AI Drafter 
TaxTMI 
TaxTMI 
2022 (2) TMI 794
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....on Regulation Act, 2010. b) Pass such other and further orders as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case." 2. It is the case of the petitioner, being Commonwealth Human Rights Initiative (hereinafter, 'CHRI') that it is an independent, nonprofit, civil society organisation, headquartered in New Delhi, India since 1993, working to promote access to justice, access to information and timely fulfilment of the United Nations Sustainable Development Goals (SDGs) in India and in Commonwealth countries. The petitioner was registered under the Societies Registration Act, 1860 on July 21, 1993. 3. It is stated in the petition that several institutions of the Central and State Governments including Human Rights Commissions, Central and State Information Commissions, law enforcement agencies and legal aid authorities, recognise the petitioner as a resource partner in the domains of police and prison reform and transparency in governance. 4. On September 03, 1993, the petitioner was granted a Certificate of Registration No. 231650671 under the Foreign Contribution Regulation Act, 1976. Thereafter, on October 28, 2016, the pet....
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.... point 3(a) of the FC-4 Form had already been disclosed in the documents annexed to the said form. The said information was submitted again as per the format given under point 3(a) of the FC-4 Form in Annexe-2 to the petitioner's response dated June 26, 2021. (b) "The Bank Account No. 60051011 0004721, Bank of India, New Delhi opened on 18.02.2016 has not been intimated online to the Ministry and there is flow of foreign contribution in this Bank account." "Further, one utilization account through which the Association has been utilizing foreign contribution has not been intimated in ARs for the FY 2016-17 and 2017-18." In this regard, it is stated that the response by the petitioner dated June 26, 2021, to the impugned order has duly clarified that: a. On February 22, 2012, the petitioner opened a new utilisation bank account with the name: "Commonwealth Human RightsFNF" with account number: 600510110003989 with the Bank of India, Green Park Branch, New Delhi, 110016. This action was taken in accordance with the requirement of the donor specified in the grant letter that an exclusive utilisation account be opened for the purpose of utilising funds....
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....ommunication No. II/21022/ 58(213)/2018-FC(MU) dated September 05, 2018, regarding the manner of receipt and utilisation of foreign funds by the petitioner for the FYs 20112012 to 2016-2017. h. Further, the bank statement pertaining to the said utilisation account was attached to the Annual Return for every FY subsequent to the date of its opening until its closure on October 05, 2016, filed online in the FC-4 Form. It is stated that from the copy of the statement of the bank account, attached with the return for the AY 2016-2017, it may be seen that the account has been closed with NIL balance. It was further stated that the hard copy of the said return was also submitted by speed post on December 23, 2017, with a copy of the bank statement. i. The details of the above-mentioned account had been closed, the same was not reported in the Annual Return for 2017-2018 onwards. However, it appears that this closed account is incorrectly being reflected in the pre-populated format of the FC-4 Form by the respondent although the status of the account is closed. It is submitted that the said account was not utilised for any purpose since its closure on October 05, 2016. ....
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.... 2021. They further contended that given the drastic nature of the power of suspension under Section 13(1) to bring an organisation to a grinding halt and to threaten its existence as well as damage its reputation, this particular safeguard of recording reasons for the necessity of suspension enshrines an important principle of natural justice, which has been violated. 10. That apart, they contended that the impugned order is ultra vires to Section 13(1) of the FCRA, 2010 as the reasons in the order of suspension are wholly alien to the scheme of suspension under Section 13(1) of the FCRA, 2010. Moreover, they stated that the impugned order has made a hotchpotch of the provision of suspension under Section 13(1) along with the provision for cancellation under Section 14 of the FCRA, 2010. 11. According to them, the Competent Authority without any inquiry and without giving any opportunity of being heard to the certificate holder, has concluded that certain provisions of FCRA, 2010 have been violated and on that basis proceeded to suspend the certificate under Section 13(1) of the FCRA, 2010. In this regard, they also contended that the impugned order has been passed in the ex....
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....21, passed under Section 20 and Section 23 of the Act. The said audit was conducted from August 09, 2021, to August 14, 2021. Upon scrutiny of audited records, certain observations were drawn and shared with the petitioner vide letter dated October 07, 2021, for comments. The petitioner's response dated November 10, 2021, was duly examined by the respondent. Only after such consideration of the petitioner's reply to audit observations, the respondent discovered each of the grounds under Section 14(1) stated in the Show Cause Notice, and thereafter the said notice was served on the petitioner. 16. The Show Cause Notice dated December 07, 2021, read with Section 20 and Section 23 of the FCRA, 2010 shows that an inquiry as required under Section 14 of the FCRA, 2010 was authorised by the respondent only on July 29, 2021, and the question of cancellation can be said to have been pending consideration only after that date for the purpose of Section 13(1). These subsequent events however do not state the material illegality of the June 07, 2021 suspension order as extended on December 01, 2021, with retrospective application. It is submitted that the impugned Order is liable to be qua....
