TaxTMI 
TaxTMI 
2022 (4) TMI 471
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....ct, 2020 for short, "the 2020 Act" or "the Amendment Act", as the case may be, which has come into effect on 29.9.2020, in particular, Sections 7, 12(1A), 12A and 17(1), being manifestly arbitrary, unreasonable and impinging upon the fundamental rights guaranteed to the petitioners under Articles 14, 19 and 21 of the Constitution. 2. Re: Writ Petition (Civil) No. 566 of 2021 (a) Petitioner No. 1 in this petition along with Carol Faison founded a trust in the name of "The Care and Share Charitable Trust" in Vijayawada, India (bearing Registration No. 242/1997), in the year 1997. It is the case of the petitioners that the Trust is also registered with the Income Tax authorities and Ministry of Home Affairs, Government of India including under the Foreign Contribution (Regulation) Act, 1976 for short, "the 1976 Act" for receipt of foreign funds (FCRA No. 010260151 dated 8.12.1998 and renewed on 10.8.2016 under the 2010 Act). Petitioner No. 1 is serving as one of the trustees of the said Trust and petitioner No. 2 (Nigel Mills) is a social worker and one of the trustees of the stated Trust. The Trust is engaged in the social upliftment activity such as helping children below the pove....
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....ontribution. The petitioner-Trusts and similarly placed persons The expression "person" as defined in Section 2(1)(m) of the 2010 Act as amended, reads thus: "2. Definitions.-(1) In this Act, unless the context otherwise requires,- (a) to (l) xxx xxx xxx (m) "person" includes- (i) an individual; (ii) a Hindu undivided family; (iii) an association; (iv) a company registered under section 25 of the Companies Act, 1956 (1 of 1956);" (individuals/non-profit organisations) shall mandatorily have to shift to new regime and open FCRA account(s) in the specified branch on or before the designated date. There is no tangible justification forthcoming for introducing such a change in the dispensation. (c) The petitioners have referred to the Circular issued by the Reserve Bank of India (RBI) dated 6.2.2012 in exercise of its power under Section 36(1)(a) of the Banking Regulation Act, 1949, containing detailed guidelines for implementation of the provisions of the 2010 Act including the opening of FCRA accounts in all scheduled commercial banks (excluding Regional Rural Banks/RRBs) throughout India. Public notice dated 3.10.2020 issued by the respondent No. 2 after advent of the chang....
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....est unreasonableness, ambiguity, overbreadth and impose unreasonable restrictions. Section 17(1) is also discriminatory, as it mandates opening of "FCRA account" and receiving of foreign contribution only at one bank at New Delhi, i.e., New Delhi Main Branch for short, "NDMB" of the State Bank of India for short, "SBI", 11, Sansad Marg, New Delhi-110001 on specious ground of logistical issues for verification of accounts at different locations. Broadly on these assertions, the petitioners have prayed for the following reliefs: - "a. To hold and declare that the impugned Sections 7, 12A, 12(1A) and 17 as inserted in the FCRA, 2010 by the Foreign Contribution (Regulation) Amendment Act, 2020 are ultra vires Articles 14, 19 & 21 of the Constitution of India and the same be struck down as unconstitutional. b. A writ in the nature of certiorari and/or any other writ, order or direction of like nature setting aside and quashing the impugned public notice dated 13th October, 2020 issued by the Respondent No. 2 as illegal and unconstitutional. c. To direct the Respondents not to interfere with the acceptance and utilisation of foreign contribution, operation of the existing bank acco....
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....eceiving foreign contributions. That change, however, is manifestly arbitrary, irrational and unreasonable. The purpose of provisions such as Section 17 (unamended) and the relevant Rules framed under the Act served the cause of effective monitoring of foreign contribution received, in order to prevent misutilisation of such funds. However, the amended provision is excessive, irrational, arbitrary and falls foul of test of proportionality. It suffers from the vice of disproportionate restrictions and failure to provide fair procedure. To buttress the grounds of challenge, reliance is placed on K.C. Gajapati Narayan Deo & Ors. vs. State of Orissa AIR 1953 SC 375; Maneka Gandhi vs. Union of India & Anr. (1978) 1 SCC 248; Ajay Hasia & Ors. vs. Khalid Mujib Sehravardi & Ors. (1981) 1 SCC 722 (para 16); Indra Sawhney & Ors. vs. Union of India & Ors. 1992 Supp (3) SCC 217; T.M.A. Pai Foundation & Ors. vs. State of Karnataka & Ors. (2002) 8 SCC 481 (para 25); Natural Resources Allocation, In Re, Special Reference No.1 of 2012 (2012) 10 SCC 1 (para 107); Modern Dental College and Research Centre & Ors. vs. State of Madhya Pradesh & Ors. (2016) 7 SCC 353 (paras 60); Shayara Bano vs. Union o....
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....ance is also placed on the elucidation of this Court in In Re: Distribution of Essential Supplies and Services During Pandemic 2021 SCC OnLine SC 339 (Suo Moto Writ Petition (C) No.3 of 2021), for issuing a peremptory writ. Also, reliance is placed on the decision in Teesta Atul Setalvad vs. State of Gujarat (2018) 2 SCC 372, to urge that in the past instances have come to the fore regarding misappropriation of funds by NGOs. Lastly, reliance is placed on Rev. Stainislaus vs. State of Madhya Pradesh & Ors. (1977) 1 SCC 677. (b) The principal relief claimed in this petition, however, does not survive for consideration. For, the date of last extension granted by the competent authority has expired; and no further extension had been granted thereafter during the pendency of this writ petition. Nevertheless, we reproduce the reliefs claimed in this writ petition, which read thus: - "A. Issue a Peremptory Writ of Mandamus directing Respondent No. 1 not to grant any further extension to the NGOs from complying with the mandate of the FCRA (Amendment) Act, 2020. B. Direct Respondent No. 1 and Respondent No. 2 to maintain a register of all NGOs who are involved in the receiving of fun....
