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Synopsis

In a significant decision, the Karnataka High Court has said that mere possession of permanant registration under the Foreign Contribution Regulations Act does not entitle an NGO to receive and utilise the funds from abroad for specific purposes.

A single judge bench of Justice K S Hemalekha said that having permanent registration under the Foreign Contribution (Regulation) Act (FCRA), 2010, is not sufficient ground for any organisation or NGO to get money credited to their designated savings bank account unless such entities get clearance from the Ministry of Home Affairs.

The court dismissed a writ petition filed by Bengaluru's MANSA Centre for Development And Social Action seeking direction to its bank to release over Rs 29.12 lakh, received from Denmark-based NGO 'Dan Church Aid' that were kept aside.

“The object of the FCRA, 2010, is to consolidate the law to regulate the acceptance and utilisation of foreign contributions or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contributions or foreign hospitality for any activities detrimental to national interest and for matters connected therewith or incidental thereto,” the court said.

The NGO sought direction to the bank to compensate a sum of Rs 10 Lakhs, along with interest, for the damages caused to it.

The petitioner claimed the bank's decision to freeze the fund was highly arbitrary and showed high-handedness as money was received from other donors and not just 'Dan Church Aid'. 

In response, the bank claimed the Government of India, Ministry of Home Affairs' FCRA unit had directed it not to credit the amount received from 'Dan Church Aid' into their account till further instructions from the ministry. In view of the instruction issued under Section 46 of the FCR Act, 2010, the bank had followed the direction. The bank further said that the Reserve Bank of India also had directed to withhold the amounts received from 'Dan Church Aid' without clearance of the Ministry of Home Affairs as per Regulations 35(A) of the Banking Regulation Act, 1949 and they had withheld the credit amount.

The Union government also showed a communication from the Director (Monitoring Unit), Foreigners Division (FCRA Wing), Ministry of Home Affairs, stating that 'Dan Church Aid' had been placed under the ‘Prior Reference/Permission Category’, based on feedback/inputs of field/security agencies.

The government had then communicated to the Reserve Bank of India (RBI) to instruct all banks and their branches to notify the ministry for clearance about funds flowing into Indian individuals/entities from 'Dan Church Aid' before crediting the amount to the accounts of recipient NGOs or associations.

The bench said that a letter of October 31, 2013 by the MHA had clearly instructed the bank not to credit the amount received from 'Dan Church Aid' to the petitioner’s account till further instructions.

The court highlighted that the Foreign Contribution Regulation Act was enacted in 1976 noticing that some of the foreign countries were funding individuals, associations, political parties, candidates for elections, correspondence, columnists, editors, owners, printers or publishers of newspapers and they were extending hospitality. 

The effects of such funding and hospitality were quite noticeable and to have control over such funding and hospitality and to regulate the acceptance and utilization of the foreign contribution or foreign hospitality, by certain persons or associations, with a view to ensure 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, the bench said.

The court thus said that the contention of the petitioner that it had obtained permanent registration under the FCRA 2010 did not create a right in its favour to get the amounts credited to the designated savings bank account and it had to be always subject to the clearance by the Ministry of Home Affairs.