NOEL HARPER & ORS. versus UNION OF INDIA & ANR.
[2022] 19 S.C.R. 879, Supreme Court of India, 2022
Outcome: Disposed off
Segment: Ratio
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NOEL HARPER & ORS.
v.
UNION OF INDIA & ANR.
(Writ Petition (Civil) No. 566 of 2021)
APRIL 08, 2022
[A. M. KHANWILKAR, DINESH MAHESHWARI AND
C. T. RAVIKUMAR, JJ.]
Foreign Contribution (Regulation) Act, 2010, as amended by
Foreign Contribution (Regulation) Amendment Act, 2020 – ss. 7,
12(1A), 12A and 17(1) – Constitutional validity of amendments
concerning ss.7, 12(1A), 17 (1) and s.12A – Amended s.7 prohibited
transfer of foreign contribution to other persons while the
unamended s.7 restricted the transfer of foreign contribution, but
did not completely prohibit the same unlike the amended s.7 –
s.12(1A) envisaged that every person making an application under
sub-Section (1) of s.12 was obliged /required to open FCRA account
in the manner specified in s.17 and mention details of such account
in his application – s.17, in particular sub-Section (1) as amended,
mandated that every person granted certificate or prior permission
u/s.12 shall receive foreign contribution only in an account
designated as FCRA account in the specified bank – The unamended
ss.12 and 17 did not impose such restrictions – s.12A inserted vide
the 2020 Act empowered the Central Government to require Aadhaar
number etc., as identification document – Held: The amended
provisions vide the 2020 Act, namely, ss.7, 12(1A), 12A and 17 of
the 2010 Act are intra vires the Constitution and the Foreign
Contribution (Regulation) Act, 2010 – The amended s.7 completely
rules out transfer of foreign
contribution by the person who has
received/accepted the same in the first place – That however does
not prevent the recipient from utilising the foreign contribution
“itself” for the purposes for which he has been granted a certificate
of registration or obtained prior permission under the Act – The
restriction inevitably fixes the accountability of the recipient
organisation and mandates maximum utilisation by itself for permitted
purposes – This is the procedure established by law – It can neither
be said to be arbitrary nor discriminatory much less manifestly
arbitrary - within the meaning of Art.14 or impinging upon Art.21
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of the Constitution – The pre-amendment dispensation (unamended
s.7) was not sufficient to effectively regulate the acceptance and
utilisation of foreign contribution as predicated by the Foreign
Contribution (Regulation), 2010 – To overcome the mischief and to
enhance transparency and accountability regarding acceptance and
also utilisation of foreign contribution which is quite substantial
every financial year having proliferating effect on the economy of
the nation, it became necessary to enact amended s.7 – The fact
that unamended s.7 was less restrictive, cannot be the basis to test
the constitutional validity of the amended provision on the
touchstone of Art.19(1)(c) or 19(1)(g) or Arts.14 and 21 of the
Constitution – s.12(1A) and s.17(1), is a holistic approach adopted
by the Parliament to provide for strict regulatory measure and for
ensuring transparency and accountability in the matter of foreign
contribution – Being a matter of security of the State, public order
and in the interests of the general public, it is not open to question
the validity of such a law on the touchstone of Art.19(1)(c) or
19(1)(g) of the Constitution – It is not a provision to completely
prohibit forming of the associations or engaging in business of
charity as such – It is a provision for regulating the manner of
doing business more importantly, concerning foreign contribution
– The provision became necessary for efficient
regulation of foreign
contribution on real-time basis, hence, it can neither be said to be
manifestly arbitrary nor irrational much less without legitimate
objective of the State – Accordingly, the challenge to these provisions
as being violative of Arts. 14, 19 and 21 of the Constitution is negated
– Insofar as insertion of s.12A is concerned, this amendment had
been necessitated to safeguard the sovereignty and integrity of the
country, and public order, including in the interests of the security
of the State and of the general public – It is not open to argue that
associations desirous of obtaining certificate of registration under
this Act need not furnish official identification document pertaining
to its key functionaries – s.12A is to be read down and construed as
permitting the key functionaries/office bearers of the applicant
(associations/NGOs) who are Indian nationals, to produce Indian
Passport for the purpose of their identification – That shall be
regarded as substantial compliance of the mandate in s.12A
concerning identification – Constitution of India – Arts. 14, 19(1)(c),
19(1)(g) and 21.