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....20 Act. The same were complied with by all concerned without any demur. (d) The purpose behind the amendment of 2020, is to make meaningful and effective regulatory arrangement and real-time reporting of utilisation of the foreign contribution for the activity for which it has been earmarked and permitted to be so used in terms of the registration certificate or prior permission of the competent authority. (e) The permission to receive foreign contribution is granted to persons for a definite cultural, economic, educational or social programme meant for the benefit of the society, as mandated in Sections 11 and 12 of the 2010 Act. The dispensation envisaged in the Act is to seek registration or prior permission of the competent authority to receive and utilise foreign contribution. The person having obtained such certificate of registration or prior permission, cannot complain about the regulatory provisions regarding utilisation thereof for the prescribed activities. For, the legislative intent behind enactment of the 2010 Act is that foreign contribution cannot be allowed unless it is tightly regulated and controlled. (f) The implementation of the 2010 Act increasingly reveale....
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....tended to remedy the mischief of endless chain of transfers of foreign contribution from the recipient NGOs to other registered NGOs creating layered trail of money making it difficult to trace the flow and legitimate utilisation thereof. (h) The successive multiple chain of transfers not only create a layered trail of money, but also lead to substantive portion of foreign contribution being utilised as administrative expenditure by the concerned entity by claiming it as its own allowance for administrative expenditure to the extent of 50 per cent of the receipt. The aggregate of such administrative expenditure, if reckoned with the aggregate quantum of inflow of funds by the original recipient, would, in a given situation, far exceed the statutory bar of 50 per cent of total contribution received by the NGO from abroad. Further, the wisdom of the Parliament was also in favour of reducing the permissibility of administrative expenditure by limiting it to 20 per cent, so that maximum benefit is reaped by the society at large due to its utilisation for permissible activities of the NGO. (i) The subject amendment became necessary also to obliterate the mischief of foreign powers and....
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....the new dispensation. (l) Initially, a public notice was issued on 13.10.2020 providing for procedure and operation of the designated FCRA account, giving time till 31.3.2021, which came to be extended from time to time until December, 2021. It is stated that the respondent No. 1 also informed all the FCRA registered associations/organisations through SMS and e-mail on their registered mobile number and e-mail address about the public notice dated 13.10.2020. The competent authority also amended the Foreign Contribution (Regulation) Rules, 2011 for short, "the 2011 Rules". It is urged that some individual hardship may be caused to the registered associations on account of the change, but that cannot be the basis to declare the law made by the Parliament, vide the 2020 Act, invalid. Reliance is placed on M/s. Laxmi Khandsari & Ors. vs. State of U.P. & Ors. (1981) 2 SCC 600 and All India Council for Technical Education vs. Surinder Kumar Dhawan & Ors. (2009) 11 SCC 726, wherein this Court held that the Court must refrain from interfering with policy matters on the specious ground of individual hardship to some persons. (m) It is further stated that the 2010 Act mandates Ministry of....
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....e said Bill titled as "Foreign Contribution (Regulation) Bill, 2006" recognised that significant developments had taken place since 1984, such as change in internal security scenario, an increased influence of voluntary organisations, spread of use of communication and information technology, quantum jump in the amount of foreign contribution being received and large-scale growth in the number of registered organisations, necessitating comprehensive legislative approach. The Bill was referred to the Department-related Parliamentary Standing Committee on Home Affairs. Eventually, the 2010 Act was perceived. This legislative history has been taken note of in the case of INSAF supra at Footnote No.22. The amendments effected in the year 2020 had become necessary to ensure that the object of the Act is achieved efficiently. (o) It is urged that the 2010 Act cannot be equated with any other general legislation. The object behind this Act is to insulate the democratic polity and public institutions and individuals working in the national democratic space from being unduly influenced with the aid of foreign contribution or foreign hospitality received from foreign source. The object behi....
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....ion of the individual judges when the society/legislature as a whole are unclear and substantially divided on the relevant issues. (q) Reliance is also placed on Rustom Cavasjee Cooper vs. Union of India (1970) 1 SCC 248 (para 63, 70) , restating the above principle and observing that the Court will not sit in appeal over the policy of Parliament in enacting a law. Reliance is also placed on R.K. Garg vs. Union of India & Ors. (1981) 4 SCC 675 (para 8) , wherein it has been observed that the Courts have only the power of destroying and not to reconstruct. Further, in respect of economic regulation being replete with complexity, self-limitation needs to be exercised by the Courts, thereby following the path of judicial wisdom. Reliance is also placed on Peerless General Finance and Investment Co. Limited & Anr. vs. Reserve Bank of India (1992) 2 SCC 343 (para 31); Premium Granites & Anr. vs. State of T.N. & Ors. (1994) 2 SCC 691 (para 54); Delhi Science Forum & Ors. vs. Union of India & Anr. (1996) 2 SCC 405 (para 7); BALCO Employees' Union (Regd.) vs. Union of India & Ors. (2002) 2 SCC 333 (para 38); and State of Madhya Pradesh vs. Narmada Bachao Andolan & Anr. (2011) 7 SCC 639 (p....
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..... AIR 1952 SC 221 (paras 3-6, 8); The State of Punjab vs. Ajaib Singh & Anr. AIR 1953 SC 10 (para 22); Habeeb Mohamed vs. The State of Hyderabad AIR 1953 SC 287 (paras 4-6); Kedar Nath Bajoria vs. The State of West Bengal AIR 1953 SC 404 (paras 6-16); Baburao Shantaram More vs. Bombay Housing Board & Anr. AIR 1954 SC 153 (para 6); Harman Singh & Ors. vs. Regional Transport Authority, Calcutta Region & Ors. AIR 1954 SC 190 (para 7); Sakhawant Ali vs. State of Orissa AIR 1955 SC 166 (paras 9-10); Budhan Choudhry & Ors. vs. State of Bihar AIR 1955 SC 191 (paras 5, 7, 9); D.P. Joshi vs. State of Madhya Bharat & Anr. AIR 1955 SC 334 (paras 14-16); Hans Muller of Nurenburg vs. Superintendent, Presidency Jail, Calcutta & Ors. AIR 1955 SC 367 (paras 14, 24-25); Kishan Singh & Ors. vs. State of Rajasthan & Ors. AIR 1955 SC 795 (paras 3-5); P. Balakotaiah vs. Union of India & Ors. AIR 1958 SC 232 (para 13(IIa), 14-16); Shri Ram Krishna Dalmia vs. Shri Justice S.R. Tendolkar & Ors. AIR 1958 SC 538 (paras 11-17); Express Newspaper (Private) Ltd., & Anr. vs. Union of India & Ors. AIR 1958 SC 578 (paras 210-218); Khandige Sham Bhat vs. Agricultural Income-tax Officer, Kasaragod & Anr. AIR 1963 S....
