On Friday 8th April 2022 the Supreme Court declared the Foreign Contributions (Regulation) Amendment Act, 2020, legal. The Foreign Contributions (Regulation) Amendment Act imposes new regulations for non-profit organisations acting independently of any government (INGOs). It is now mandatory for INGOs to receive all foreign funds into SBI accounts.
Challenges were initially made against the new amendments due to them being perceived as unreasonable, ambiguous, and imposing restrictions that make it difficult for INGOs to function efficiently. The petitioners challenged the following amendments of the Foreign Contribution (Regulation) Amendment Act, 2020:
1. Sub-Granting of FC
This new provision bans the registered person from transferring any foreign contributions. This is regardless of whether the person is registered or not. These changes are considered illogical and directly affect social upliftment schemes through foreign contribution. It, therefore, results in the violation of the rights given under the Constitution of India.
2. Aadhaar for Registration
The validity of Sections 12 A was also challenged. Section 12 A made it mandatory to produce Aadhaar card details of the office bearers, functionaries, and directors. This was to be used as an identification document for the purpose of registration. This change affects the basic rights of the individual and violates Article 19 of the Constitution.
3. FCRA Account with SBI
The FCRA account clause makes it mandatory for all foreign contributions to be received to one bank at New Delhi.
In response to the petition and allegations made, the Union of India submitted the following amendments:
- Transparency of Contributions: The Act’s objective is to enhance transparency and accountability in receiving foreign contributions. This is to be achieved through effective monitoring of genuine INGOs in ensuring a substantial portion of the foreign contribution is spent on the activities for which it has been received.
- Facilitating access to data: In order to monitor all foreign contributions, all data should be correlated in one designated channel. This allows the flow of funds and foreign contributions to be monitored more efficiently.
- Prevention of interference: In order to prevent the unwanted interference of foreign powers and to restrict activities which go against the requirements of the country, this allows the interior policy to remain protected.
- Accountability: In order to assure the accountability of those handling foreign funds and to ensure the legitimacy of those funds. This prevents the use of endless chains of transfers within INGOs and ensures all foreign funds which go into or out of a company are properly registered, traceable, and legitimate. This involves ensuring all transfers are through registered INGOs and to allow companies to create healthy global expansion.
- Identification: In order to ensure all persons involved in INGOs are easily identifiable and enable real-time monitoring of those involved within the INGO to ensure all activities are legitimate and non-detrimental to the overall National interest.
It was also assured that no amendment prohibits or bans any person to transact in foreign contributions but rather ensures all contributions are registered and easy to monitor. This is to be done in accordance with the 2010 act including the registration of funds through FCRA.
These amendments are applicable to all INGOs handling foreign contributions from any foreign source and are not discriminatory towards any INGO. It is also stated that the amendments do not impact any fundamental rights.
Supreme court’s decisions
The objections to the amendments were turned down by a bench of judges in 2020. It was declared that the amended provisions are in line with the constitution for the reason of sovereignty and integrity of India. It was held that the amended provisions are to safeguard the sovereignty of the country and are in the interests of the security of the State and of the general public.
However, the court also stated that in regard to the required Aadhar cards, it will only be required by the key functionaries of the INGO and those associated if they do not bear Indian nationality, for those who do, produce an Indian passport for the purpose of compliance and identification will create a seamless transition to more transparent practices.
The SC order reiterates the fact that any foreign money flowing into the INGO not-for-profit sector will be subject to detailed scrutiny and the sector needs to ensure that they are following respect to the above amendments. For more information, please see the following sources.