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Foreign Contribution (Regulation) Act, 2010 – Foreign
Contribution (Regulation) Amendment Act, 2020 – Legislative
history culminating with the 2010 Act, as amended in 2020 –
Adoption of strict regime for prohibiting “transfer” of foreign
contribution and insistence of “utilisation” thereof by the recipient
himself/itself – Discussed.
Policy – Judicial Review – Scope – Held: It is not for the
Court to consider relative merits of the different political theories
or economic policies including that an economic legislation may be
troubled with crudities, inequities, uncertainties or the possibility
of abuse cannot be the basis for striking it down.
Policy – Just law made by the Parliament – On mere plea of
individual hardships, Court cannot interfere with policy matters.
Legislation – Amended provisions – Role of the Parliament –
Democratic accountability – Judicial review – Held: There is
presumption that the Parliament understands and reacts to the needs
of its own people as per the exigencies and experience gained in
the implementation of the law – The Parliament is supreme and has
a final say in matters of legislation when it reflects on alternatives
and choices with inputs from different quarters, with a check in the
form of democratic accountability and a further check by the Courts
which exercise the power of judicial review – The Courts however
ought not to adopt a doctrinaire approach in construing the
amended provisions and undermine the legislative
intent.
Words and Phrases – Expression “foreign contribution” –
Meaning of – Distinction between foreign contribution and foreign
investment – Held: By its very nature, foreign contribution is a
donation accepted from a foreign source purportedly for definite
cultural, economic, educational, religious or social programme and
to serve the cause of humanity – The expression “foreign
contribution” has been defined in s.2(1)(h) of the 2010 Act to mean
donation, which can be in the form of delivery or transfer made by
any foreign source of any article, currency, security, etc. – Foreign
Contribution (Regulation) Act, 2010 – s.2(1)(h).
Words and Phrases – Transfer and utilization of foreign
contribution – Expressions “transfer” and “utilisation” – Meaning
of – Discussed – Foreign Contribution (Regulation) Act, 2010.
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Disposing of the writ petitions, the Court
HELD:
Validity of Section 7 of the Foreign Contribution
(Regulation), 2010, as amended vide the 2020 Act
1. The amended provision completely rules out transfer of
foreign contribution by the person who has received/accepted
the same in the first place. That does not prevent the recipient
from utilising the foreign contribution “itself” for the purposes
for which he has been granted a certificate of registration or
obtained prior permission under the Act. [Para 44][958-D-E]
2. There is no restriction regarding utilisation of foreign
contribution, leave alone complete prohibition. The rationale of
Section 7 as amended, inter alia, is that the donor (foreign source)
is made fully aware of the definite purposes already declared by
the recipient and permitted by the competent authority and
corresponding obligation upon the recipient regarding utilisation
of the funds itself for stated purposes and none else. [Para 46][959-
C]
3. The legislative intent for which the amendment has been
effected is to introduce strict dispensation qua the recipient of
foreign contribution to utilise the same “itself” for the purposes
for which it has been permitted as per the certificate of registration
or permission granted under the Act by the Central Government.
In addition, by the same Amendment Act, utilisation of foreign
contribution for administrative purpose by the recipient has been
lowered
to twenty per cent only with a view to ensure maximum
spending on the purposes for which the foreign contribution has
been accepted by the recipient having certificate of registration.
Absent such stringent provision, some of the recipient
organisations were reportedly indulging in successive chain of
transfers to other organisations, thereby creating a layered trail
of money and also utilisation of funds towards administrative costs
of successive transfers upto fifty per cent leaving very little funds
for spending on the purposes for which it was permitted. Hence,
providing complete restriction on transfer simplicitor, was the
just option to fix accountability of the recipient organisation and
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maximise utilisation for the permitted purposes. Such being the
avowed objective and purpose of the amendment, the challenge
to the amended Section 7 must fail. [Paras 50 and 51][961-H;
962-A-D]
4. The fact that earlier transfer of foreign contribution was
permitted as per the unamended provision, that by itself cannot
be the basis to challenge the validity of the amended provision.
For, it is open to the Parliament to change the benchmark of
restriction from higher standard to lower standard or vice versa
on the basis of the exigencies and experience gained during the
implementation of the applicable provision at the relevant time.