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....ing amended provisions being violative of Article 14, is devoid of merits. (t) While countering the challenge on the ground of Article 19(1)(c) and 19(1)(g), it is stated that there exists no right to seek a foreign contribution without regulation. Further, the 2010 Act does not prohibit the foreign contributions or the right to form the associations itself or the right to practice any profession. Rather, it merely seeks to provide efficacious regulatory regime regarding foreign contributions to be received by such associations. The rights under Article 19(1)(c) and 19(1)(g), therefore, remain unaffected. It is urged that right to form an association and right to freedom of trade and profession do not include right to receive unbridled and unregulated foreign contributions and more so its utilisation for activities other than permissible activities. In other words, the law in question is squarely covered by the exceptions provided for within the meaning of Article 19(4) and 19(6) of the Constitution. (u) The challenge to the amendments made on the touchstone of Article 19(1)(c), needs to be considered in light of the object of the Principal Act. It is an Act to protect umbrella t....
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.... have a direct and proximate relationship with the stated object of the Principal Act, they are fully protected within the meaning of Article 19(4) and 19(6). (x) It is further contended that right to life and liberty within the meaning of Article 21 of the Constitution, cannot and does not include the right to receive unregulated funds and contributions; misuse of which inevitably threatens the polity and sovereignty and integrity of the country. The amended provisions, by no stretch of imagination, prohibit the inflow of foreign contributions or the right to form associations itself or the right to practice any profession. The same merely provide for tight regulatory mechanism to ensure that the foreign contribution received from foreign source is utilised only for the purpose by the recipient itself for which it has been so permitted, and that restriction is only to secure the sovereignty and integrity of the nation and public order. In any case, it (regulatory mechanism) being procedural matter, would come within the purview of procedure established by law. Being a reasonable restriction for accomplishing the objectives of the Principal Act and founded on intelligible differen....
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....registered associations or persons having prior permission of the competent authority. (z) As regards the grievance of the writ petitioners being forced to open and operate account in the designated bank and branch i.e., SBI, NDMB, it is stated in the reply affidavit that for outstation FCRA organisations located in remote areas and for operational ease of any FCRA organisation, MHA and SBI have put in place a system to enable the associations/FCRA organisations/NGOs to open main bank account in SBI, NDMB without any need to physically come to Delhi. It certainly dispels and redresses the principal grievance of the writ petitioners about they being forced to visit Delhi to open account in the designated branch coupled with the enabling provision allowing the registered associations to utilise and transact from any scheduled bank/branch of their choice in the country. The fundamental basis of assail to the amended provisions, therefore, falls to the ground. (aa) The respondents have relied on the Standard Operating Procedure (SOP) issued by the appropriate authority in regard to the opening of FCRA account in the designated branch (SBI, NDMB) to receive the inflow of foreign contr....
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....companies and incidental matters; and are consistent with the underlying principles expounded in the Principal Act. (cc) After having said as above, the affidavit goes on to highlight that none of the amended provisions even remotely permit or attempt to oversee the banking functions. The amended provisions of the Act, as well as, the Regulations, are intended to only bring out clarity on crucial role assigned to the banks in respect of the implementation of the Principal Act of 2010. Similarly, the stated circular is only an administrative guidance for better implementation of the provisions of the 2010 Act. (dd) The respondents have, thus, prayed for dismissal of the writ petitions W.P. (C) No.566 of 2021 and W.P. (C) No.751 of 2021 filed by the registered associations, consequently leaving nothing for consideration in the writ petition filed by Vinay Vinayak Joshi W.P. (C) No.634 of 2021. 6. Counter affidavit filed by respondent No. 3-SBI in W.P. (C) No.751 of 2021 (a) SBI has also filed counter affidavit dated 20.10.2021 in Writ Petition (C) No.751 of 2021 sworn by one Anjana Tandon, Dy. General Manager, SBI, New Delhi Main Branch. This affidavit essentially deals with the ....
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....ate FCRA account (utilization account) at one or more branches of scheduled banks of their choice. Alternatively, they are free to use their previous accounts as utilization accounts, to which funds can be transferred from the designated FCRA account at SBI, NDMB. (d) It is also asserted that the entities are not required to maintain minimum balance in FCRA accounts. Further, they are free to operate their account without physically approaching SBI Branch on regular basis as in the case of any other normal account holder, if they intend to access internet banking facility. It is denied that the registered associations/concerned entities are required to appoint a designated person in New Delhi and make frequent trips for offline KYC verification as alleged. Instead, they can approach the nearest SBI Branch and get the offline verification of document done at the said Branch itself. In other words, the argument of inconvenience put forth by the writ petitioners and similarly placed persons have not only been refuted, but information regarding sufficient logistical arrangements made by the respondent-Bank (SBI) to facilitate opening as well as operating of FCRA account by authorised ....
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....t, in particular Sections 7, 12(1A), 12A and 17(1). The rejoinder affidavit also points out the reason for rejection of application for registration and opening of bank account. Those matters, however, cannot be the basis to test the validity of the provisions. Hence, it is not necessary to elaborate the same. They are more in the nature of inconvenience caused in respect of process of registration and of operating the FCRA accounts. 8. Submissions of the writ petitioners in Writ Petition (C) Nos.566 and 751 of 2021 (a) The registered associations/writ petitioners would urge that the argument of legislative policy being inviolable cannot be countenanced. For, this Court in A.K. Gopalan vs. State of Madras AIR 1950 SC 27, noted that the Court is obliged to consider the effect of the law on the citizens and whether the same impacts the fundamental rights guaranteed under Part III of the Constitution. (b) It is urged that this Court in INSAF supra at Footnote No.22 (paras 18 to 22) has already recognised the right to receive foreign contribution. Thus, it is not open to contend that no fundamental right exists to receive foreign contribution. The amended provisions are arbitrary an....
