Business Today: New Delhi: Tuesday,
February 14, 2017.
The Foreign
Contribution (Regulation) Act, 2010 and rules framed under it (the
"FCRA" or "Act") regulate the receipt and usage of foreign
contribution by non-governmental organisations ("NGOs") in India.
NGOs play an important role in the upliftment of the weaker sections of the society
and their overall development. This is especially true in the case of India,
where a vast majority of its population continues to remain under the poverty
line and have little or no access to even basic facilities provided by the
government.
Being
non-profit organisations, operations of NGOs are entirely reliant on donations,
both domestic and foreign. In recent times, many NGOs have come under the
government scanner for alleged contravention of FCRA. As per news reports, as
many as 11,000 NGOs have even lost their permit to receive foreign
contribution. While, the government claims that the licenses were cancelled due
to violation of the act, the NGOs are contending that the government is wrongly
using its discretionary powers under the act to suppress voices of dissent,
especially those against government policy. Since foreign aid is often
paramount for the expansion or sometimes even for the survival of an NGO, it is
important for an NGO to have a clear understanding of legal compliances prior
to availing and using such funding. With this in mind, we have in this article
set out a brief snapshot of the Act and its provisions relevant for an NGO
intending to raise foreign aid.
Scope and
objective of the Act
The intent of
the Act is to prevent use of foreign contribution or foreign hospitality for
any activity detrimental to the national interest. It has a very wide scope and
is applicable to a natural person, body corporate, all other types of Indian
entities (whether incorporated or not) as well as NRIs and overseas
branches/subsidiaries of Indian companies and other entities formed or
registered in India. It is implemented by the Ministry of Home Affairs,
Government of India (the "Authority").
In order
to achieve the above objective, the Act:
I.
Prohibits acceptance and use of foreign contribution or
foreign hospitality by a certain specified category of persons such as a
candidate for election, judge, journalist, columnist, newspaper publication,
cartoonist, et al.
II.
Regulates the inflow to and usage of foreign contribution
by NGOs by prescribing a mechanism to accept, use and report usage of the same.
It defines
the term 'foreign contribution' to include currency, article other than gift
for personal use (not exceeding the value of INR 25,000) and securities
received from foreign source. While foreign hospitality refers to any offer
from a foreign source to provide foreign travel, boarding, lodging,
transportation or medical treatment cost. The term 'foreign source' also has an
extensive ambit and includes:
·
Foreign citizens
·
Foreign companies, corporations and MNCs
·
Foreign government and their agencies
·
International agencies other than specified and
government notified agencies
·
Foreign trusts, foundations, trade unions, societies,
clubs or any other associations of individuals formed outside India
Acceptance
of foreign funds
The Act
permits only NGOs having a definite cultural, economic, educational, religious
or social programme to accept foreign contribution, that too after such NGOs
either obtain a certificate of registration or prior permission under the Act.
Registration
and prior approval under FCRA
In order to
be registered under the FCRA, an NGO must be in existence for at least three
years and must have undertaken reasonable activity in its field for which the
foreign contribution is proposed to be utilised. Further, it must have spent at
least INR 1,000,000 over three years preceding the date of its application on
its activities. The registration certificate is valid for a period of five
years and must be thereafter renewed in the prescribed manner.
NGOs not
eligible for registration can seek prior approval from FCRA for receiving
foreign funding. This permission is granted only for a specific amount of
foreign funding from a specified foreign source for a specific purpose. It
remains valid till receipt and full utilisation of such amount.
In both of
the above cases, the applicant must file the application in a prescribed format
with the Authority and submit all the documents as required under the Act.
Further, it must have a separate bank account exclusively for the deposit of
foreign contribution. No other fund can be credited to this account.
Timelines
and eligibility criteria
Within ninety
days from the date of receipt of the application for registration or prior
approval, the Authority is required to conduct appropriate investigation and if
satisfied that the applicant fulfills all the eligibility criteria, grant the
registration certificate or prior approval as the case may be. Some of these
criteria include:
1.
The applicant must be a bonafide entity.
2.
The applicant must not have been prosecuted or convicted
for creating communal tension or disharmony in any specified district or any
other part of the country.
3.
The applicant must not have been found guilty of
diversion or mis-utilisation of its funds.
4.
Neither the applicant nor any of its office bearers must
have any records of conviction under any law or be under prosecution for any
offence.
5.
Acceptance of foreign contribution by the applicant must
not prejudicially impact the sovereignty and integrity of India.
6.
In case the registration or approval is not granted
within ninety days, the Authority is required to record its reason for refusal
and intimate the applicant of the same. However, the Authority is not bound by
this requirement in cases where there is no obligation to provide information
under the Right to Information Act, 2005 ("RTI Act"). Under the RTI
Act, certain information is exempt from public disclosure and includes:
7.
Information which may have a prejudicial effect on the
security, strategic, scientific or economic interests of the state.
8.
Information which has been expressly forbidden to be
published by judiciary.
9.
Information, the disclosure of which would cause a breach
of privilege of the legislature.
10.
Information including commercial confidence, trade
secrets or intellectual property, the disclosure of which would harm the
competitive position of a third party, unless the competent authority is
satisfied that larger public interest warrants the disclosure of such
information.
Thus, if the
reason for refusal to register or grant prior approval under the Act (in the
opinion of the Authority) relates to above information, the same will not be
disclosed to the applicant NGO.
Use of
foreign funding
The Act
imposes various conditions on the use of foreign funds and some of them are as
follows:
1.
All funds received by a NGO must be used only for the
purpose for which they were received.
2.
Such funds must not used in speculative activities
identified under the Act.
3.
Except with the prior approval of the Authority, such
funds must not be given or transferred to any entity not registered under the
Act or having prior approval under the Act.
4.
Every asset purchased with such fund must be in the name
of the NGO and not its office bearers or members.
Reporting
requirement
Every NGO
registered or having prior approval under the Act must file an annual report
with the Authority in the prescribed form. This report must be accompanied by
an income and expenditure statement, receipt and payment account, and balance
sheet for the relevant financial year. For financial years where no foreign
contribution is received, a 'NIL' report must be furnished with the Authority.
Cancellation
of registration certificate
Under the
Act, the Authority is empowered to cancel the registration certificate of a NGO
in the following circumstances:
·
It has made false statement in any of its applications or
submissions under the Act.
·
It has violated any of the terms and conditions of
registration.
·
Authority is of the view that cancellation of
registration is necessary in the public interest.
·
It has violated any of the provisions of the Act or any
order passed under it.
·
It has been inactive for two consecutive years in its
chosen field of service.
The Act
follows the principles of natural justice and requires the Authority to provide
the person concerned reasonable opportunity of being heard prior to passing any
order. During the pendency of proceeding
for cancellation of registration, the Authority can also suspend the
registration of the concerned NGO for a period of upto six months. During the
suspension period, the concerned NGO is placed under several restrictions
including prohibition from receiving any foreign contribution except with the
prior approval of the Authority. In case of cancellation of its registration,
the NGO concerned would be ineligible for a period of three years to apply for
prior approval or registration under the Act.
.JPG)
.JPG)