[Para 52][962-D-E]
5. Indubitably, foreign contribution is qualitatively different
from foreign investment. Receiving foreign donation cannot be
an absolute or even a vested right. No one can be heard to claim
a vested right to accept foreign donation, much less an absolute
right. This is so because the theory of possibility of national polity
being influenced by foreign contribution is globally recognised.
For, foreign contribution can have material impact in the matter
of socioeconomic structure and polity of the country. The foreign
aid can create presence of a foreign contributor and influence
the policies of the country. It may tend to influence or impose
political ideology. Such being the expanse of the effect of foreign
contribution coupled with the tenet of constitutional morality of
the nation, the presence/inflow of
foreign contribution in the
country ought to be at the minimum level, if not completely
eschewed. The influence may manifest in different ways, including
in destabilising the social order within the country. [Paras 53 and
54][962-E-F, H; 963-A-C]
6. One fails to understand as to how such a provision
(amended Section 7) can be regarded as discriminatory or so to
say vague or irrational much less manifestly arbitrary. The
restriction therein applies to a class of persons who are permitted
to accept foreign donation for being utilised by themselves for
the definite purposes, without any discrimination and it is so done
to uphold the objective of the Foreign Contribution (Regulation)
Act, 2010. Thus, there is clear intelligible differentia with a direct
nexus sought to be achieved with the intent of the Foreign
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Contribution (Regulation) Act, 2010. Such strict regime had
become inevitable because of the experience gained by the
concerned authorities over a period of time, including about the
abuse of the earlier dispensation under the unamended provision.
[Para 57][963-H; 964-A-B]
7. The restriction inevitably fixes the accountability of the
recipient organisation and mandating maximum utilisation by itself
for permitted purposes. This is the procedure established by law.
It can neither be said to be arbitrary nor discriminatory much
less manifestly arbitrary — within the meaning of Article 14 or
impinging upon Article 21 of the Constitution. As a matter of law,
since the subject Act deals with a distinct class of persons
(accepting/receiving foreign contribution) and it is founded on an
intelligible differentia having object sought to be achieved by the
Foreign Contribution (Regulation) Act, 2010, it fulfils the test
predicated in Shayara Bano. For the same reason, the amended
provision under challenge is neither capricious, irrational or
lacking determining principle, nor suffers from the vice of
excessiveness and being disproportionate. [Para 58][964-D-F]
8.1. There is presumption that the Parliament understands
and reacts to the needs of its own people as per the exigencies
and experience gained in the implementation of the law. Mere
plea of inconvenience is not enough to attract the constitutional
inhibition. The Courts
ought not to adopt a doctrinaire approach
in construing the amended provisions and undermine the
legislative intent of strengthening the regulatory mechanism
concerning foreign contribution. The legislature enjoys
considerable latitude while exercising its wisdom on the basis of
inputs collated from different quarters. There is intrinsic evidence
to indicate that the change effected by the amendments is to serve
the legitimate Government purpose and has a rational nexus to
the object of the Foreign Contribution (Regulation), 2010 and
the amendments, and that the pre-amendment dispensation
(unamended Section 7) was not sufficient to effectively regulate
the acceptance and utilisation of foreign contribution as predicated
by the Foreign Contribution (Regulation), 2010. [Para 59][964-
F-G; 965-A-B]
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8.2. While examining the issue as to whether the amended
provision is a reasonable restriction, the Court cannot be oblivious
to the concern of the Parliament/Legislature backed by the past
experiences including cancellation of registration of substantial
number of registration certificates after due inquiry and for
tangible reasons owing to abuse and misutilisation of foreign
contribution (donation); and especially when receipt or acceptance
of foreign exchange or be it foreign contribution, is otherwise
understood to be ordinarily prohibited. The subject enactment is
essentially conceived in the interests of public order and also
general public as the intent is to prevent misuse and misutilisation
of foreign contribution coming from foreign sources to safeguard
the values of a sovereign democratic republic. [Para 63][966-D-
E; 967-G-H]
8.3. The restriction or complete prohibition on transfer to
third party, by no standards deprive acceptance of foreign
contribution and utilisation thereof in the manner permitted for
definite purposes, such as cultural, economic, educational or social
programme. Such a provision must be understood as being
procedure established by law in the interests of the general public
and in the interests of sovereignty and integrity of the country,
including public order. Resultantly, there is no infraction even of
Article 19(1)(c) or 19(1)(g) of the Constitution as urged by the
writ petitioners, including Articles 14 and 21 of the
Constitution.