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....ed Section 7 is not only absurd, but defeat the very object of the Principal Act, which allows regulated use of foreign contribution. In absence of any definition of expressions "transfer" and "utilisation", use of foreign contribution by the entity would be risking violation of the provisions of the Act. (d) It is urged that Section 7 is overbroad and vague. There is ambiguity as to what constitutes various social or educational or cultural or economic or religious purpose under Section 11(1) of the Act and at the same time, Section 35 of the Act invites punishment for contravention of any provision of the Act. For that reason, Section 7 suffers from the vice of manifest arbitrariness and hit by Article 14 of the Constitution. To buttress this argument, reliance is placed on the enunciation of this Court in Shreya Singhal vs. Union of India (2015) 5 SCC 1. Further, the amended Section 7 would not permit collaboration between registered non-profit organisations to serve larger social needs across the country with any other entity or person. That is bound to hamper work of grassroot organisations which receive sub-grants in India from a consortium lead partner in international deve....
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....s obligation can be taken forward by the Bank. No tangible logic is forthcoming to justify the need for Section 12(1A) read with Section 17(1), as to how national interest would be jeopardised by not adhering to that regime especially when all the scheduled banks are regulated by the Reserve Bank of India, including other Government owned public sector banks or even local branches of SBI. Each one of them is obliged to report all such transactions within 48 hours to the MHA. Such a provision, therefore, is simply absurd and irrational. (g) It is argued that the impact of amended provisions is to denude the registered associations to have physical access to their primary account at Delhi along with a host of other restrictions. It is further urged that the amended provision does not stand the test of legitimate goal for which such dispensation is necessary nor spells out the causal connection for compelling the persons seeking foreign contribution to open bank accounts only in specified branch at New Delhi and how it would further the cause of the State interests. Even, the principle of necessity has not been substantiated by the State, especially when there are already existing r....
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....r. Gopal Sankaranarayanan, learned senior counsel and Mr. Gautam Jha, learned counsel for the petitioners and Mr. Tushar Mehta, learned Solicitor General and Mr. Sanjay Jain, learned Additional Solicitor General for the respondents. Legislative History 10. In the first place, we must advert to the legislative history culminating with the 2010 Act, as amended in 2020. A Bill was introduced in the Rajya Sabha in the year 1973 titled as "the Foreign Contribution (Regulation) Bill, 1973". The Statement of Objects and Reasons appended to the said Bill read thus: - "STATEMENT OF OBJECTS AND REASONS There has been widespread concern about the unregulated receipt of funds from foreign agencies by individuals and organisations in the country. The Bill seeks to regulate the acceptance and utilisation of foreign contribution or hospitality with a view to ensuring that our parliamentary institutions, political associations, academic and other voluntary organisations as well as individuals working in important areas of national life may function in a manner consistent with the values of a sovereign democratic republic." (emphasis supplied) On 19.2.1974, the House referred the Bill to a....
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....ing in many forms including receipt by religious organisations. It was agreed that the foreign contribution can be permitted in regulated manner without completely prohibiting the inflow thereof. Eventually, to address the mischief of growing foreign influence owing to influx of foreign donations in our country, the Bill was passed which took the form of the Act i.e., the Foreign Contribution (Regulation) Act, 1976. This Act came into force on 5.8.1976 Vide notification No. GSR 755(E), dated 5.8.1976 published in the Gazette of India, Extraordinary, Part-II, section 3(i) as a shield in our legislative armoury. The preamble of the 1976 Act reads as under: "An Act to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain persons or associations, with a view to ensuring that parliamentary institutions, political associations and academic and other voluntary organisations as well as individuals working in the important areas of national life may function in a manner consistent with the values of a sovereign democratic republic, and for matters connected therewith or incidental thereto." (emphasis supplied) Over the course of time, this Ac....
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.... shall accept foreign contribution only after they are registered with the Central Government specifically for the purpose and accept such contributions only through a specified branch of a bank. They would, however, be required to give, within such time and in such manner as may be prescribed, intimation to the Central Government as to the amount of foreign contribution received by them, the source from which and the manner in which such foreign contribution was received by them, etc. Where any registered association does not accept foreign contribution through the specified branch of a specified bank or does not submit intimations, etc., in time, the Central Government has been empowered to direct that such association shall not accept foreign contribution without the prior permission of the Central Government. A new sub-section (1A) had also been included in this section to provide that an association not so registered with the Central Government shall obtain prior permission of the Central Government before accepting any foreign contribution and also give intimation to the Central Government as to the amount of contribution received by it. (iv) The Act only enabled the Centra....
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....cing the system of grant of registration to the associations receiving foreign contribution. 2. Significant developments have taken place since 1984 such as change in internal security scenario, an increased influence of voluntary organisations, spread of use of communication and information technology, quantum jump in the amount of foreign contribution being received, and large scale growth in the number of registered organisations. This has necessitated large scale changes in the existing Act. Therefore, it has been thought appropriate to replace the present Act by a new legislation to regulate the acceptance, utilisation and accounting of foreign contribution and acceptance of foreign hospitality by a person or an association. 3. The Foreign Contribution (Regulation) Bill, 2006 provides, inter alia, to - (i) consolidate the law to regulate, acceptance and utilisation of foreign contribution or foreign hospitality and prohibit the same for any activities detrimental to the national interests; (ii) prohibit organisations of political nature, not being political parties from receiving foreign contribution; (iii) bring associations engaged in production or broadcast of aud....