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....ing of Sections 13, 14, 20, and 23 does not contemplate, but in fact, offers protection against, trigger-happy suspension orders at the first hint of the slightest violation by an organisation without proper inquiry. 19. These safeguards exist because the suspension of FCRA registration has drastic consequences for an organisation, threatening its very existence. Freezing of FCRA accounts causes disruption of operations, reputational loss, and threatens employees' livelihood for an unduly long period of 360 days. Impugned suspension is liable to be quashed for failing to adhere to the said safeguards and for issuance without jurisdictional fact under Section 13. 20. It is their contention that the respondent in its counter affidavit has failed to rebut the petitioner's response to each allegation. Allegations contained in the impugned suspension order dated June 07, 2021, are not retained in the Show Cause Notice dated December 07, 2021, served under Section 14(2) of the Act. In any case, the said allegations were hyper-technical in nature and only of form and not substance. The allegations do not warrant suspension as they violate the doctrine of proportionality. 21. It i....
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....ribution which is auditable as per Section 20 of the FCRA, 2010 and is also liable for inspection of their records and activities by authorised officers of the Central Government as provided under Section 23 of the FCRA, 2010. 25. The FCRA registration of the petitioner was granted vide letter dated September 03, 1993, and was subsequently renewed on October 28, 2016, and was valid up to October 31, 2021. It is submitted that the grant of FCRA registration to NGOs / Associations under Section 12 of the FCRA, 2010 and its subsequent renewal / continuation under Section 16 of the FCRA, 2010 is subject to fulfillment of terms and conditions as envisaged under the FCRA, 2010. In the present matter, the petitioner's association has come under adverse notice of the respondent through the inputs of the security agency. It is stated by the respondent that the security agency inputs in a sealed cover are submitted before this Court at the time of the preliminary hearing on June 26, 2021, which suggests that the petitioner's association is involved in such other activities, that are grave in nature and carry potentially serious violation of the provisions of the FCRA, 2010 and rules made ....
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....is no such provision(s) envisaged under Section 13 of the FCRA, 2010, to offer an opportunity to the registration certificate holder of being heard before suspending the registration certificate. It is submitted by the respondent that the opportunity of being heard is provided under Section 14(2) of the FCRA, 2010, before the proceedings leading to the cancellation of registration certificate and if things would turn in that direction, that opportunity of being heard would be duly provided to the petitioner. 30. It is stated that the Central Government had reasonable grounds to issue suspension order and those grounds are mentioned in the said order. Moreover, the respondent stated that the suspension order is not a punitive measure, nor is it stigmatic and it is only interim in nature which may or may not lead to cancellation of the certificate of registration of the petitioner. It is submitted that the FC-4 Form of Annual Return is a statutory document and NGO / Association is obligated to provide / furnish the information sought on each point in the FC-4 Form. Further, the receipt, payment account, income statement, expenditure statement, and balance sheet are supportive docu....
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....ional Solicitor General reiterating the above stand: i. That the power under Section 13 of the FCRA, 2010 for suspension of certificate is not predicated on the issuance of Show Cause Notice under Section 14(2) of the FCRA, 2010. Moreover, Section 13 empowers the Central Government to suspend the certificate of registration of a defaulting organisation "pending consideration of the question of cancelling the certificate on any of the grounds mentioned in Section 14(1)" after recording reasons in writing. That the period for suspension cannot exceed 180 days at first instance or for a further period not exceeding 180 days. ii. It is submitted that during the period of suspension, the Central Government may permit receipt and / or utilisation of foreign contribution if considered appropriate. Further, under Rule 14 of the FCRR, 2011 up to 25% of the unutilised amount may be spent during suspension with prior approval of the Central Government, whereas the remaining 75% only after revocation of suspension. Vide order dated July 29, 2021, of this Court, the petitioner has been permitted to utilise 25% of the amount lying in its custody as foreign contribution. Section....
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....ncerned, it is submitted that the petitioner has misread the ratio of the said judgment in support of his contention that Show Cause Notice under Section 14(2) of the FCRA, 2010 is a precursor to suspension under Section 13. However, it is clear from the bare reading of the judgment that the suspension, in that case, was found to be contrary to the scheme of the Act only because "the Central Government had neither issued any notice of hearing / Show Cause Notice in terms of Section 14(2) nor had it initiated any inquiry in terms of the said Section". viii. The material and relevant facts of the instant case are distinguishable from the said judgment wherein the suspension order dated April 30, 2013, was passed by the Central Government and it had neither issued any notice of hearing / Show Cause Notice in terms of Section 14(2) of the FCRA, 2010 nor had it initiated any inquiry in terms of same. The Central Government wrote to the petitioner seeking certain information for the first time vide letter dated May 02, 2013, which is after the petitioner was suspended. Further, no reasons were recorded in the order of suspension as to why the registration of the organisation was....