Consistent with this view, the challenge to the amended Section
7 must be rejected on all counts. [Para 65][967-B-D]
8.4. For the same reason, the argument of the writ
petitioners about lack of rational nexus with the object sought to
be achieved by the Principal Act much less the Amendment Act,
must also fail. The rationale is of larger public interests and more
particularly to obviate adverse impact on the economy, public
order, sovereignty and integrity of the country. Such amendment
has been necessitated because of the past experience consequent
to implementation of the unamended Section 7 of the 2010 Act.
It is so highlighted in the objects and reasons and the introduction
of the Amendment Act. It can also be culled out from the debates
in the Parliament whilst considering the Amendment Bill in the
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respective Houses. To overcome the mischief and to enhance
transparency and accountability regarding acceptance and also
utilisation of foreign contribution which is quite substantial every
financial year having proliferating effect on the economy of the
nation, it had become necessary to enact amended Section 7. In
other words, there is a clear rationale behind the amendment
which is consistent with the purpose of the Principal Act and the
object sought to be achieved under the enactments. The fact that
unamended provision was less restrictive, cannot be the basis to
test the constitutional validity of the provision on the touchstone
of Article 19(1)(c) or 19(1)(g) or Articles 14 and 21 of the
Constitution. The amended Section 7, being plain and clear and
having nexus with the object sought to be achieved and is
necessitated because of sovereignty and integrity of India or
security of the State, public order and in the interests of the
general public. It is unfathomable as to how the amended provision
can be regarded as unconstitutional on any parameter. [Para
66][967-D-H; 968-A-B]
Validity of Section 12(1A) and Section 17(1) of the Foreign
Contribution (Regulation), 2010, as amended vide the 2020 Act
9. Section 12(1A) has been inserted by Act 33 of 2020, which
envisages that every person who makes an application under sub-
Section (1) of Section 12 is obliged/required to open FCRA account
in the manner specified in
Section 17 and mention details of such
account in his application. Section 17, in particular sub-Section
(1) as amended, mandates that every person who had been granted
certificate or prior permission under Section 12 shall receive
foreign contribution only in an account designated as FCRA
account in the specified bank. The unamended Sections 12 and
17 did not impose such restriction. Notably, as per the new regime
foreign remittances are being received through SWIFT platform
by international banking wherein certain mandatory fields are
required to be captured apart from other details transaction wise.
Further, foreign remittances do not have structured framework,
including disclosures regarding purposes. All these deficiencies
will stand resolved thereby enhancing the monitoring mechanism
in real-time basis, remittance wise by adopting the new
dispensation predicated in the amended provisions. Once again,
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the need to strictly regulate the inflow of foreign funds and to
oversee utilisation thereof for the purposes for which it has been
received having been recognised and being the rationale behind
the Amendment Act, including owing to the experience regarding
abuse of the regime under the unamended provision, the
challenge to such amendment cannot be taken forward. [Paras
68 and 69][968-D-H; 969-A]
10. Section 17 came to be amended in the aftermath of
realisation of clear and discernible lacunae having cropped in due
to the presence of FCRA accounts of scores of registered
organisations, in different scheduled banks across the country.
The challenge became more pronounced due to doubling of foreign
contribution inflow in the last decade which had impacted the
efficiency of monitoring and achieving the object of the Principal
Act. The amended provision now mandates that FCRA accounts
of all the registered persons/organisations are required to be
opened in one particular branch in the country providing for
essential information and fields, thereby ensuring a complete and
transparent check on the inflow and utilisation of foreign
contribution towards a single point source on real-time basis.
