Supreme Court's Perspective on Foreign Contribution Regulation Act (FCRA)
- In Current Affairs
- 12:56 PM, May 02, 2020
- Shrijeet Phadke
Introduction
In the month of March 2020 Supreme Court of India passed an important judgment on Foreign Contribution (Regulation) Act 2010 which justified the receipt of foreign contribution by the organizations in India which are agitating for public cause without any political affiliation or goal. It unequivocally held that only those organizations which have connection with active politics or take part in party politics are prohibited from receiving foreign contributions under the said Act. Validation of government power by Supreme Court under Foreign Contribution (Regulation) 2011 Rule 3 (vi) which states that any organization which habitually engages itself in or employs common methods of political action like 'bandh' or 'hartal', 'rasta roko', 'rail roko' or 'jail bharo' in support of public causes can also be declared as an organization of political nature. This definition is a shot in the arm for government at the center to curb politically motivated Non-Governmental Organizations in India. A close scrutiny of Supreme Court’s judgement demonstrates that it has struck a balance by way of restraining arbitrary exercise by executive on one hand and rampant misuse of the act to funnel slush money into the country to destabilize the nation and its interests on the other.
Background
The act has its roots in 1973, two years after the Bangladesh war when the then Congress government under the leadership of Indira Gandhi wanted to tighten its grip on the nation passing through a tumultuous phase. The world was still a bipolar, divided in the camps of Soviet Russia (U.S.S.R) and United States of America (U.S.A). Each camp was pulling teeth to rope in as many countries as possible into its camp. India with its proclaimed non-aligned principals of foreign policy was always on radar of foreign powers. Also, the Congress dithered by anti-corruption movement led Jayprakash Narayan believed that the movement was supported by various NGOs in India. Government believed that these NGOs were receiving sumptuous assistance from external sources.
Against this backdrop, the government realized the need to safeguard India from a spate of subversive activities sponsored by Foreign Powers to destabilize India. Government brought out Foreign Exchange Regulation Act 1973 legislation to address this issue. To shield the sensitive areas like journalism, judiciary, politics from the influence of extraneous powers, government introduced an ad hoc legislation to deal with a foreign contribution in India.
The Hon’ble Supreme Court narrated the necessity of Foreign Contribution (Regulation) Act 2010 (“FCRA”) as follows;
“It is imperative to refer to the statutory regime. The Foreign Contribution (Regulation) Act, 1976 (hereinafter referred to as ‘the 1976 Act’) was enacted to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain persons or associations with a view to ensure that parliamentary institutions, political associations, academic and other voluntary organizations as well as other individuals working in important areas of national life may function in a manner consistent with the values of a sovereign democratic republic and the matters connected therewith and incidental thereto”
The Act however, turned out to be ineffective in curbing the menace of foreign funds necessitating substantial amendment. Foreign funds are a necessary evil. They generated employment and contributed to overall development. Government had to strike right balance. In 2005, the UPA called for a fresh debate and discussion on FCRA. A draft bill was prepared seeking overhaul of FCRA 1976 Act. Ministry of Home Affairs report stated that in 2003-04 around 30,000 NGOs registered in India remitted Rs.5000 crores from abroad under FCRA. As per 2003 data the highest recipient of foreign funds was the Andhra Pradesh based NGO called Sri Sathya Sai Central Trust which received Rs 95 crores during 2003-04 inter alia a major foreign funds recipient states Delhi, Tamil Nadu, Karnataka and Andhra Pradesh.
The government by way of proposed amendment enacted in FCRA 2010 and followed by FCRA Rules 2011, whereby the aid and assistance to humanitarian works and national security would not be hampered.
