Research ArticleConstitutional Law

A Drastic Evolution Of The FCRA ACT Through Its Amendment


Author: Abhyudaya Chandra, BBA.LLB(H.) 3rd Year student at Amity University, Madhya Pradesh.

Abstract

The Foreign Contribution (Regulations) Act, 2010 is an act of The Parliament. The main aim of the act is to manage the foreign contribution made to individuals, associations or companies in India. And to prevent misuse of funds, strengthen national security and increase transparency, the government feels the need for some changes to the 2010 FCRA law. Key Points the amendment includes, that certain persons are prohibited to take foreign contributions, compulsory registration is required to accept foreign contribution, for registration Aadhar card number is must. Will the recent amendment for non-profits backfire or is it going to change the style of fundings for non-profits ?

Introduction

With the new corrections to the Foreign Contribution (Regulation) Act, 2010, the Government has made it troublesome regarding consistency for non-benefit associations to get to foriegn funding. In this research paper, we will take a look at the historical backdrop of the Foreign Contribution (Regulation) Act (FCRA) since its origin in 1976 and through its different amendments.

The original Foreign Contribution (Regulation) Act (FCRA) enacted in 1976 by the Indira Gandhi – led government during the time of emergency. The FCRA, upheld by the Ministry of Home Affairs (MHA), coordinates the inflow of new fundings or help to the country.The ostensible justification given for the law was to curb foreign interference in domestic politics. This was the Cold War era, when both the Soviets and the Americans meddled in the internal affairs of post-colonial nations to secure their strategic interests. Amid suspicions of the ubiquitous ‘foreign hand’ stoking domestic turbulence, the FCRA was aimed at preventing political parties from accepting contributions from foreign sources[1].

The aim behind the Act was to keep unfamiliar associations from affecting social, political, financial, or potentially strict conversations in the country. For that reason, the Act denies certain people and associations from tolerating any unfamiliar commitment, which incorporates ideological groups, government workers, print or visual news sources, etc. The 1976 Act permitted non-benefit associations to get foriegn donations, but they needed to submit a yearly report about the sum they got and spent.

In 1984, the law was altered to make it required for non-benefit associations to enlist prior to accepting any unfamiliar gifts. They could likewise not exchange that cash to other non-benefits who were not enlisted under the Act. After the progressions achieved by the 1984 revisions, the FCRA Act came to be seen as a law zeroing in on non-benefit associations with unfamiliar commitments.

In 2010, the 1976 Act was revoked and supplanted by Foreign Contribution (Regulation) Act, 2010 alongside the Foreign Contribution (Regulation) Rules, 2011.

The motivation behind the 2010 Act, as its preface determines, was to:

Regulate the acknowledgment and use of “unfamiliar commitment or unfamiliar friendliness” by specific people or affiliations or organizations.

Prohibit such acknowledgment and use for any exercises negative to the public interest.

The parliament affirmed a revision in 2018 that changed the meaning of the expression “unfamiliar source” and made unfamiliar financing to ideological groups legitimate reflectively.

Presentation of the 2010 Act

Comprehensively, the 2010 Act presented the accompanying key changes that render the 2010 Act more tough than the 1976 one:

a) Under the 2010 Act, FCRA enrollment is legitimate for a very long time and should be recharged from that point, while under the 1976 Act it was a perpetual enlistment.

b) Under the 2010 Act, just half of the unfamiliar commitments could be used for regulatory costs, though no such explicit limitation existed under the 1976 Act.

The recent Amendments to Foreign Contributions (Ordinance) of 2020 was introduced at the Lok Sabha on 20 September 2020.The law amends the Law on Foreign Contributions (Ordinance) of 2010. The law regulates the receipt and use of foreign contributions from individuals, associations and companies. Foreign participation is a donation or transfer of currency, collateral, or goods (above a certain value) from a foreign source. All these NGOs must register with the FCRA. Initial registration is valid for five years and can be extended later if all standards are met. Registered associations can receive foreign contributions for social, educational, religious, economic and cultural purposes. Filing for annual income tax returns is mandatory. In 2015, the MHA announced new rules requiring NGOs to accept foreign funds that must not jeopardize India’s sovereignty and integrity or undermine friendly relations with foreign countries or disturb general harmony. He also said that all these NGOs need to have accounts at national or private banks that have basic banking facilities to provide real-time access to security agencies. The purpose of the bill is to “strengthen compliance mechanisms, increase transparency and accountability in the receipt and use of foreign contributions, and promote native non-governmental organizations or associations working for the good of society”.