[Para 70][969-B-C]
11. The fact that earlier FCRA account could be opened in
any scheduled bank, cannot preclude the Parliament from
legislating a law which requires inflow of foreign contribution in
some other manner specified by law. Merely because the
framework of
acceptance of foreign contribution had been changed
cannot be the basis to question the validity of the amended
provisions. Introducing change for the betterment of governance
is the prerogative and wisdom of the Parliament. The FCRA
account operators cannot claim right of continuity of a deficient
and flawed framework. Ordinarily, convenience of business and
persons engaged in doing business must be uppermost in the
mind of the Parliament/Legislature — to effectuate the goal of
ease of doing business. However, the strict regime had become
essential because of the past experience of abuse and
misutilisation of the “foreign contribution” and cancellation of
certificates of as many as 19,000 registered organisations on the
ground of being grossly noncompliant. A fortiori, it would certainly
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justify the need to have a holistic approach to ensure that the
objective of the Principal Act is fulfilled, namely, of strict
regulation of the inflow and utilisation of foreign contribution for
the purposes for which it is so permitted, such as only cultural,
economic, educational or social programme. [Para 71][969-D-H;
970-A-B]
12. In fact, the Parliament must be credited with for having
taken recourse to corrective dispensation for eradicating the
mischief, which any sovereign country can ill-afford. The
Parliament is supreme and has a final say in matters of legislation
when it reflects on alternatives and choices with inputs from
different quarters, with a check in the form of democratic
accountability and a further check by the Courts which exercise
the power of judicial review. 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. Hence,
there had been legitimate goal for amending the subject
provisions of acceptance of funds through one channel.
Concededly, despite the requirement of opening FCRA account
in the designated bank, it is open to the organisation to utilise
the amount so received in the FCRA account through multiple
accounts in the scheduled branches. In that sense, it is a balanced
approach. [Para 72][970-B-D]
13. A priori, opening of main FCRA account in the
designated bank as per the
law made by the Parliament in that
regard, cannot be brushed aside on the specious argument of
some inconvenience being caused to the registered associations.
Assuming that some inconvenience is likely to be caused to few
applicants, but the constitutionality of a statute cannot be assailed
on the basis of fortuitous circumstances and more so when it
being only a one-time exercise to ensure inflow of foreign
contribution through one channel only, being a precondition for
grant of permission. [Para 73][970-E-G]
14. As a matter of law, the validity of the amendments must
be tested on the touchstone of tenets underlying Articles 14, 19
and 21 of the Constitution. The permission is a precondition for
acceptance and utilisation of foreign contribution. Such persons
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are a separate class and engage in specified activity. It cannot be
a usual or ordinary business for everyone and anyone wanting to
accept foreign contribution. Permitting inflow of foreign
contribution, which is a donation, is a matter of policy of the State
backed by law. In this case, it is governed by the 2010 Act as
amended. It is open to the State to have a regime which may
completely prohibit receipt of foreign donation, as no right inheres
in the citizen to receive foreign contribution (donation). [Para
74][971-A-C]
15. The provision such as Section 12(1A) and Section 17(1)
introduced by the Amendment Act, is a holistic approach adopted
by the Parliament to provide for strict regulatory measure and
for ensuring transparency and accountability in the matter of
foreign contribution. Notably, there was unanimity amongst the
members of both the Houses cutting across party lines to have
such a strict regime as indiscriminate receipt/inflow and more so
utilisation of foreign contribution had been threatening the
sovereignty and integrity of the country itself. Being a matter of
security of the State, public order and in the interests of the
general public, it is not open to question the validity of such a law
on the touchstone of Article 19(1)(c) or 19(1)(g) of the
Constitution. It is not a provision to completely prohibit forming
of the associations or engaging in business of charity as such. It
is a provision for regulating the manner of doing
business more
importantly, concerning foreign contribution. The provision
became necessary for efficient regulation of foreign contribution
on real-time basis, hence, it can neither be said to be manifestly
arbitrary nor irrational much less without legitimate objective of
the State. Accordingly, the challenge to these provisions as being
violative of Articles 14, 19 and 21 of the Constitution is negated.