National Security & Constitutional Ethos are Paramount;
Nation often receive foreign funds to cater to developmental needs. Bound by the directive principles of state policy which pledges to work for welfare of its people, Indian government also accepts foreign funds. But no government wants to give short shrift. Especially a country like India with myriad diversity in its bosom is always likely to be abused by foreign powers. Bearing this fact in mind Supreme Court instead of striking down the Foreign Contribution Regulation Rule 3(v) read the same down. The Rule 3(v) states as follows;
3. Guidelines for declaration of an organization to be of a political nature, not being a political party. - The Central Government may specify any organization as organization of political nature on one or more of the following grounds;
v. organization of farmers, workers, students, youth based on caste, community, religion, language or otherwise, which is not directly aligned to any political party, but whose objectives, as stated in the Memorandum of Association, or activities gathered through other material evidence, include steps towards advancement of Political interests of such groups;
While interpreting abovesaid provision Supreme Court states;
“Therefore, such of those organizations which are working for the social and economic welfare of the society cannot be brought within the purview of the Act or the Rules by enlarging the scope of the term ‘political interests’. We are of the opinion that the expression ‘political interests’ in Rule 3 (v) has to be construed to be in connection with active politics or party politics”
The Hon’ble Supreme Court has declared that 3(V) is vague in nature. However, the provision doesn’t conform to the rigors of unconstitutionality. It offers a leeway to the government to come up with certainty as far as the term ‘political interest’ is concerned merely by way of new rules in the FCRA 2010. Instead of fresh amendment in the Act which requires time consuming parliamentary procedure. It is therefore imperative for the government of India to come out with new rules in FCRA 2010 at the earliest to plug the loopholes to protect national interests which are at the altar of foreign contributions loaded with malicious agenda.
The fundamental question is that why developing countries like India are recipients of generous foreign funds. Why the same funds are not being utilized in source countries to alleviate their own problems. Why countries which are highly capitalistic in nature generously hand out largesse to developing countries. It is axiomatic that barring few organizations which adhere to the causes they espouse, majority of them are always on the prowl to perpetuate their vicious agenda in foreign land.
In June 2014, a few weeks after the Modi government came to power, the Intelligence Bureau submitted a report to the Prime Minister’s Office titled, “Impact of NGOs on Development.” The report claimed that foreign-funded NGOs protesting coal and mining projects in the country were stalling India’s development which negatively impacted GDP growth by two to three percentage points. The report called Greenpeace a “threat to national economic security.”
In his article in Organiser dated 27th January 2020, Mr. Nageshwar Rao a former IPS officer wrote-
A humongous amount of Rs. 2,08,096 Crores of foreign ‘donations’ has been pumped into the country, in the last two decades, by foreign sources through official open channels by remitting to FCRA-NGOs. This discussion does not factor in the number of foreign funds that gets into the country through illegal routes or otherwise camouflaged as foreign investment. Since it is extremely difficult to collect such data, one can only hazard a guess about its volume, details and purposes.
Further analysis of the FCRA data indicates that as on 1st April 2017 the total amount brought forward by the FCRA-NGOs as unspent money from past foreign ‘donations’ is a whopping Rs. 15,907 Crores, more than 50% of which is lying with about 2% of the FCRA-NGOs. Interestingly, foreign donors continue to remit fresh funds every year to the same small group of entities. Why do foreign ‘donors’ continue to pour in big bucks to the entities that are already sitting on a staggering pile of cash? Or, are the foreign ‘donors’ supplying money to their representatives or donees to build cash reserves for some future plans? Whatever it may be, the prognosis seems very ominous!
The instances of destabilization by missionaries and certain NGOs are very well known. Anti-national elements like evangelists and Maoists are hand in glove to propagate fissiparous agenda in the country. By now it is widely known how missionary organizations stalled Kudamkulam nuclear project for years in Tamil Nadu. In an interview published in the May 6, 2010 edition of “Sathyadeepam”, a Catholic weekly published from Kochi (Kerala), Bishop Charles Soreng of Hazaribagh, Jharkhand has admitted that the Maoists are sympathetic to the church and sipport the pastors who carry out conversion activities. It is exigent to rein in on all the organizations in India receiving foreign funds to derail development and demolish the fundamental attributes of Indian Constitution. NGOs are sometimes used as tool by anti-national forces to carry out covert operations. M.K. Narayanan, the then Indian National Security Advisor, observed, “An important source of funds to jehadi terrorist outfits are religious charities. Sincere believers contributing to charities are perhaps unaware that a sizeable portion of the funds go to fund terrorist activities and terrorist outfits.... Conduits through which such funds find their way to terrorist organizations include established banking channels.” OECD countries published a “REPORT ON ABUSE OF CHARITIES FOR MONEY-LAUNDERING AND TAX EVASION” and listed down following methods and schemes involving the abuse of charities to facilitate tax evasions, crime, money laundering;
- An organization poses as a registered charitable organization to perpetrate a tax fraud;
- A registered charity willfully participates in a tax evasion scheme for the personal benefit of its organizers or directors;
- A registered charity is involved willfully in a tax evasion scheme to benefit the organization and the donors, without the assistance of an intermediary;
- A registered charity is involved willfully in a tax evasion scheme to benefit the organization and donors with the assistance of an intermediary;
- A charity is abused unknowingly by a taxpayer or a third party, such as unscrupulous tax return preparer who prepared and presented false charitable receipts;
- Tax sheltered donations as part of a tax evasion scheme;
- Salaried employees concealed as volunteer workers;
- An organization registered as exempted from the VAT that is performing taxed activities;
- The issuance of receipts for payments that are not true donations;
- The issuance of receipts to individuals working for the beneficiary organization;
- Criminals use names of legitimate organizations to collect money;
- Terrorism financing scheme using charities to raise or transfer funds to support terrorist organizations;
- Misuse of charity funds by charities; and
- Manipulation of the values of donated assets.