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....l as individuals working in the important areas of national life may function in a manner consistent with the values of a sovereign democratic republic the Foreign Contribution (Regulation) Act, 1976 (49 of 1976) was enacted. Since its enactment in 1976 several deficiencies had been found and it was proposed to enact a fresh law on the subject by repealing the Act 49 of 1976. Accordingly the Foreign Contribution (Regulation) Bill was introduced in the Parliament." (emphasis supplied) It will be useful to advert to the preamble of the 2010 Act. The same reads thus: - "An Act to consolidate the law to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto." The underlying reason discernible from the Statement of Objects and Reasons and the concerns expressed by the members during the debate in the concerned Houses, make it amply clear that there was need to strictly regulate the inflow of foreig....
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....n may transfer, with the prior approval of the Central Government, a part of such foreign contribution to any other person who has not been granted a certificate or obtained permission under this Act in accordance with the rules made by the Central Government. *** 12. Grant of certificate of registration.- (1) An application by a person, referred to in section 11 for grant of certificate or giving prior permission, shall be made to the Central Government in such form and manner and along with such fee, as may be prescribed. (2) On receipt of an application under sub-section (1), the Central Government shall, by an order, if the application is not in the prescribed form or does not contain any of the particulars specified in that form, reject the application. (3) If on receipt of an application for grant of certificate or giving prior permission and after making such inquiry as the Central Government deems fit, it is of the opinion that the conditions specified in sub-section (4) are satisfied, it may, ordinarily within ninety days from the date of receipt of application under sub-section (1), register such person and grant him a certificate or give him prior permission, as ....
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....reign contribution by the person referred to in sub-section (1) is not likely to affect prejudicially- (i) the sovereignty and integrity of India; or (ii) the security, strategic, scientific or economic interest of the State; or (iii) the public interest; or (iv) freedom or fairness of election to any Legislature; or (v) friendly relation with any foreign State; or (vi) harmony between religious, racial, social, linguistic, regional groups, castes or communities; (g) the acceptance of foreign contribution referred to in sub-section (1),- (i) shall not lead to incitement of an offence; (ii) shall not endanger the life or physical safety of any person. (5) Where the Central Government refuses the grant of certificate or does not give prior permission, it shall record in its order the reasons therefor and furnish a copy thereof to the applicant: Provided that the Central Government may not communicate the reasons for refusal for grant of certificate or for not giving prior permission to the applicant under this section in cases where is no obligation to give any information or documents or records or papers under the Right to Information Act, 2005. (6) The cert....
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....compliances such as submission of annual returns and maintenance of proper accounts. This has led to a situation where the Central Government had to cancel certificates of registration of more than 19,000 recipient organisations, including non-Governmental organisations, during the period between 2011 and 2019. The criminal investigations also had to be initiated against dozens of such non-Governmental organisations which indulged in outright misappropriation or mis-utilisation of foreign contribution. 4. Therefore, there is a need to streamline the provisions of the said Act by strengthening the compliance mechanism, enhancing transparency and accountability in the receipt and utilisation of foreign contribution worth thousands of crores of rupees every year and facilitating genuine non-Governmental organisations or associations who are working for the welfare of the society. 5. The Foreign Contribution (Regulation) Amendment Bill, 2020, inter alia, seeks to provide for- (a) amendment of clause (c) of sub-section (1) of section 3 to include "public servant" also within its ambit, to provide that no foreign contribution shall be accepted by any public servant; (b) amendment....
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....in the prescribed form or does not contain any of the particulars specified in that form, reject the application. (3) If on receipt of an application for grant of certificate or giving prior permission and after making such inquiry as the Central Government deems fit, it is of the opinion that the conditions specified in sub-section (4) are satisfied, it may, ordinarily within ninety days from the date of receipt of application under sub-section (1), register such person and grant him a certificate or give him prior permission, as the case may be, subject to such terms and conditions as may be prescribed: Provided that in case the Central Government does not grant, within the said period of ninety days, a certificate or give prior permission, it shall communicate the reasons therefor to the applicant: Provided further that a person shall not be eligible for grant of certificate or giving prior permission, if his certificate has been suspended and such suspension of certificate continues on the date of making application. (4) The following shall be the conditions for the purposes of sub-section (3), namely: - (a) the person making an application for registration or grant o....
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.... of any person. (5) Where the Central Government refuses the grant of certificate or does not give prior permission, it shall record in its order the reasons therefor and furnish a copy thereof to the applicant: Provided that the Central Government may not communicate the reasons for refusal for grant of certificate or for not giving prior permission to the applicant under this section in cases where is no obligation to give any information or documents or records or papers under the Right to Information Act, 2005. (6) The certificate granted under sub-section (3) shall be valid for a period of five years and the prior permission shall be valid for the specific purpose or specific amount of foreign contribution proposed to be received, as the case may be. *** 12A. Power of Central Government to require Aadhaar number, etc., as identification document.- Notwithstanding anything contained in this Act, the Central Government may require that any person who seeks prior permission or prior approval under section 11, or makes an application for grant of certificate under section 12, or, as the case may be, for renewal of certificate under section 16, shall provide as identifica....
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....er Article 19(1)(a)] in the interests of the sovereignty and integrity of India, the security of the State, friendly relations with Foreign States, public order, decency or morality or in relation to contempt of Court, defamation or incitement to an offence; in case of Article 19(1)(c) - in the interests of the sovereignty and integrity of India, public order or morality; and in case of Article 19(1)(g) - in the interests of the general public. It is rightly urged by the respondents that whenever the challenge is to the amended provisions, the scope of enquiry, inter alia, ought to be as to whether the same is in consonance with the Principal Act, achieve the object and purpose of the Principal Act and are otherwise just, rational and reasonable. Further, there is no fundamental right vested in anyone to receive foreign contribution (donation) or foreign exchange; and that the purport of the Principal Act and the impugned amendments are only to provide a regulatory framework and not one of complete prohibition. 22. Indisputably, serious concern about the impact of widespread inflow of foreign contribution on the values of a sovereign democratic republic had been repeatedly express....
