Court held that once an offence is compounded, the contravention cannot be used adversely against the applicant for registration; otherwise, it would be disproportionate, particularly where the violation was technical, had no larger implication, and stood compounded. The Court further held that the authority failed to consider this relevant material, vitiating the decision.

Natural justice/vagueness: The rejection order additionally alleged transfer of foreign contribution to another organisation, a case never put to the applicant earlier. The applicant was not put on notice, and the order gave no particulars (no identification of the recipient, time, or details), rendering the ground vague and violative of principles of natural justice.

Conclusion: The first ground of rejection (contravention/transfer) was held unsustainable due to (i) compounding wiping the adverse effect of the technical contravention for registration purposes, (ii) failure to consider the compounding as relevant material, and (iii) breach of natural justice and vagueness regarding the alleged transfer.

2) Sustainability of rejection based on the applicant "appearing" to be religious and failure to consider relevant material

Legal framework: The Court examined the statutory requirement governing registration for persons having a definite programme including a religious programme, and held that the statutory text requires a clear, categorical conclusion founded on material.

Interpretation and reasoning: The Court held that the authority's conclusion that the applicant "appears to be religious" was tentative and did not meet the statutory standard implied by the word definite. The Court reasoned that if the authority intended to reject on this ground, it had to reach a definite conclusion based on materials, not a speculative or non-committal inference. The Court further treated the existing recognition of the applicant under another statutory regime as relevant material: the applicant had been found to be a charitable organisation under the applicable income-tax registration, and the authority's failure to consider this was held to reflect non-application of mind. The Court also relied on the principle that the Act operates "in addition to" other laws and does not override them, and therefore the charitable character accepted under another law remained a relevant consideration while assessing the applicant under this regime.

Conclusion: The second ground of rejection was held infirm because the authority did not record a definite, material-based conclusion about the applicant's nature and failed to consider relevant material bearing on its status/character, thereby vitiating the decision-making process.

3) Maintainability of writ jurisdiction despite statutory appeal

Legal framework: The Court considered the existence of a statutory appellate remedy to the High Court and applied the principle that writ jurisdiction may still be invoked where there is violation of natural justice, while noting that when the designated alternative forum is also the High Court, entertaining a writ should be exceptional and subject to a higher threshold.

Interpretation and reasoning: The Court held that the writ petition was maintainable because the impugned order suffered from fundamental breach of natural justice (new, unnotified and vague allegation of transfer), disproportionality in treating a compounded technical contravention as disqualifying, and other defects including failure to consider relevant materials. These vitiating factors satisfied the higher threshold for entertaining a writ despite the appellate remedy.

Conclusion: The writ petition was held maintainable on the facts due to serious procedural and decisional infirmities.

Result / Operative directions (as decided)

The Court set aside the rejection order and remitted the matter for fresh decision. The authority was directed to consider relevant materials identified by the Court, and to issue a fresh, non-vague notice (based on relevant material) specifically on the alleged transfer issue, obtain the applicant's response, and pass a fresh order within three months.

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