"Not An Absolute Right": Supreme Court Backs Centre On Foreign Funds For NGOs

In a huge relief to the Centre, the Supreme Court today upheld the validity of certain amendments to the provisions of the Foreign Contribution (Regulation) Act, 2010, which came into effect in September 2020, saying "the strict regime had become essential because of the past experience of abuse and misutilisation of foreign contribution."

The court was hearing a petition challenging the amendments saying that they have imposed harsh and excessive restrictions on the NGOs in utilising foreign funds.

New terms will now apply to receipt and use of foreign donations by NGOs.

"Receiving foreign donation cannot be an absolute or even a vested right," the court said, adding the theory that foreign contribution can influence national polity is globally recognised. 

"Foreign contribution can have a material impact in the matter of socio-economic structure and polity of the country," a bench of Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar said.

The Supreme Court had reserved its judgement on November 9, 2021.

The writ petitions filed by Noel Harper and Jeevan Jyothi Charitable Trust challenged the amendments saying that they have imposed harsh and excessive restrictions on the NGOs in utilizing foreign funds. The other petition filed by Vinay Vinayak Joshi has challenged the extension of time allowed by the Ministry of Home Affairs to NGOs to comply with the new FCRA conditions.

Solicitor General Tushar Mehta had appeared for the Centre and said that the amendments have been made only for better regulation and monitoring of inflow and outflow of foreign funds.

"There may be money coming in for Naxalite activity or to destabilise the country. There are IB inputs also most of the time, at times money coming for development works is used to train Naxalites," Mr Mehta had argued.

The Court in its order said that foreign aid can create the presence of a foreign contributor and influence the policies of the country, and it may tend to influence or impose political ideology

"We find force in the argument that it had become necessary for the Parliament to step in and provide a stringent regime for effectively regulating the inflow and utilisation of foreign contribution," the order said.

Advocate Gopal Sankaranarayanan appeared for the petitioners and questioned the amendment that requires funds to be transferred to only SBI's main branch in Delhi. He said, "They (government) say as long as donations from Timbaktoo to Libya comes to SBI main branch ..from there the fund can be transferred to terrorist organisations etc...in this way how is the avowed objective being met? Their issue is utilisation and not receiving."

"Like Pratham, the NGO involved in child educations funds in several remote parts of the country and they cannot do it now anymore under the amendment. The presumption cannot be that everyone is criminal and somehow most of them are against sovereignty and integrity," Mr Sankaranarayanan had said.

The order today said that the amendments are essentially conceived in the interests of public order and also the general public as the intent is to prevent misuse and misutilisation of foreign contributions coming from foreign sources to safeguard the values of a sovereign democratic republic.

"Half of the administration that has happened in the country during Covid is through the NGOs. This kind of amendment will drive a stake through the way NGOs have been functioning in Independent India," the petitioners had argued.

Justice AM Khanwilkar had then clarified that the intent of the Act is that you receive the foreign exchange for the purpose or cause that has been stated. "If it is for a purpose that has not been disclosed then the government department cannot allow such inflow. You have to ensure that the fund flow meets the intent of the organisation and the FCRA Act," he said.

The Centre had earlier told the court that there is no question of fundamental rights being violated through control of acceptance of foreign contributions by certain types of organisations because these organisations or individuals are always open to operating with locally secured funds and achieve their objectives.