Writ Petition (Civil) Nos. 566, 634, and 751 of 2021
FACTS
- In 1997, Noel Harper and Carol Faison established “The Care and Share Charitable Trust” in Vijayawada, India. The trust is registered with both the Income Tax authorities and the Ministry of Home Affairs of the Indian government. It is also certified under the Foreign Contribution (Regulation) Act (FCRA) 1976 to receive foreign funds.
- Noel Harper and Nigel Mills are some of the trustees. As the trust engaged in upliftment of society by lending a hand to poors, or childrens of individuals in the sex work industry, physically challenged kids, orphan childrens, babies who have been left without parental care or babies in need of care and support and also providing support and assistance to young individuals/juveniles.
- The Trust has set up and runs more than nine schools in different slum areas. and rescued over 1,000 kids and 165 infants adding to it, Also Since 2000, the Trust has run a daily milk program for 500 kindergarten children. In addition to this the trust is involved in facilitating the rehabilitation and reintegration of migratory laborers in collaboration with the International Labour Organisation (ILO), while addressing the issues faced by women from underserved or marginalized community, families of migrant workers, returnees, organizations advocating for women’s rights, trade unions, panchayats, departments, and other entities connected with labor, administration and governance. The Trust was also awarded with the National Award for Children’s Welfare by the Ministry in 2007.
- Petitioners number three and four are also amongst the trustees Additionally, registered under the Indian Trusts Act, 1882.
- In 2020, the union government introduced stricter regulations on the Foreign Contribution Regulation Act through various amendments. These amendments further imposed limits on who could receive foreign contributions, how organizations could use these contributions, and whether they could be transferred to other individuals or organizations.
- The abovementioned trusts are heavily dependant on foreign contributions for daily expenses But under 2020 amendments it resulted in cancellation of the Trust’s certificate that allowed it to utilize funds for activities. Additionally, the “FCRA Account” is also barred from receiving foreign contributions.
ISSUES RAISED
Moreover, Some of the Non-Governmental Organisations (NGOs) questioned the constitutional validity to the FCRA Act 2010 vide the FCRA Amendment Act 2020. particularly sections 7, 12A, 12(1a) and 17(1) being manifestly arbitrary, unjustified, and violating fundamental rights to Non-Governmental Organisations under Articles 14,19, 21 of The Constitution.
CONTENTION-
Petitioner arguments- The 17(section) of the FCRA is violative of the Article14, 19(1c), 19(1g), and 21 of the Constitution. This process necessitates the establishment of a primary Foreign Contribution Regulation Act (FCRA) account, which must be specifically opened only at the State Bank of India (SBI), New Delhi Main Branch (NDMB). The amendment to that of Section 7 prohibited already registered entities to transfer any contributions, regardless of their registration status. This change, which was allowed under the previous provision is viewed as arbitrary and negatively impacting the trust’s ability to implement social upliftment programs funded by foreign contributions. Non-profit and voluntary organizations, including the petitioners, Plays a pivotal role to contribute to India’s Gross Domestic Product (GDP) while providing support to the livelihoods of millions by offering direct employment as well as through comprehensive social welfare programs. The validity of section 12(1A) has also been challenged which requires the submission of Aadhaar details for office bearers. as identification document to seek registration and on 17(1) on ground of being unreasonable, discriminatory, and ambiguous. Further they argue that amendment lacks legitimate objective and has disproportionate impact on NGO’s.
Respondent’s arguments- The amendments are designed to implement effective measures which are concerned in accordance of the inflow and use of foreign funds. These changes were prompted by large-scale transfers and a sudden increase in foreign contributions in recent times, which created operational challenges and led to malpractices. To address the misuse of the previous FCRA Act of 2010, Parliament has adopted a more regulated provisions, mandating that foreign contributions to be received through a single channel and used exclusively for the intended purposes. The government responded by explaining that the amended provisions aim to address the ongoing issue of foreign contributions being transferred repeatedly between recipient NGOs and other registered NGOs. This creates a complex trail of funds, making it challenging to track their flow and ensure proper utilization. Also discusses necessity of section 12(A) and noted The inflow of foreign contributions certainly has nearly doubled between 2010 and 2019. Provisions like Section 12A aim to ensure accurate identification of individuals and organizations they are connected with, and to facilitate real-time monitoring of activities to protect national interests. The 2010 FCRA Act prohibits benami and fictitious activities, Meanwhile highlighting the necessity for proper identification during registration to maintain transparency among FCRA/NGO functionaries. Such provisions should satisfy the criteria of having a legitimate aim and passing the proportionality test, also many registered association did not adhere to essential procedures and neglected to follow fundamental formalities leading to the cancellation of certificate of registration which is more than 19000, this indicates gross violation by large number of associations. Also upheld sections 17(1) and 12(1A), the process is neither arbitrary or irrational.
RATIONALE
The purpose of the amended Section 7 is to ensure that the donor (foreign source) is fully informed about the specific purposes for which the recipient has declared and obtained approval from the relevant authority regarding the use of the funds. The funds are to be used solely for these declared purposes and nothing else.
The rationale behind the amendment is rooted in broader public interests, specifically aimed at mitigating potential negative impacts on the economy, public order, sovereignty, and integrity of the country. The need to strictly regulate the inflow of foreign funds and to monitor their use for the intended purposes has been recognized as the key justification for the Amendment Act.
DEFECTS OF LAW
The court dismisses the challenge to Article 14 by accepting the State’s argument without sufficient reasoning or legal justification. The amendment affects the operations of associations by banning sub-transfers and limiting the funds available for administrative purposes. This adverse impact on associations is inconsistent with the principle of equality, regardless of the law’s novel intentions.
The judgment has ignored the principle of proportionality. Reasonable restrictions on freedom of association under Article 19(4) must be evaluated using the test of proportionality. As the Supreme Court highlighted in Justice K.S. Puttaswamy vs Union of India (2017), proportionality is crucial for safeguarding against arbitrary State action.
Regarding the rights to freedom of peaceful assembly and association United Nations Special Rapporteur highlighted It is paradoxical that some states, which criticize foreign-funded associations within their own countries, simultaneously receive significant foreign funding themselves in the form of loans, financing, or development assistance—often in amounts much larger than what civil society organizations (CSOs) in those states receive.
Most NGOs in India are relatively small and focus primarily on community work, often lacking the expertise needed to draft proposals and engage with donors. This provision in the Act threatens to undermine the entire model of providing relief and support to millions of impoverished and ordinary citizens with a single action.
The Court has attempted to balance the right to privacy with national interest. Consequently, the Apex Court’s decision prioritizes state interests and legitimizes Parliament’s actions to implement necessary stringent measures for protection. However, accepting such precedents as blanket law may have adverse sectoral consequences.
INFERENCE
It can be noted from the aforesaid that the legislature and the judiciary are aligned to take concrete steps towards curbing improper utilization of foreign contributions coming into the country by requiring all such foreign contribution to be utilized by the recipient itself. The changes introduced through FCRA Amendments, which now have the Supreme Court’s stamp of approval, have not only made compliances under FCRA more stringent but have also put an end to a very common mode of funding for the NGOs operating in India i.e. sub-granting of foreign contributions received from donors outside India. This has also resulted in radical shift in the functioning of foreign foundations in India, who often relied on sub-granting through their registered organizations in India to pursue and promote their objectives in India.
According to United Nations High Commissioner, the FCRA Amendment is “used to deter or punish NGOs for human rights reporting and advocacy.” It imposes excessive restrictions and burdens on the legitimate work of human rights defenders and activists, placing them in significant jeopardy.
Name- Kiran Jadhav
College- Government Law College, Mumbai