On April 8, 2022, in the case of Noel Harper vs. Union of India1, the Supreme Court upheld the validity of certain amendments made to the provisions of the Foreign Contribution (Regulation) Act, 2010 (hereinafter referred to as the “FCRA”) which came into effect in September, 2020, clarifying that “the strict regime had become essential because of the past experience of abuse and misutilisation of foreign contribution”.
The FCRA was enacted in 2010 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.
What is Foreign Contribution (Regulation) Amendment Act, 2020 (“2020 Amendment”) and what changes were introduced?
In 2020, the Union Government enhanced the FCRA’s stringency through a series of amendments under the 2020 Amendment that placed strict limitations on who could receive foreign contributions, how organisations could use such contributions and whether they could be transferred to other persons and organisations.
The 2020 Amendment made the following key changes to the FCRA:
- Transferring foreign contributions to any other ‘person’, including individuals, associations or registered companies was prohibited (Section 7).
- The amount of foreign contribution that can be used for administrative expenses was reduced to 20% from 50% (Section 8(1)(b)).
- The Central Government has been empowered to direct persons receiving foreign contribution to not utilise it or receive any further funding after conducting a summary inquiry (Section 11(2)).
- Those registered under the FCRA or applying for registration are now required to open a bank account in the main branch of State Bank of India in New Delhi and may only receive and deposit foreign contributions through this branch (Sections 12 & 17).
- All office bearers, directors and key functionaries of the registered organisation were required to provide their Aadhaar numbers for identification purposes (Section 12A).
What was decided in Noel Harper vs. Union of India?
In 2021, Noel Harper, the chairperson of the Andhra Pradesh-based Care & Share Charitable Trust, and the trustees of three other NGOs challenged the constitutional validity of the 2020 Amendment (particularly Sections 7, 12 (1A), 12 A and 17) claiming they were arbitrary, unreasonable and impinging upon the fundamental rights guaranteed under Articles 14, 19 and 21 of the Indian Constitution. According to the petitioners, Section 7 of the 2020 Amendment which bars even registered recipients of foreign contributions from transferring funds to other persons or organisations irrespective of the registration status of the transferee, is discriminatory, vague and irrational.
Observing that receiving foreign donations cannot be an “absolute or even a vested right”, the Apex Court held that no one can be heard to claim a vested right to accept the foreign donation because the theory of the possibility of the national polity being influenced by foreign contribution is globally recognised.
The Court held that the bar on ‘transfer’ within amended Section 7 refers to simple transfers by the recipient of the foreign contributions to third parties who are not engaged in the former’s cultural, social, educational, and social programmes. In this context, amended Section 7 advances the legislature’s intent to mandate the recipient’s use of foreign contributions solely for the purpose for which it was permitted to receive the registration.
The Court also observed that in order to eradicate misuse and abuse of foreign contribution in the past, despite the firm regime in place in terms of the FCRA Act, the Parliament in its wisdom has now (vide the 2020 Amendment) adopted the 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. The Court highlighted that 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.
Further, Section 12A under the 2020 Amendment mandated a person, who seeks prior permission or prior approval under Section 11 or makes an application for grant of certificate under Section 12 of the FCRA, including for renewal of a certificate, to provide the Aadhaar number of all its office bearers or directors or other key functionaries as an identification document.
The Court discussed the necessity of insertion of Section 12A and noted that the inflow of foreign contribution had almost doubled between the years 2010 and 2019 and many of the registered associations had failed to comply with basic statutory formalities necessitating cancellation of certificates of registration of more than 19,000 registered organisations. This is a staggering (substantial) number indicative of gross violations by large number of registered associations. More so, the 2020 Amendment had been necessitated to safeguard the sovereignty and integrity of the country, and public order, including in the interests of the security of the State and of the general public. However, the Court read down Section 12A and construed it as permitting the key functionaries or office bearers of the associations/NGOs, who are Indian nationals, to produce Indian passports for the purpose of their identification. The Court also observed that the underlying purpose of this provision is merely to identify the key functionaries of the registered association so that they can be made accountable for violations, if any.
The Court also upheld Sections 17(1) and 12(1A) under which those seeking FCRA registration and recipients of foreign contributions would have to open an FCRA account at the Sansad Marg branch of the State Bank of India in New Delhi. The Court held that opening a bank account at a specified location is a one-time exercise. This process will increase efficiency. Further, the account can be operated without the physical presence of the account-holder. Therefore, the process is neither arbitrary nor irrational.
To sum up, the Court held that the amended provisions vide the 2020 Amendment, namely, Sections 7, 12(1A), 12A and 17 of the FCRA are intra vires the Constitution and the FCRA, for the reasons cited above.
1 Writ Petition (Civil) No. 566 of 2021.