'You Are Discouraging NGO Activities' : Supreme Court Tells Centre On FCRA Amendments

The Supreme Court on Thursday(October 28) orally observed that the impact of the Foreign Contributions Regulation (Amendment) Act 2020 will be the discouragement of NGO activities.

A bench comprising Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar was hearing petitions challenging the constitutional validity of FCRA amendments. The bench noted that the amendments imposed an absolute prohibition on the NGOs from transferring the foreign contributions to other entities.

"The NGO is registered, complying with all requirements. Now under old regime he could transfer it to such NGO which is registered. Now the effect is that...transfer even if it promotes the permitted activity, the NGO can't transfer to other", Justice Khanwilkar noted.

Additional Solicitor General Sanjay Jain, representing the Union, submitted that "the main purpose of an NGO is utilisation" and not transfer of funds.  The ASG argued that the amendment doesn't in any manner curtail or prohibit legitimate utilisation for the objective of trust; what is prohibited is outsourcing of corpus.

"We are ensuring that the NGO is resourcing the money for its own utilisation and is not acting as a nodal agency", the ASG said.

ASG submitted that the transfer as they understand is an expression used in contra distinction to utilisation. If a NGO engaged in Housing actually has to transfer funds to construction company, it is a utilisation as distinct from transfer, it is a utilisation towards attainment of its own objectives. The transfer would be when a NGO receives foreign contribution and then without applying it to its own utilisation, it transfers it to some other person or an entity, which was earlier permissible to a limited extent as is stated in later part of erstwhile section 7, which has now been withdrawn.

But the bench pointed out that the transfer is a very wide term, hinting that even transfer for the purposes of the NGO could also get prohibited.

Justice Maheshwari pointed out "transfer is a very wide term".

The bench pointed out there could be NGOs with the objective of funding subsidiary NGOs, and asked why such transfer is prohibited.

"If the objective of NGO is to finance other NGO or subsidiary NGOs or Independent NGOs, it could transfer earlier now it is completely prohibited. You can use it only for your own activity?", the bench asked.

"Yes you can only use it for your own activity. You have to utilise for your own objective" ASG said.

"What if it is one of my objective as a NGO? I may fund other NGO who are doing the same job. That is one of my activity. You say even that activity cannot be done now. Whether it'll be permissible or not?", Justice Khanwilkar asked.

The bench also observed that there could be foreign donors, who may not be wanting to deal with multiple organizations in India, and want to contribute to one organization for distribution to other organizations across the country.

ASG responded to the Court's query saying that "If a NGO is interested in doing this financing it can through money it received through domestic contribution. It can do it through domestic funds, received through domestic and non-foreign contribution route. "

"If at all particular NGO is interested in reaching other NGO in other states and it wants to help it, nothing prevents it from undertaking it as activity if its own objectives permit it." ASG said

"A donor can't determine legal mechanisms of donee country" he added.

"You're discouraging NGO activity in the process. It will result in that", the Bench said.

ASG submitted that "We want there should be proper utilisation of foreign contributions received for purposes which are allowed purposes. If this kind of transfer of corpus are permitted from one organisation to other, when one organisation is not in control of day to day affairs of another organisation it will lead to a perverted situation."

The matter will be next heard on November 9th. 

Petitioners' arguments : FCRA Amendments Impose Blanket Restrictions, Disproportionate & Harsh : Petitioners Argue Before Supreme Court

Centre's Counter-affidavit : FCRA Amendments Aim To Prevent Foreign Powers Interfering With Internal Polity, Diversion Of Funds By NGO : Centre Tells Supreme Court

Details Of Petitions: The writ petitions, Noel Harper and others v. Union of India and Jeevan Jyothi Charitable Trust and others v. Union of India have challenged the amendments saying that they have imposed harsh and excessive restrictions on the NGOs in utilizing foreign funds.

 Click Here To Read/Download The Order