Darpan a national portal run by NITI Aayog on NGOs in the country, provides a list of approximately 280 NGOs in Uttar Pradesh which have been black listed by the Uttar Pradesh government for misappropriation of money.
India Today on 10th January 2018 carried a sting operation on Madrasas in Kerala which are hotbed of Wahabi ideology and concluded that the madrasas receive direct funding Saudi Arabia to nurture extremist version of Islam.
Children in India are most vulnerable as they are soft targets and can be levered easily, the glaring example is Russ Foundation which is foreign funded NGO mostly from United Kingdom and its supervisor was arrested for sexual abuse of 11 years old child. It is unfortunate that this organization receives grants from Tamil Nadu state AIDS control society also.
Conclusion
NGOs are arteries of democratic countries and inevitable for voicing grievances of people in the democracy. NGOs in India like Akshay Patra foundation is doing commendable job and completely devoted to cause they are espousing. However, some non-governmental organizations are used merely as conduit to twist constitutional democracy in India, mar development, welfare of people NGOs which are abusing legal and structural framework to perpetuate some vested interests must be curbed with immediate effect. Laws like FCRA 2010 must be revisited to make them robust by including necessary mechanism to clampdown on foreign contribution directed at achieving political, cultural, economic, religious or any other interests which are perfidious for the constitutional values and security of nation. All NGOs may be brought under umbrella of Unlawful Activities Prevention Act (UAPA) and Prevention of Money Laundering Act (PMLA) for their effective monitoring.
India also should think of other options like restricting foreign funding in limited sectors like education, health etc with strict monitoring thereof also CSR funding of Indian companies should be encouraged to minimize a foreign contribution.
In democracy every person has right to espouse his cause and also to assert fundamental rights however, that should not be at the cost of security and integrity of nation.
On 4th of August 1949 during a debates in constituent assembly of India Mr. Brijeshwar Prasad said-
…………I only want that if the President feels that he cannot meet the emergency without abrogating some of the fundamental rights of the citizen he must be empowered to do so. And there are reasons behind it. I feel that if there is a conflict between the, security of the State and the personal liberty of the individual I will choose the former and lay stress on the security of the State. For the first time in the chequered history of India we have got an independent State of our own; are we going to barter it away in the name of some newfangled notions which have been discredited in their own homelands? The best thing of course is to have both security of the State and personal liberty of the individual. But the ideal thing is not Always possible, and when there is a conflict between these two, my friends will have to make a choice; I would choose the security of the State.
References
https://www.organiser.org/Encyc/2020/1/27/The-Dangers-of-Foreign-Funding.html
http://docs.manupatra.in/newsline/articles/Upload/3DA179CB-01A8-4CBD-B12C-75037B4CC972.pdf
https://www.livelaw.in/pdf_upload/pdf_upload-370990.pdf
https://shodhganga.inflibnet.ac.in/bitstream/10603/31667/15/15_appendix.pdf
https://www.oecd.org/tax/exchange-of-tax-information/42232037.pdf
https://www.downtoearth.org.in/indepth/the-power-game-22324
https://indiankanoon.org/doc/1333892/
Image Credits: The Policy Times
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