Firstpost: New Delhi: Tuesday,
January 17, 2017.
The Supreme
Court, on 11 January, passed an order directing the government to audit about
30 lakh non-governmental organisations (NGOs) and voluntary organisations that
receive public funds, but have invariably failed to explain their spending. The
order directs the government and the government agency, Council for Advancement
of People’s Action and Rural Technology (CAPART) to begin with an audit
process, and initiate proceedings to recover these funds from them, in case
there was misappropriation. CAPART is an autonomous body under the Rural
Development Ministry. The next date of hearing is 5 April when the government
has to present its statutory framework and guidelines for action.
The Supreme
Court order came in as a response to a public interest litigation (PIL) filed
by advocate Manohar Lal Sharma in 2011 at the height of the anti-corruption
movement. The PIL sought a tab on the functioning of NGOs. A Bench of Chief
Justice of India JS Khehar and Justices DY Chandrachud and NV Ramana passed the
order, stating that a mere blacklisting of NGOs that do not file annual
statements is not an adequate measure, and actions for criminal proceedings for
misappropriation and civil action for recovery of monies should also be
considered as a part the audit proceedings. The Bench has also demanded that
the government file a compliance report by 31 March 2017. The PIL by Sharma
argued that NGOs were given funds worth crores but the government has no
transparent mechanisms in place to monitor the spending of these public funds.
The judicial
order states - “It seems the respondents ( government and its various
ministries and wings) are not aware of the responsibility of audit despite
General Financial Rules 2005 meant for such organisations. Keeping this in view
we direct to complete the process of audit of all NGOs by 31 March 2017 and
submit the report to this court.”
A Central
Bureau of Investigation (CBI) report that compiled state-wise data of 32 lakh
NGOs revealed that only 10 percent of NGOs filed annual income and expenditure
statements.According to an RTI query by Asian Centre for Human Rights, between
2002 and 2009, the Centre had granted Rs. 4756 crore and the state governments
released Rs 6654 crore to various NGOs. However, there is no statutory
provision to regulate the NGOs, and therefore, in essence, no ombudsman
mechanism to put checks and balances on the spending of these organisations.
In September
2016, in a hearing of the same case, the then Chief Justice of India TS Thakur
along with Justice AM Khanwilkar, had stated that creating an NGO and running
it is not very regulated activity. CJI Thakur had suggested - “What is an NGO?
Anyone can register a society and it becomes an NGO... There is no legal brain
work done at the Central level to control them. Unless some mechanism is put in
place centrally, nothing can be done... retired government employees and
politicians run these NGOs drawing on their influence.” A possibility for
passing the buck to the Law Commission for framing of an effective law to
monitor the flow and use of state monies had been considered.
The Supreme
Court’s readiness to question the government’s lack of accountability in
monitoring and regulating NGO spending is unparalleled as the court has, in
agreement with amicus curiae, Rakesh Dwivedi also directed the government to
lay down guidelines for their accreditation, and devise and implement a
functional accounting strategy, along with a procedure for recovery in the
event that the NGOs fail to submit their balance sheets and certificate of
utilisation of funds. “There can be no doubt that the amount disbursed is
public money and needs to be accounted for", the Bench has declared.
In India,
not-for-profits ideally can be registered under three main laws the Societies
Registration Act, 1860, the Trust Act and section 8 of the Companies Act, 2013.
A plethora of organisations such as hospitals, religious organisations,
resident welfare associations, clubs and educational institutions may be
registered as a not-for-profit under one of these Acts. Inherently, there is a
definite lacuna with how the term ‘NGO’ remains rather subjective. For a
majority of people, an NGO would be an organisation that works around social
development issues; however, legally, the scope of the term is too broad and
generic, and does not set adequate boundaries to classify such organisations.
It is, therefore, significant for the government to have a tool to differentiate
between various types of organisations in order to set up a functional
monitoring and regulatory system. Moreover, for an audit this extensive, and
for so many NGOs, will be an expensive affair, both for the government as well
as the organisations, and neither the apex court nor the Central government in
general have given a clear thought on the finances for implementation and
quality control of this process.
Since 2014,
civil society organisations, including NGOs, have been continually under the
government radar. Moreover, about 10,000 NGOs had their licenses revoked to
receive foreign funds under the Foreign Contributions Regulations Act (FCRA),
thereby, impeding their work on a number of social issues such a health,
environment and human rights. The Lokpal Bill also brings top officials and
executives of local and foreign-funded NGOs under its ambit as ‘public
servants’.
The NGO
community, therefore, is still divided on the impact and implications of the
judicial order. Despite this, the court order has received some praise as it
will help distinguish between the various entities that are registered as
not-for-profits, but their functioning may be spurious. At this point, the fate
of NGOs are enmeshed in a number of cross-cutting legislations the FCRA and the
Lokpal Bill and this judicial order provides for another layer of quality
control when it comes to governing the issues of NGO management vis-a-vis funds
and legal compliance. But it seems like a deliberate attempt by the State to
target NGOs and de-legitimise their purpose of providing checks and balances on
the government and the protection of human rights and an open society.
.JPG)
.JPG)