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....years or has become defunct. (2) No order of cancellation of certificate under this section shall be made unless the person concerned has been given a reasonable opportunity of being heard. (3) Any person whose certificate has been cancelled under this section shall not be eligible for registration or grant of prior permission for a period of three years from the date of cancellation of such certificate." 35. In the present case, the impugned suspension order inter alia reads as under: "******** ******** ******** Whereas, scrutiny of Annual Returns (ARs) of the Association reveals multiple violations of provisions of the FCRA, 2010 and Rules made there under. For example, details of activities/projects for which foreign contribution has been received and utilized has not been given at the prescribed point 3(a) in FC-4 form in AR for the FY 2018-19. The Bank Account No.600510110004721, Bank of India, New Delhi opened on 18.02.2016 has not been intimated online to the Ministry and there is flow of foreign contribution in this Bank account. Further, one utilization account through which the Association has been utilizing f....
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....uspension is not a final action but an interim measure for a period of 180 days, extendable by a further 180 days. The only effect of suspension is that the certificate is kept in abeyance and the certificate holder does not receive contribution during that period. There is also a safeguard, that is, in case of hardship, the certificate holder can apply to the Central Government for receiving the financial contribution or utilising the foreign contribution in its custody which may be allowed by the Central Government. 38. The only caveat is that the power of suspension should not be exercised in an arbitrary manner and without any reasonable ground or as a vindictive misuse of power. It is precisely to obviate arbitrariness, that Section 13(1) of the FCRA, 2010 contemplates recording of reasons in writing, which shows the satisfaction of the Central Government that pending consideration of the question of cancellation of the certificate, it is necessary to suspend the certificate. 39. The reasons to be recorded is on the basis of the material available on record, which can include the material filed by the certificate holder as per the provisions of the Act / Rules and Order ....
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....ionnaires nor do they find mention in the order of extension or in the Show Cause notice dated December 07, 2021. According to them, they are general questionnaires that are sent to all FCRA registered entities in the country from time to time and do not constitute inquiry for the purpose of Section 14 of the FCRA, 2010. I am unable to agree with the submission for the reason, the subject matter of questionnaires is not a general information sought from the petitioner, but with regard to the manner of receipt and utilisation of foreign funds for the FYs 2011-2012 to 2015-2016 and regarding manner of receipt and utilisation of foreign funds by the petitioner for the FYs 2011-2012 to 2016-2017. In fact, the suspension order also records the nonintimation of utilisation of foreign contribution in annual returns for the year 2016-2017 and 2017-2018. It also refers to the fact that petitioner has refunded some contribution back to the donor in FYs 2013-2014 and 2014-2015, which according to the respondent is in violation of the FCRA, 2010. So, it is clear that the reasons depicted in the suspension order are relatable to the questionnaires. Therefore, it can be said that the questionnai....
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....nsion order can be passed by the Central Government considering the gravity of violations, the nature of evidence available and effect on public interest. These aspects can be deduced from the material available on record including the annual returns filed / the replies to the questionnaires. So, it follows that the violations of FCRA, 2010 can be reasons to suspend the certificate. In that sense, the reasons and grounds are inter-related. This conclusion of mine shall negate the submission of Mr. Datar and Mr. Singh that the order of suspension is wholly alien / ultra vires to the scheme of suspension under Section 13(1) of the FCRA, 2010. 44. The plea of Mr. Datar and Mr. Singh, that given the drastic nature of the power of suspension to bring an organisation to a grinding halt can be answered by noting the safeguard stipulated in proviso to Section 13(2)(a), empowering the Central Government to permit receipt of foreign contribution by such person on such terms and conditions as it may specify. Section 13(2)(b) stipulate permission being granted for the utilisation of the foreign contribution in the custody, which is 25% of the unutilised amount as per the FCRR, 2011. 45. ....
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....Central Government has extended the suspension, for a further period of 180 days, vide order dated December 01, 2021, which shall justify the suspension more particularly when Show Cause notice under Section 14(2) of the FCRA, 2010 has also been issued. 49. The plea of Mr. Datar and Mr. Singh that a conjoint reading of Sections 13, 14, 20, and 23 of the FCRA, 2010 does not contemplate, but in fact, offers protection against suspension orders at the first hint of the slightest violation by any organisation without proper inquiry, is unmerited. If reasons to suspend under Section 13 of the FCRA, 2010 exist pending consideration of the question of cancelling the certificate, the decision to hold audit / inspection under Section 20 and 23 of the FCRA, 2010, is justified which is in furtherance to an inquiry under Section 14(1) of the FCRA, 2010, even if it is the first violation. But it is reiterated that for an action under Section 13(1) no inquiry is required to be conducted. Even otherwise, it is the case of the respondent that the inquiry into the infirmities in the account of the petitioner had started in the year 2017 itself, resulting in the impugned order. 50. Much relian....