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....he path of moderation by making it mandatory for all to accept foreign contribution only through one channel and to utilise the same "itself" for the purposes for which permission has been accorded. Undeniably, the sovereignty and integrity of India ought to prevail and the rights enshrined in Part III of the Constitution must give way to the interests of general public much less public order and the sovereignty and integrity of the nation. It must be borne in mind that 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. 26. The Statement of Objects and Reasons for the Amendment Act of 2020 makes it amply clear that the annual inflow of foreign contribution had almost doubled between the years 2010 and 2019 and many recipients of foreign contribution had not utilised the same for the purposes for which they were registered or granted prior permission under the Act. Further, many recipients had also failed to adhere to and fulfil the statutory compliances - which resulted in cancellation of as many as 19,000 certificates of c....
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....the 1976 Act was enacted, the Parliament had discussed about three options. The first was of outright prohibition; the second being acceptance subject to prior permission of Government; and the third - acceptance subject to intimation being given to Government. The Parliament opted for the second option and that continues to this day in the form of 2010 Act, as amended in 2020. At the same time, from the experience gained aftermath implementation of the dispensation predicated for regulating the inflow of foreign contribution from foreign source and its utilisation, the need to make it more stringent was felt. The amendments vide the 2020 Act, are the product of that experience and the Parliament, for accomplishing the objectives of the Principal Act and to uphold the sovereignty and integrity of the nation as well as public order and in the interests of the general public, introduced the regime requiring acceptance of foreign contribution from foreign source only through one channel and utilising the same by the recipient itself for the activities for which prior permission has been granted to him in that regard. The permission to be granted by the Central Government can be a gene....
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.... provisions of the 2010 Act before we proceed to examine the challenge specific to the amended provisions vide the 2020 Act. Chapter I of the 2010 Act deals with short title, extent, application and commencement of the Act as well as definitions of certain expressions referred to therein. 33. Chapter II is about regulation of foreign contribution and foreign hospitality. Section 3 3. Prohibition to accept foreign contribution.-(1) No foreign contribution shall be accepted by any- (a) candidate for election; (b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper; (c) public servant, Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government; (d) member of any Legislature; (e) political party or office-bearer thereof; (f) organisation of a political nature as may be specified under sub-section (1) of section 5 by the Central Government; (g) association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode, or any other electronic form as defined in clause (r) of sub-section (1) of sectio....
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....section, of any foreign contribution where such contribution is accepted by him, subject to the provisions of section 10,- (a) by way of salary, wages or other remuneration due to him or to any group of persons working under him, from any foreign source or by way of payment in the ordinary course of business transacted in India by such foreign source; or (b) by way of payment, in the course of international trade or commerce, or in the ordinary course of business transacted by him outside India; or (c) as an agent of a foreign source in relation to any transaction made by such foreign source with the Central Government or State Government; or (d) by way of a gift or presentation made to him as a member of any Indian delegation, provided that such gift or present was accepted in accordance with the rules made by the Central Government with regard to the acceptance or retention of such gift or presentation; or (e) from his relative; or (f) by way of remittance received, in the ordinary course of business through any official channel, post-office, or any authorised person in foreign exchange under the Foreign Exchange Management Act, 1999 (42 of 1999); or (g) by way of any schol....
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....ain prior permission of the Central Government before accepting any foreign hospitality; (c) require any person or class of persons not specified in section 11, to furnish intimation within such time and in such manner as may be prescribed as to the amount of any foreign contribution received by such person or class of persons as the case may be, and the source from which and the manner in which such contribution was received and the purpose for which and the manner in which such foreign contribution was utilised; (d) without prejudice to the provisions of sub-section (1) of section 11, require any person or class of persons specified in that sub-section to obtain prior permission of the Central Government before accepting any foreign contribution; (e) require any person or class of persons, not specified in section 6, to furnish intimation, within such time and in such manner as may be prescribed, as to the receipt of any foreign hospitality, the source from which and the manner in which such hospitality was received: Provided that no such prohibition or requirement shall be made unless the Central Government is satisfied that the acceptance of foreign contribution by such per....
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....efore the commencement of this Act, shall be deemed to have been registered or granted prior permission, as the case may be, under this Act and such registration shall be valid for a period of five years from the date on which this section comes into force. (2) Every person referred to in sub-section (1) may, if it is not registered with the Central Government under that sub-section, accept any foreign contribution only after obtaining the prior permission of the Central Government and such prior permission shall be valid for the specific purpose for which it is obtained and from the specific source: Provided that the Central Government, on the basis of any information or report, and after holding a summary inquiry, has reason to believe that a person who has been granted prior permission has contravened any of the provisions of this Act, it may, pending any further inquiry, direct that such person shall not utilise the unutilised foreign contribution or receive the remaining portion of foreign contribution which has not been received or, as the case may be, any additional foreign contribution, without prior approval of the Central Government: Provided further that if the person ....
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....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 or prior permission for a period of three years from the date of cancellation of such certificate. is about cancellation of such certificate. Section 15 deals with issues of management of foreign contribution of person whose certificate has been cancelled and Section 16 133 16. Renewal of certificate.-(1) Every person who has been granted a certificate under section 12 shall have such certificate renewed within six months before the expiry of the period of the certificate. Provided that the Central Government may, before renewing the certificate, make such inquiry, as it deems fit, to satisfy itself that such person has fulfilled all conditions specified in sub-section (4) of section 12. (2) The application for renewal of the certificate shall be made to the Central Government in such form and manner and accompanied by such fee as may be prescribed. (3) The Central Government shall renew the certificate, ordinarily wi....
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....ient itself only for the purposes for which such permission had been granted, with prohibition to transfer such foreign contribution to any other person by virtue of Section 7 of the 2010 Act. Validity of Section 7 38. Having said this, now we may revert to the grounds on which Section 7, as amended vide the 2020 Act, has been challenged. It is urged that the unamended provision though restricted the transfer of foreign contribution, yet it did not completely prohibit the same unlike the amended Section 7. The amended Section 7 postulates complete prohibition on the transfer of foreign contribution to other person - not even to a person having certificate of registration under the Act. In other words, a person who is registered and granted a certificate or has obtained prior permission under the Act to receive foreign contribution will henceforth be required to utilise the amount "itself" and not through any other person. 39. Be it noted that the proviso to the unamended Section 7 envisaged that if a part of foreign contribution was to be transferred to some other person who had not been granted a certificate or obtained prior permission under the 2010 Act, that could be made po....
