Delhi High Court Upholds Validity Of Centre's 2013 Notification For Compounding Offences Before Institution Of Prosecution Under FCRA

The Delhi High Court has upheld the validity of Ministry of Home Affairs' notification dated April 26, 2013 specifying the officers competent for compounding the offences before institution of any prosecution, issued under sec. 41(1) of the Foreign Contribution (Regulation) Act, 2010.

The said provision states that any offence punishable under the FCRA Act, not being an offence punishable with imprisonment only, may, before the institution of any prosecution, be compounded by such officers or authorities and for such sums as the Central Government may specify in a notification in the Official Gazette.

A division bench comprising of Justice Vibhu Bakhru and Justice Amit Mahajan was of the view that the impugned notification was issued by the Central Government in exercise of powers under sec. 41 of the FCRA and the same did not fall foul of any provision of the Act.

"We are unable to accept that the impugned notification is ultra vires to the Constitution of India. It merely stipulates the terms on which given offences can be compounded," the Court said.

The Court was dealing with a plea filed by Mizpah Charitable Trust claiming that the impugned notification was ultra vires of the provisions of the FCR Act.

In addition, the plea also challenged an order issued by the Centre, whereby the petitioner was advised to pay a penalty of Rs. 11,78,260 for compounding the offence of delay in filing of the annual returns under the FCR Act, for the financial years 2009-10, 2010-11 and 2011-12.

It was the petitioner's case that the delay in filing an annual return is not an offence punishable under the FCRA, adding that since the Act came into effect on May 1, 2011, the same cannot be applied to impute commission of an offence prior to that date.

The petitioner's challenge to the impugned notification was thus based on two assumptions: first, that the delay in filing the return is not an offence under the FCRA and second, that the impugned notification, in substance, creates an offence with retrospective effect.

Rejecting the argument that non-filing of an annual return within the prescribed time is not an offence under FCRA, the Court said that sec. 18 of the Act mandates that every person, who has been granted a Certificate of Registration or prior approval under the Act, shall file an intimation to the Central Government disclosing as to the amount of foreign contribution received, the source from which and the manner in which the foreign exchange was received, and the purpose for which and the manner in which the same was utilized.

"It is clear from the above that the petitioner was required to furnish the annual returns in Form FC-6 along with its final accounts (income and expenditure statement, receipt and payment account and balance sheet) within nine months of the end of the relevant financial year. Therefore, the petitioner was required to file the annual return for the financial year ending on 31st March of any year on or before 31st December of that year. There is no ambiguity that the petitioner was required to file the annual returns within the prescribed period in compliance with the provisions of the FCR Act," the Court said.

The Court further observed that heading of a section of an enactment may be used as an aid for interpretation of that section but does not control the meaning or import of the section where the language of the section is free from ambiguity.

In this backdrop, the Court rejected the petitioner's argument that delay in filing of the annual return under the FCRA is not an offence.

"It is relevant to note that the FCR Act and FCR Rules came into force with effect from 01.05.2011. Failure to file annual returns in terms of Rule 17 of the FCR Rules prior to 01.05.2011 cannot be construed as an offence under the FCR Act. Clearly, the petitioner could not be held guilty of an offence of not filing the returns under the FCR Act, prior to it coming into force," the Court observed.

Noting that petitioner's obligation to file the annual return for the financial year 2010-11 had arisen on May 1, 2011 and the same was required to be filed before December 31, 2011, the Bench opined that the failure to do so was a failure to comply with the provisions of the FCRA.

"This does not amount to imputing any act committed prior to the FCR Act coming into force as an offence under the said Act," the Court said.

Accordingly the Court set aside the impugned order to the extent that it stipulated payment of penalty for the delay in filing the annual return for the financial year 2009-10.

"Before concluding, it would also be relevant to clarify that the impugned order enables the petitioner to compound the offence of non- filing of the annual return within the stipulated time. However, the petitioner is not compelled to pay the penalty and apply for compounding of the offences, if he does not wish to do so. The only consequence of not availing the opportunity to compound the offence is to run the risk of prosecution that may be instituted," the Court said.

The plea was accordingly disposed of.

Case Title: MIZPAH CHARITABLE TRUST v. UNION OF INDIA

Citation: 2022 LiveLaw (Del) 874

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