With current government allocations, laws have now been introduced to tighten over-regulated laws, which can have some negative consequences for the not-for-profit sector. Some critics argue that the bill is not intended to improve existing legislation, but to regulate and bureaucratize India’s non-profit eece ecosystem.

Salient Features of FCRA

(a) Part 3 (1) (c) of the Ordinance has been amended to include “officers” within its scope.

to ensure that no civil servant accepts foreign contributions;

(b) Amended in Section 7 of the Law which prohibits the transfer of foreign ownership to anyone

Associations / people.

(c) Article 8 (1) The law is amended to reduce administrative fraud limits

The “fifty percent” fee is there. up to “twenty percent”.

(d) A new Section 12A has been added which authorizes the central government to make motions Aadhaar et al. Number, as identification;

(e) A new Article 14A has been added to allow the central government to empower anyone

to submit a certificate issued in accordance with the law;

(f) Section 17 of the Act has been amended to ensure that whoever accepts

Only foreign contributions will receive a certificate or prior approval in accordance with Section 12 on an account defined as “FCRA Account”, which he opened on that account

through the State Bank of India branch in New Delhi, as can be done by the central government

Notices, Specifications, and Other Related Issues.[2]

1.Prohibition to accept foreign contribution:- According to this act there are some people who cannot accept and are prohibited to accept any foriegn donation. Like election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties, among others. If a person who accepts foreign donations is found guilty of violating the provisions of the Foreign Contribution Act (1976), foreign donations that are not used or received can be used or accepted only with the prior approval of the central government. The bill adds that the government can limit the use of unused foreign contributions to those who have previously been granted permission to receive such contributions. This can happen if, based on a comprehensive investigation and awaiting further investigation, the government believes that the person has broken the law.

2. Aadhar for registration: The law states that a person can accept a foreign contribution if they:(i) have received a registration certificate from the central government, or (ii) are not registered but have previously received government permission to accept foreign presence. Anyone requesting registration (or extension of such registration) or prior authorization to receive foreign donations must apply to the central government in the prescribed manner. The bill adds that anyone seeking prior authorization, registration or renewal of registration must provide an Aadhaar number to a key employee, director or employee as identification. In the case of foreigners, they must provide a copy of the passport or card to Indian nationals abroad for identification[3].

Suspension of Registration: Currently, an organization’s FCRA registration may be suspended for a period of not more than one hundred and eighty days, as specified, in violation of FCRA rules.

The bill proposes to change this to “one hundred and eighty days or an additional period not exceeding one hundred and eighty days as prescribed”.

This amendment entitles the MHA to suspend the organization’s FCRA registration for more than six months. This amendment entitles the MHA to suspend the organization’s FCRA registration for more than six months.

3. FCRA Account: According to the law, registered persons can only receive foreign deposits at bank branches designated by them. However, you can open more accounts with other banks to absorb deposits. The draft law changes this so that foreign donations may only be deposited into accounts that the bank has identified as “FCRA accounts” at the Bank Negara India branch in New Delhi notified by the central government. No funds other than foreign contributions can be received or deposited into this account. Individuals can open another FCRA account with the bank of their choice to deposit or use the installments received.

Mandatory opening of a FCRA bank account at State Bank Of India, Delhi

The law amends Part 17 of the FCRA to require foreign donors to receive this amount only in an account known as an “FCRA Account” which is opened at the State Bank Of India branch of New Delhi. However, this gives the recipient flexibility to open another FCRA account with one of the designated banks in India to maintain or use offshore contributions received from their FCRA account with India’s Branch State Bank in New Delhi. Under the existing section 17 of the FCRA, international contributors are entitled to international contributions to FCRA accounts that have been opened with the respective designated banks.

The changes appear to be aimed at centralizing the flow of foreign deposits to banks, making it easier for the government to monitor and track funds received under the FCRA. However, it can also create logistical difficulties and constraints and add to the costs of major NGOs in India, many of which are based in remote areas.