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.... any foreign source in India, by way of fee (including fees charged by an educational institution in India from foreign student) or towards cost in lieu of goods or services rendered by such person in the ordinary course of his business, trade or commerce whether within India or outside India or any contribution received from an agent of a foreign source towards such fee or cost shall be excluded from the definition of foreign contribution within the meaning of this clause; and "foreign source" 2. Definitions.-(1) In this Act, unless the context otherwise requires,- (a) to (i) xxx xxx xxx (j) "foreign source" includes,- (i) the Government of any foreign country or territory and any agency of such Government; (ii) any international agency, not being the United Nations or any of its specialised agencies, the World Bank, International Monetary Fund or such other agency as the Central Government may, by notification, specify in this behalf; (iii) a foreign company; (iv) a corporation, not being a foreign company, incorporated in a foreign country or territory; (v) a multi-national corporation referred to in sub-clause (iv) of clause (g); (vi) a company within the meaning of th....
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....sation (amended Section 7). For, the legislative intent is now one of complete prohibition regarding transfer of foreign contribution to third party. 44. Significantly, as per the scheme of the 2010 Act, a certificate of registration is not granted for acting as an intermediary between the donor (foreign source) and the grassroot level organisation. The amended provision, therefore, completely rules out such transfer of foreign contribution by the person who has received/accepted the same in the first place. That does not prevent the recipient from utilising the foreign contribution "itself" for the purposes for which he has been granted a certificate of registration or obtained prior permission under the Act. 45. The expression "transfer" has not been defined in the Act. The meaning of expression "transfer" in the subject enactment would presuppose giving away of the foreign contribution in whole or in part to third person without retaining any control thereon; and such change of hands is obviously without offering any services in return, namely, free of costs. The third person would then be free to deal with such transferred foreign contribution in the manner he chooses to do s....
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....ducting adult literacy programs.; * Conducting research.; * Non-formal education/schools for the mentally challenged.; * Non-formal education projects/coaching classes.; * Any other activities related to the above. 3. Economic * Following but not being commercial or profit making activities: * Micro-finance projects, including setting up banking co-operatives and self-help groups.; * Self-sustaining income generation projects/schemes. * Agricultural activities.; * Rural development programmes/schemes.; * Animal husbandry projects.; * Setting up and running handicraft, centres/cottages and khadi industry/social forestry projects.; * Vocational training, tailoring, motor repairs, computers etc.; * Projects for income generation activities or any other developmental projects for urban slum development.; * Any other activities related to the above, not being commercial activities. 4. Social * Construction/running of hospitals/dispensaries/clinics.; * Construction of community halls etc.; * Construction and management of old age homes.; * Welfare of the old aged persons or widows.; * Construction and management of orphanage.; * Welfare of the orphans.; * Construction and management ....
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....e third party or outsources its certain activities to third person, whilst undertaking definite activities itself and had to pay therefor, it would be a case of utilisation. The transfer within the meaning of Section 7, therefore, would be a case of per se (simplicitor) transfer by the recipient of foreign contribution to third party without requiring to engage in the definite activities of cultural, economic, educational or social programme of the recipient of foreign contribution, for which the recipient had obtained a certificate of registration from the Central Government. On this interpretation, it must follow that the argument regarding amended Section 7, being ultra vires, must fail. 48. Concededly, Section 8 permits the recipient of foreign contribution to utilise only specified portion thereof for administrative purposes, to the extent permissible. As per Section 8, the administrative expenses qua foreign contribution received by the registered person ought not to exceed twenty per cent (instead of fifty per cent under the unamended provision) of such contribution in the concerned financial year. The proviso to Section 8(1), however, enables spending beyond twenty per cen....
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....layered trail of money and also utilisation of funds towards administrative costs of successive transfers upto fifty per cent leaving very little funds for spending on the purposes for which it was permitted. Hence, providing complete restriction on transfer simplicitor, was the just option to fix accountability of the recipient organisation and maximise utilisation for the permitted purposes. Such being the avowed objective and purpose of the amendment, the challenge to the amended Section 7 must fail. 52. Be that as it may, the fact that earlier transfer of foreign contribution was permitted as per the unamended provision, that by itself cannot be the basis to challenge the validity of the amended provision. For, it is open to the Parliament to change the benchmark of restriction from higher standard to lower standard or vice versa on the basis of the exigencies and experience gained during the implementation of the applicable provision at the relevant time. 53. Indubitably, foreign contribution is qualitatively different from foreign investment. Receiving foreign donation cannot be an absolute or even a vested right. By its very expression, it is a reflection on the constituti....
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....eceiving or accepting foreign contribution is obliged to obtain a certificate of registration under the Act or prior permission, as the case may be. Further, such person is obligated to comply all the stipulations attached to the certificate of registration or prior permission, without any exception. 56. Apparently, receiving "foreign exchange" is itself completely prohibited and made subject to exceptions provided for in terms of the Foreign Exchange Management Act, 1999 for short, "the 1999 Act". On conjoint reading of the provisions of the 1999 Act and the regulatory mechanism provided for in the 2010 Act, it is a clear pointer to the strict regime to be followed by all concerned for allowing inflow of "foreign contribution" (donation) in the manner prescribed and its utilisation only for definite purposes permitted by the competent authority. 57. We fail to understand as to how such a provision (amended Section 7) can be regarded as discriminatory or so to say vague or irrational much less manifestly arbitrary. The restriction therein applies to a class of persons who are permitted to accept foreign donation for being utilised by themselves for the definite purposes, without ....
