Supreme Court adjourns hearing of NGO’s plea challenging 2020 FCRA amendment, SBI rule

The Supreme Court has adjourned a plea filed by Noel Harper of NGO Care and Share Charitable Trust challenging the amendments to the Foreign Contribution Regulation (Amendment) Act, 2020 and the rule mandating opening of an NGO’s primary account in SBI’s main branch in New Delhi.

The NGO is involved in public service for over 2 decades in different states of India and the petitioners have benefited several thousand street children, children of sex workers, physically challenged kids, shelter orphans, abandoned babies and juveniles though building and running schools, rehabilitation of street children and daily milk programs. They are also awarded with National Award for Child Welfare by the Government of India in 2007. The petitioners are dependent upon foreign contribution to meet their day-to-day expenses.

Senior Advocate Gopal Sankaranarayanan, who appeared on behalf of the NGO, submitted, “Pursuant to the new amendment they have omitted Rule 24 so now there is no procedure for transfer. I would take you to an observation made in 2020 by you when certain rules of FCRA was challenged. We are looking at droughts, floods etc and we at bar have also got to send migrants to their homes. A lot of this money has come from foreign countries. Whenever it’s foreign we look at it from coloured lenses.”

The bench presided by Justice A.M. Khanwilkar and Justice C.T. Ravikumar states, “There is a different in approach when it’s a law made by Parliament. It says I want foreign funds but it has to be gotten like this. Now tell us if the law falls foul of Article 14.”

Relying on the Pegasus judgement yesterday, Sankaranarayanan submitted that, “If national security is applied then the clear restriction is on me. The Supreme Court makes it very clear that Centre cannot get a free pass every time it is raised. They have to satisfy and not me. ‘National security cannot be the bugbear that the judiciary shies away from, by virtue of its mere mentioning’.”

He also questioned the bench, “The Centre is now bound to follow the act. So any miss and a registered entity and I will be prosecuted under the act. If this is not manifestly arbitrary then what is? I think the draftsman made some mistake and they did not want to say this. Now it’s an complete and outright ban. No person who is registered can transfer such foreign contribution. As soon as such prohibition comes into force it becomes an absolute prohibition. Now goods and services are stuck with me even if other person is registered….These organizations have done excellent work all across India and they have never been found to default on any legal provisions existing till before FCRA came into force from 1970 onwards. This is extreme and very harsh.”

The petitioner submitted that in Covid-19 pandemic times when the petitioners are in dire need of foreign aid for better outreach in providing access to necessary resources to the people, the petitioners are unable to effectively dispense with the aid due to the embargo set out under the Foreign Contribution Regulation (Amendment) Act, 2020

The plea challenged Sections 7, 12A, 12(1A) and 17 inserted in the FCRA by the Foreign Contribution (Regulation) Amendment Act, 2020 as ultra vires Articles 14, 19 and 21 of the Constitution of India

What is FCRA?

The Foreign Contribution Regulation Act, 1976 (FCRA) was enacted by Parliament with the sole motive of regulating the receipt and utilization of foreign contribution by any organisation/society registered under the act. The FCRA, 1976 was repealed by the FCRA 2010 which asserted the aim of the law to curtail activities detrimental to the national interest and significantly provided that-

• Foreign contributions could be transferred to third parties with prior approval of Central Government
• A maximum of 10% of the funds received could be transferred to an unregistered entity
• Mandatory registered of entities having definite cultural, economic, educational, religious or social programme who receive foreign contribution
• The FCRA account would be a dedicated one in any branch of a scheduled bank  

Amendment 2020 challenged

Amendment came into effect on 29.09.2020, Parliament has made substantial changes to these essential aspects of the FCRA regime.

• Substitution of Section 7 completely bars the transfer of foreign contributions which means the money is fungible and any transaction from the dedicated FCRA account to any other provider of goods and services within the country stands prohibited.
• Insertion for Section 12A which requires the directors or office bearers of the entity to produce only their Aadhaar as an identification for registration for grant of certificate
• The Amendment also mandates that any applicant shall open an account designated as FCRA Account only in one branch of the State Bank of India at New Delhi to be specified by the Central Government

The petitioner also submitted that the amendments brought through the Foreign contribution Regulation (Amendment) Act, 2020 that no considerable relief work is being undertaken by NGOs and such other entities work is being undertaken by NGOs during pandemic because they don’t have access of funds which they otherwise had.

It was also submitted that the Right to life and liberty under Article 21 does not encompass the right to receive unregulated foreign contributions, the Central government had told the Supreme Court while defending amendments made in 2020 to the Foreign Contribution (Regulation) Act (FCRA)

Further the petitioner NGO prayed for:

• Striking down Section 7, 12A, 12(1A) and 17 inserted in the FCRA, 2010 by Foreign Contribution (Regulation) Amendment Act, 2020

• Directing the respondent not to interfere with the acceptance and utilization of foreign contribution, operation of the existing bank accounts in the scheduled banks

• To quash the public notice dated 13.10.2020 released by Government of India which notifies the main branch of the SBI at Sansad Marg as the nodal branch for FCRA accounts.