[Paras 75 and 80][971-C-F; 973-E-F]
16. The fact that the registered associations were already
complying with the statutory formalities of furnishing of accounts,
intimation, audit and disposal of assets to the satisfaction of the
concerned Authorities, it would not follow that the Parliament/
Legislature is denuded of its power of changing the regulatory
mechanism or framework to make it more effective and to make
it real-time regarding the inflow or receipt of foreign contribution
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and utilisation thereof for the purposes for which it has been so
permitted. [Para 81][973-F-H]
Validity of Section 12A of the Foreign Contribution
(Regulation), 2010, as amended vide the 2020 Act
17. Section 12A, which was inserted vide the Amendment
Act of 2020, mandates that the person concerned who seeks prior
permission or prior approval under Section 11, or makes an
application for grant of certificate under Section 12, including for
renewal of certificate under Section 16, to provide as identification
document, the Aadhaar number of all its office bearers or Directors
or other key functionaries. The Statement of Objects and Reasons
of the Amendment Act are testimony about the past experience
of abuse of foreign contribution receipts and spending on activities
not connected with the purposes for which it was so permitted. It
had been noticed that the inflow of foreign contribution had almost
doubled between the years 2010 and 2019 and many of the
registered associations had failed to comply with basic statutory
formalities necessitating cancellation of certificates of registration
of more than 19,000 registered organisations. This is a staggering
(substantial) number indicative of gross violations by large number
of registered associations. More so, this amendment had been
necessitated to safeguard the sovereignty and integrity of the
country, and public order, including in the interests of the security
of the
State and of the general public. It is a law made by the
Parliament which is competent to make such a law concerning
the activities related to foreign donations and more particularly
about its acceptance in prescribed manner and utilisation for the
purposes defined in the certificate/permission granted by the
competent authority. It has a legitimate purpose and nexus sought
to be achieved with the objective underlying the Principal Act
and the subject amendment. It is not open to argue that
associations desirous of obtaining certificate of registration under
this Act need not furnish official identification document pertaining
to its key functionaries. [Para 83][974-C-H; 975-A]
18. Regardless of the above, the provision (Section 12A)
envisages that a copy of the Passport can also be provided as
identification document of all its office bearers or Directors or
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other key functionaries or Overseas Citizen of India Card, in
case of a foreigner. The underlying purpose of this provision is
merely to identify the key functionaries of the registered
association so that they can be made accountable for violations,
if any. As the Passport in case of a foreigner is accepted as
sufficient identification document, there is no reason why such
Passport of Indian national cannot be relied upon for the same
purpose. Thus understood, the challenge to this provision is
unreasonable. Whereas, the provision needs to be construed as
permitting furnishing of the Indian Passport of the key
functionaries of the applicant who are Indian nationals, for the
purpose of their identification. [Para 84][975-B-D]
Conclusion
19. The amended provisions vide the 2020 Act, namely,
Sections 7, 12(1A), 12A and 17 of the 2010 Act are intra vires the
Constitution and the Principal Act. As regards Section 12A, the
said provision is to be read down and construed as permitting
the key functionaries/office bearers of the applicant (associations/
NGOs) who are Indian nationals, to produce Indian Passport for
the purpose of their identification. That shall be regarded as
substantial compliance of the mandate in Section 12A concerning
identification. [Para 87][975-F-H]
Rustom Cavasjee Cooper v. Union of India (1970) 1
SCC 248 : [1970] 3 SCR 530; R.K. Garg v. Union of
India & Ors. (1981) 4 SCC 675 : [1982] 1 SCR 947;
Ombalika Das v. Hulisa Shaw (2002) 4 SCC
539 :
[2002] 2 SCR 902; Shayara Bano v. Union of India &
Ors. (2017) 9 SCC 1 : [2017] 9 SCR 797; Dr. Ashwani
Kumar v. Union of India & Anr. (2020) 13 SCC 585 :
[2019] 12 SCR 30; Laxmi Khandsari & Ors. v. State of
U.P. & Ors. (1981) 2 SCC 600 : [1981] 3 SCR 92 and
All India Council for Technical Education v. Surinder
Kumar Dhawan & Ors. (2009) 11 SCC 726 : [2009] 3
SCR 859 – relied on.
Shreya Singhal v. Union of India (2015) 5 SCC 1 :
[2015] 5 SCR 963; K.S. Puttaswamy (Retired) & Anr.
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(AADHAAR) v. Union of India & Anr. (2019) 1 SCC 1:
[2018] 8 SCR 1 and Anuradha Bhasin v. Union of India
& Ors. (2020) 3 SCC 637 : [2020] 1 SCR 812 –
distinguished.
Indian Social Action Forum (INSAF) v. Union of India
AIR 2020 SC 1363 – clarified.
Public Union for Civil Liberties v. State of T.N. & Ors.
