'No Reasonable Opportunity Of Being Heard': Plea In Andhra Pradesh HC Challenges Provisions Relating To Cancellation Of FCRA Certificate

The petition seeks declaration that Sections 14(1) (d), 14(3) and 15 of Foreign Contribution Regulation Act, 2010 and Rule 15 of the Foreign Contribution Regulation Rules, 2011 are ultra vires Articles 14, 19 and 21 of the Constitution and consequently for quashing of the aforementioned provisions as null and void.

The plea also challenges the circular issued by the Union Ministry of Home Affairs dated 18.10.2019 which cancelled petitioner's FCRA registration certificate under Section 14, for not filing returns for F.Y. 2017-18 without granting reasonable opportunity to be heard.

It is averred that the petitioner has been penalized due to inadvertently failing to file the returns for F.Y. 2017-18 and despite it having paid a penalty of Rs. 1,98,798/-, filing the missing returns and re-registering in accordance with Union Ministry of Home Affairs Scheme, its application for re-registration was rejected. Further it is stated that due to the cancellation, the Petitioner cannot accept or use foreign contribution for its charitable activities as its bank account has been freezed.

Brief Facts

The Petitioner is a charitable society, registered in Andhra Pradesh since 1993. It claims to be reliant on foreign contributions to carry out its activities, including employing its staff, supporting the needs of communities through charitable work and providing relief during this unprecedented COVID-19.

The Foreign Contribution Registration Act, as amended in 2010, regulates the acceptance and utilization of foreign contribution. Section 11 of the FCRA provides that no person having definite cultural, economic, educational, religious, or social programme shall accept foreign contribution unless it obtains a certificate of registration from Government.

Section 18 of FCRA read with Rule 17 of FCRA Rules prescribes that every person who has been granted a certificate shall give an intimation in the form of Annual Return to the Government about the amount of foreign contribution received by it, its source, and the purpose for which and manner in which such Foreign Contribution was utilized for every financial year. Such return is to be filed within nine months of the closure of financial year.

The Petitioner had valid FCRA registration certificate since 2003. However, the FCRA registration of the Petitioner society and 1807 other such NGOs stood cancelled via notice dated 18.10.2019 due to non-filing of Annual returns for F.Y. 2017-18.

Challenged provisions of FCRA

Section 14(1) of FCRA states that a certificate issued may be cancelled by the Government for various grounds. One of the grounds under clause (d) is "holder of the certificate has violated any of the provisions of this Act or rules or order made thereunder."

Section 14(3) reads that "any person whose certificate has been cancelled under this section shall not be eligible for registration or grant of prior permission for a period of three years from the date of cancellation of such certificate."

Section 15 of FCRA deals with the management of foreign contribution of person whose certificate has been cancelled. The foreign contribution of persons whose certificate has been cancelled may vest in such authority as prescribed by the central government. The provision also grants the prescribed authority the power to manage activities of the person whose certificate has been cancelled.

Rule 15 of FCR Rules, 2011 reads that "if the certificate of registration of a person who has opened a FCRA Account under Section 17 is cancelled, the amount of foreign contribution lying unutilized in that Account shall vest with the prescribed authority under the Act."

Grounds of constitutional challenge raised by the Petitioner in Writ Petition

The Petitioner contends that no reasonable opportunity of being heard was granted and it had received no prior information before cancellation. The concerned Bank informed the Petitioner in October 2019 that its account for receiving foreign funds has been attached and became non-operational meaning the funds from Foreign Contribution cannot be used by the Petitioner.

The Union Ministry had released a public notice that a few organizations including Petitioner's will be given a "one-time exception" from Section 14(3) if the organizations uploaded the missing returns, paid the prescribed penalty and submitted their application for re-registration.

The Petitioner Society took immediate steps to file its missing income tax returns and paid a penalty. However, due to lockdown caused by COVID 19 pandemic, the Petitioner was unable to collect all requisite material for re-registration within the deadline. It preferred its online application with a delay of 37 days from the deadline. But the Union Ministry rejected the application and employed Section 14(3) of FCRA to continue with the cancellation of Petitioner's certificate.

The Petitioner has alleged that cancellation of certificate has been done without any opportunity to be heard.

The Petitioner contends that Sections 14(1) (d), 14(3) and 15 of Foreign Contribution Regulation Act, 2010 and Rule 15 of the Foreign Contribution Regulation Rules, 2011 are prohibitory in nature and bestows un-canalized discretionary powers upon the Government without any fetters and guiding principles.

Sections 14(1) (d) suffers from vice of arbitrariness by virtue of being vague and overbroad. It is argued that in order to not be vague a law must be such that those governed by it understand what conduct is prohibited and what is permitted. It leaves certificate holders at the whims and mercy of the executive as they may cancel the certificates for any minor infarction of the law including procedural irregularities. It gives unfettered discretionary powers to the executive and provide scope for selective interpretation of law.

For something as minor as a mistake in uploading annual returns, organizations like petitioners are now ineligible for registration for three years, it is averred.

The submission is that the impugned provisions of FCRA violate right to freedom of speech and expression [19(1)(a)], right to form associations [19(1)(c)], right of charitable persons to carry on occupation [19(1)(g)], right to non-arbitrariness state action [Article 14], right to fair, just, and reasonable procedure established by law [Article 21].

The Respondent submitted in their Counter Affidavit that all the defaulting organizations and NGOs including Petitioner were informed about the non-filing of Annual Returns by sending emails as well as SMSs through FCRA online portal on the registered email ids and phone numbers.

The Respondent submitted that Petitioner is granted certificate under the provisions of the FCRA, 2010 and it is binding/obligated upon it to follow rules and regulations of the Act in letter and spirit. Despite providing reasonable opportunities, the Respondent contends that Petitioners failed to comply with the Rules.