Transfer of foreign contribution: Under the Act, foreign contribution cannot be transferred to any other person unless such person is also registered to accept foreign contribution (or has obtained prior permission under the Act to obtain foreign contribution). The Bill amends this to prohibit the transfer of foreign contribution to any other person. The term ‘person’ under the Act includes an individual, an association, or a registered company.

Another way to obtain foreign contributions is to apply for prior approval. It’s given to receive a certain amount from a particular donor to carry out a specific activity or project. However, associations must be registered under laws such as the Companies Registration Act 1860, Indian Trust Act 1882, or section 25 of Companies Act, 1956. A committee letter from a foreign donor stating the amount and purpose is also mandatory. In 2017, the MHA suspended the FCRA of the Public Health Foundation of India (PHFI), one of India’s largest health groups, arguing it was using “foreign funds” to attract lawmakers to tobacco control activities.

4. Inclusion of Public Servant:The bill proposes adding the category of civil servants to the list of persons prohibited from accepting foreign contributions under Part 3 (1) (c) of the 2010 FCRA. The 2010 FCRA prohibits “officials” from accepting foreign contributions. However, the draft law aims to include a broader category of “civil servants” in this prohibition. The interpretation of this term is intended to be derived from the definition in Section 21 of the Indian Penal Code 1860.

It should be noted here that the terms “civil servants” and “civil servants” look the same, but are different. Whereas “civil servant” means people who work for the government through the public service or post office and are employed by the government, “civil servants” have a broader meaning. Civil servants also include all people who work in the social and social welfare sector to strengthen the functions of the state, such as: B. a judge or arbitrator. Civil servants can be anyone who works or is on the government or state payroll, or who is paid by the government or the state to carry out their public duties.

In addition, Parliament failed to explain the reasons for prohibiting civil servants from working with non-profit organizations. Previous civil service participation has enhanced the non-profit service as it provides a platform for professionals, academics, technocrats and future citizens of all backgrounds to contribute to development goals.

The FCRA 2010 as a statutory regulation must regulate, not prohibit.The bill does not explain how prohibiting civil servants from collaborating with non-profit organizations would be in the public interest.

A comparable move seems, by all accounts, to be an endeavor to fill a hole made on account of the FCRA repudiation of senior lawyer Ms. Indira Jaising and LSM Anand Grover Lawyers Collective in 2016. Ms. Jaising asserted the prohibition on tolerating unfamiliar commitments under the 2010 FCRA stretches out to “government employees” while he is “government workers”. Subsequently, the limitations on getting unfamiliar commitments can’t be reached out to “authorities”. Notwithstanding, after this bill was embraced, such contrasts could presently don’t be justified4. The Bombay Supreme Court5 has given Indira Jaising and a group of attorneys with impermanent help from the Central Bureau of Investigation (“CBI”) “coercive measures” and mandates that permit resources be suspended under FCRA6 remain. Nonetheless, the association’s FC account hold has not been lifted. CBI has tested this choice in Apex Court and the matter has been delayed[4].

5. Reduction in Administration Cost: The FCRA 1976 didn’t put any limitation on the use of the foriegn donations got and individuals or associations can dedicate as much of their foreign funds for administrative purposes.The 2010 FCRA then establishes a threshold of 50% foreign funds received for administrative purposes of absorption, which limits the individual / association’s assessment of such absorption. The bill further reduces flexibility and reduces this threshold by up to 20%. This has had a detrimental effect on research institutes, think tanks and advocacy organizations that rely on these funds to cover their administrative costs.

Administrative costs are an important determinant of managing a non-profit organization because they include salary costs, on-site transportation costs, field fees for experts, and similar costs. Hence, the reduced percentage made it difficult for these specialists to participate. This can lead to decreased talent acquisition and human resource retention in the not-for-profit sector. In addition, limiting administrative costs will also prevent nonprofits from allocating costs for field-based projects or project monitoring and evaluation work, and nonprofits will feel discouraged and limited in expanding their reach.

6. More Extensive Powers of Central Government: The Vide Amendment Part 11 of the bill aims to give greater authority to the central government to decide which types of organizations are no longer allowed to accept foreign donations. This regulation authorizes the central government to suspend the use of foreign contributions received but not used by the organization if, after receiving the information or report and conducting a comprehensive investigation, it is believed that the organization has violated the provisions of the FCRA. The central government can suspend the use of other foreign contributions and further prohibit the receipt of additional foreign contributions from that organization. Previously, such powers were only available if the individual / association was “found guilty” of violating the FCRA[5].