(2004) 12 SCC 381 : [2004] 2 Suppl. SCR 64; K.C.
Gajapati Narayan Deo & Ors. v. State of Orissa AIR
1953 SC 375 : [1954] SCR 1; Maneka Gandhi v. Union
of India & Anr. (1978) 1 SCC 248 : [1978] 2 SCR;
Ajay Hasia & Ors. v. Khalid Mujib Sehravardi & Ors.
(1981) 1 SCC 722 : [1981] 2 SCR 79; Indra Sawhney
& Ors. v. Union of India & Ors. (1992) 3 Supp SCC
217; T.M.A. Pai Foundation & Ors. v. State of
Karnataka & Ors. (2002) 8 SCC 481; Natural
Resources Allocation, In Re, Special Reference No.1 of
2012, (2012) 10 SCC 1 : [1992] 2 Suppl. SCR 454;
Modern Dental College and Research Centre & Ors. v.
State of Madhya Pradesh & Ors. (2016) 7 SCC 353 :
[2016] 3 SCR 579; Navtej Singh Johar & Ors. v. Union
of India (2018) 10 SCC 1 : [2018] 7 SCR 379;
Distribution of Essential Supplies Services During
Pandemic 2021 SCC OnLine SC 339; Teesta Atul
Setalvad v. State of Gujarat (2018) 2 SCC 372 : [2017]
12 SCR 774; Rev. Stainislaus v. State of Madhya
Pradesh & Ors. (1977) 1 SCC 677 : [1977] 2 SCR 611;
Rajeev Suri v. Delhi Development Authority & Ors. 2021
SCC Online 7; State of Himachal Pradesh & Ors. v.
Himachal Pradesh Nizi Vyavsayik
Prishikshan Kendra
Sangh (2011) 6 SCC 597 : [2011] 5 SCR 533; Ravindra
Ramachandra Waghmare v. Indore Municipal
Corporation & Ors. (2017) 1 SCC 667 : [2016] 9
SCR 373; State of Himachal Pradesh & Ors. v. Satpal
Saini (2017) 11 SCC 42 : [2017] 1 SCR 658; Union of
India v. Indian Radiological & Imaging Association &
Ors. (2018) 5 SCC 773 : [2018] 3 SCR 649; Peerless
General Finance and Investment Co. Limited & Anr. v.
A
B
C
D
E
F
G
H
893
Reserve Bank of India (1992) 2 SCC 343 : [1992] 1
SCR 406; Premium Granites & Anr. v. State of T.N. &
Ors. (1994) 2 SCC 691 : [1994] 1 SCR 579; Delhi
Science Forum & Ors. v. Union of India & Anr. (1996)
2 SCC 405 : [1996] 2 SCR 767; BALCO Employees’
Union (Regd.) v. Union of India & Ors. (2002) 2 SCC
333 : [2001] 5 Suppl. SCR 511; State of Madhya
Pradesh v. Narmada Bachao Andolan & Anr. (2011) 7
SCC 639 : [2011] 6 SCR 443; Charanjit Lal Chowdhury
v. The Union of India & Ors. AIR 1951 SC 41 : [1950]
SCR 869; The State of Bombay & Anr. v. F. N. Balsara
AIR 1951 SC 318 : [1951] SCR 682; Kathi Raning
Rawat v. State of Saurashtra AIR 1952 SC 123 : [1952]
SCR 435; Gurbachan Singh v. State of Bombay & Anr.
AIR 1952 SC 221 : [1952] SCR 737; The State of
Punjab v. Ajaib Singh & Anr. AIR 1953 SC 10 : [1953]
SCR 254; Habeeb Mohamed v. The State of Hyderabad
AIR 1953 SC 287 : [1953] SCR 661; Kedar Nath
Bajoria v. The State of West Bengal AIR 1953 SC 404
: [1954] SCR 30; Baburao Shantaram More v. Bombay
Housing Board & Anr. AIR 1954 SC 153 : [1954]
SCR 572; Harman Singh & Ors. v. Regional Transport
Authority, Calcutta Region & Ors. AIR 1954 SC 190 :
[1954] SCR 371; Sakhawant Ali v. State of Orissa AIR
1955 SC 166 : [1955] 1 SCR 1004; Budhan Choudhry
& Ors. v. State of Bihar AIR 1955 SC 191 : [1955] 1
SCR 1045; D.P. Joshi v. State of Madhya Bharat & Anr.