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....evidence to indicate that the change effected by the amendments is to serve the legitimate Government purpose and has a rational nexus to the object of the Principal Act and the amendments, and that the pre-amendment dispensation (unamended Section 7) was not sufficient to effectively regulate the acceptance and utilisation of foreign contribution as predicated by the Principal Act. 60. Reliance placed by the petitioners on the dictum in Shreya Singhal supra at Footnote No.117 and K.S. Puttaswamy supra at Footnote No.7 to urge that it is open to the Court to test the amendment on the touchstone of manifestly arbitrary, need not detain us in light of the conclusion noted hitherto, keeping in mind the legislative history and the compelling necessity to adopt strict regime for prohibiting "transfer" of foreign contribution and insistence of "utilisation" thereof by the recipient himself/itself. For the same reasons, the dictum in Anuradha Bhasin supra at Footnote No.21 (paras 154-159) that the underlying consideration of appropriateness, necessity and the least restrictive measure compliant law, will also be of no avail. 61. The argument that this Court in the case of INSAF supra at....
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....is a reasonable restriction, the Court cannot be oblivious to the concern of the Parliament/Legislature backed by the past experiences including cancellation of registration of substantial number of registration certificates after due inquiry and for tangible reasons owing to abuse and misutilisation of foreign contribution (donation); and especially when receipt or acceptance of foreign exchange or be it foreign contribution, is otherwise understood to be ordinarily prohibited. For, the "foreign exchange" and more so "foreign contribution" can be received or brought within the territory of India only as per the dispensation provided for in the municipal law. There can be no absolute right in that regard. The fact that transfer was permitted under the unamended Section 7, it does not follow that the Parliament is not competent to amend that dispensation to make it more stringent, including to completely prohibit the inflow of foreign contribution. The amended provision is not to completely prohibit inflow of foreign contribution, but is a regulatory measure to permit acceptance by registered persons or persons having prior permission to do so with condition that they must themselve....
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....acceptance and also utilisation of foreign contribution which is quite substantial every financial year having proliferating effect on the economy of the nation, it had become necessary to enact amended Section 7. In other words, there is a clear rationale behind the amendment which is consistent with the purpose of the Principal Act and the object sought to be achieved under the enactments. The fact that unamended provision was less restrictive, cannot be the basis to test the constitutional validity of the provision on the touchstone of Article 19(1)(c) or 19(1)(g) or Articles 14 and 21 of the Constitution. The amended Section 7, being plain and clear and having nexus with the object sought to be achieved and is necessitated because of sovereignty and integrity of India or security of the State, public order and in the interests of the general public. It is unfathomable as to how the amended provision can be regarded as unconstitutional on any parameter. 67. It is urged that Rule 24 of the 2011 Rules came to be deleted with effect from 10.11.2020. This rule enabled the registered organisations to transfer foreign contribution to any unregistered person in the manner provided the....
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....y of monitoring and achieving the object of the Principal Act. The amended provision now mandates that FCRA accounts of all the registered persons/organisations are required to be opened in one particular branch in the country providing for essential information and fields, thereby ensuring a complete and transparent check on the inflow and utilisation of foreign contribution towards a single point source on real-time basis. 71. The fact that earlier FCRA account could be opened in any scheduled bank, cannot preclude the Parliament from legislating a law which requires inflow of foreign contribution in some other manner specified by law. Merely because the framework of acceptance of foreign contribution had been changed cannot be the basis to question the validity of the amended provisions. Introducing change for the betterment of governance is the prerogative and wisdom of the Parliament. The FCRA account operators cannot claim right of continuity of a deficient and flawed framework. Ordinarily, convenience of business and persons engaged in doing business must be uppermost in the mind of the Parliament/Legislature - to effectuate the goal of ease of doing business. However, the ....
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....) and All India Council for Technical Education (supra at Footnote No.32), this Court had expounded that on the plea of individual hardships, Court cannot interfere with policy matters (and in present cases a just law made by Parliament). Assuming that some inconvenience is likely to be caused to few applicants, but the constitutionality of a statute cannot be assailed on the basis of fortuitous circumstances and more so when it being only a one-time exercise to ensure inflow of foreign contribution through one channel only, being a precondition for grant of permission. There is no restriction regarding utilisation of the funds only through that (primary) FCRA account. For, it is open to the recipient to operate multiple accounts in other scheduled banks for its utilisation. 74. As a matter of law, the validity of the amendments must be tested on the touchstone of tenets underlying Articles 14, 19 and 21 of the Constitution. The permission is a precondition for acceptance and utilisation of foreign contribution. Such persons are a separate class and engage in specified activity. It cannot be a usual or ordinary business for everyone and anyone wanting to accept foreign contributio....
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....rther improvement in the operational convenience is required, it is open to the petitioners and all other interested persons to request the designated bank to improve upon such facility. However, merely because the registered association has been compelled to open FCRA account in the designated bank at the centralised location for receipt/inflow of foreign contribution from foreign source, it does not follow that such a requirement would be manifestly arbitrary or unreasonable. It is only a one-time exercise to be complied with for availing the permission accorded by the Central Government under the Act to be a certified association or person given permission to receive foreign contribution as a precondition. 77. The need to have only one entry point for the inflow of foreign contribution had been viewed by the Parliament as the best option for regulating the inflow of foreign contribution. This process is expected to increase the efficiency in continual supervision of the inflow of foreign contribution on real-time basis by the concerned Authorities and to enable them to take immediate corrective measures to deal with and pre-empt the impending threat perceived because of its vol....
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....her be said to be manifestly arbitrary nor irrational much less without legitimate objective of the State. Accordingly, we have no hesitation in negating the challenge to these provisions as being violative of Articles 14, 19 and 21 of the Constitution. 81. The fact that the registered associations were already complying with the statutory formalities of furnishing of accounts, intimation, audit and disposal of assets to the satisfaction of the concerned Authorities, it would not follow that the Parliament/Legislature is denuded of its power of changing the regulatory mechanism or framework to make it more effective and to make it real-time regarding the inflow or receipt of foreign contribution and utilisation thereof for the purposes for which it has been so permitted. Accepting the argument of the registered associations would not only be undermining the legislative intent, but also disregarding the object sought to be achieved by the Principal Act. 82. The argument of compelling necessity may have arisen for our consideration only if we were to find that the dispensation provided in the amended provisions is in the nature of complete prohibition to form association or to enga....