7. Inspections and Seizures: The central government has the power to inspect and confiscate accounts and records if there is reason to believe that any provision in this law or other currency laws has been violated. The central government may confiscate and / or confiscate objects, currencies or securities in connection with violations of the provisions of this law.

Confiscated records and accounts must be released if no legal proceedings are initiated within six months from the date of the foreclosure[6].

A person who is convicted more than once for an offense involving the acceptance or use of FC is prohibited from using the FC for a period of 5 years.

Anyone convicted of a FC crime related to an item, currency or security will be fined up to five times the value of that item or currency or ₹ 1,000, whichever is greater. If the goods or currency are not available for confiscation. It is now possible to unite certain evils.

8. FC detention in case of deletion of the registration certificate: If the Certificate of Registration is revoked, the unused FC held in the specified bank account will be available to the relevant banking authority pending additional instructions from the central government.

If a person to whom the certificate was issued does not exist or no longer exists, that person’s property will be disposed of in accordance with legal provisions at the time of registration or registration of that person.

9. FC more than one rupee rupee during the fiscal year: Anyone who receives FC more than one kroner per fiscal year is required to keep public summary information about FC revenue and usage for the receiving year and subsequent years. The central government also posts this summary on its website[7].

Conclusion:- There could be a little disagreement with the government’s expressed object of the bill to fortify consistent systems, responsibility and to work with certifiable NGO’s. However it’s not been clear how the government is going to achieve the object. For example: one of the Bills’ objectives is stated to be to deal with non-compliance cited by the government is non-filing of annual returns and non- maintenance of accounts. However none of the changes seem to handle these changes. On another hand, as discussed above a number of amendments seem to have no experience of the bills object[8].

The NGO area is now vigorously directed and global givers think that it’s hard to make awards in India. In the years ahead this may become much more awkward in the light of correction due to the amendment. In the current situation when we need funds for covid 19 related relief activities. These progressions could end up being counter-productive. And non-profits have regularly been viewed as enhancing the holes left by the government even in the current situation like covid-19. Instead of strengthening the positions of the NGO’s the amendment can also additionally result in reducing their exercise.

The growth in the number of NGOs and the level of foreign contributions received over the years has shifted the role of government from “regulator” to “controller”. The proposed law will facilitate better compliance by NGOs by using foreign contributions only for real and development activities.


REFEERENCES

  1. Verma A. , The history of FCRA and the trends in FCRA registration cancellations( feb 22, 2021 ) https://factly.in/the-history-of-fcra-and-the-trends-in-fcra-registration-cancellations/
  2. https://www.icsi.edu/media/webmodules/Foreign_Contribution_Regulation_Amendment_Act_2020.pdf
  3. https://prsindia.org/billtrack/the-foreign-contribution-regulation-amendment-bill-2020
  4. Nishith Desai, FCRA PROVISIONS FURTHER TIGHTENED, NON-PROFITS TO FACE INCREASED GOVERNMENT SCRUTINY(sept.25, 2020)https://nishithdesai.com/information/news-storage/news-details/article/fcra-provisions-further-tightened-non-profits-to-face-increased-government-scrutiny.html
  5. Nishith Desai, FCRA PROVISIONS FURTHER TIGHTENED, NON-PROFITS TO FACE INCREASED GOVERNMENT SCRUTINY(sept.25, 2020)https://nishithdesai.com/information/news-storage/news-details/article/fcra-provisions-further-tightened-non-profits-to-face-increased-government-scrutiny.html
  6. https://www.bcasonline.org/Referencer2015-16/Other%20Laws/foreign_contribution_regulation_act_2010.html
  7. https://www.bcasonline.org/Referencer2015-16/Other%20Laws/foreign_contribution_regulation_act_2010.html
  8. Pranav Srivastava & Aashna Kothiyal, Foreign Contribution (Regulation) Amendment Bill, 2020: A Few Hits And Many Misses(sept.28, 2020)https://www.mondaq.com/india/constitutional-administrative-law/988998/foreign-contribution-regulation-amendment-bill-2020-a-few-hits-and-many-misses

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