AIR 1955 SC 334 : [1955] 1 SCR 1215; Hans Muller
of Nurenburg v. Superintendent, Presidency Jail,
Calcutta & Ors.
AIR 1955 SC 367 : [1955] 1
SCR 1284; Kishan Singh & Ors. v. State of Rajasthan
& Ors. AIR 1955 SC 795 : [1955] 2 SCR 531;
P. Balakotaiah v. Union of India & Ors. AIR 1958 SC
232 : [1958] SCR 1052; Shri Ram Krishna Dalmia v.
Shri Justice S.R. Tendolkar & Ors. AIR 1958 SC 538 :
[1959] SCR 279; Express Newspaper (Private) Ltd., &
Anr. v. Union of India & Ors. AIR 1958 SC 578 : [1959]
SCR 12; Khandige Sham Bhat v. Agricultural Income-
tax Officer, Kasaragod & Anr. AIR 1963 SC 591 :
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
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SUPREME COURT REPORTS
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[1963] 3 SCR 809; Raja Bira Kishore Deb, Hereditary
Superintendent, Jagannath Temple v. The State of Orissa
AIR 1964 SC 1501 : [1964] 7 SCR 32; Ganga Ram &
Ors. v. Union of India & Ors. (1970) 1 SCC 377 :
[1970] 3 SCR 481; Anant Mills Co. Ltd. v. State of
Gujarat & Ors. (1975) 2 SCC 175 : [1975] 3 SCR 220;
Mohan Kumar Singhania & Ors. v. Union of India &
Ors. (1992) 1 Supp SCC 594 : [1991] 1 Suppl. SCR
46; Venkateshwara Theatre v. State of Andhra Pradesh
& Ors. (1993) 3 SCC 677 : [1993] 3 SCR 616; Dharam
Dutt & Ors. v. Union of India & Ors. (2004) 1 SCC
712 : [2003] 6 Suppl. SCR 151; Basheer @ N.P.
Basheer v. State of Kerala (2004) 3 SCC 609 : [2004]
2 SCR 224; O. K. Ghosh & Anr. v. E. X. Joseph AIR
1963 SC 812 : [1963] Suppl. SCR 789; Saghir Ahmad
& Anr. v. State of U.P. & Ors. AIR 1954 SC 728 : [1955]
1 SCR 707; Babulal Parate v. The State of Maharashtra
& Ors. AIR 1961 SC 884 : [1961] 3 SCR 423; Daya v.
Joint Chief Controller of Imports & Exports & Anr. AIR
1962 SC 1796 : [1963] 2 SCR 73; Akadasi Padhan v.
State of Orissa & Ors. AIR 1963 SC 1047 : [1963] 2
Suppl. SCR 691; Municipal Committee, Amritsar & Ors.
v. State of Punjab & Ors. (1969) 1 SCC 475 : [1969] 3
SCR 447; Madhu Limaye v. Sub-Divisional Magistrate,
Monghyr & Ors. (1970) 3 SCC 746 : [1971] 2
SCR 711; Daruka & Co v. Union of India & Ors. (1973)
2 SCC 617 : [1974] 1 SCR 570; Md. Serajuddin &
Ors. v. State of Orissa (1975) 2 SCC 47 : [1975] Suppl.
SCR
169; Municipal Corporation of the City of
Ahmedabad & Ors. v. Jan Mohammed Usmanbhai and
Anr. (1986) 3 SCC 20 : [1986] 2 SCR 700; Sushila Saw
Mil v. State of Orissa and Ors. (1995) 5 SCC 615 :
[1995] 2 Suppl. SCR 426; Krishnan Kakkanth v.
Government of Kerala & Ors. (1997) 9 SCC 495 :
[1996] 7 Suppl. SCR 487; Laxmikant v. Union of India
& Ors. (1997) 4 SCC 739 : [1997] 3 SCR 861; Indian
Handicrafts Emporium & Ors. v. Union of India & Ors.
(2003) 7 SCC 589 : [2003] 3 Suppl. SCR 43; Om
Prakash & Ors. v. State of U.P. & Ors. (2004) 3 SCC
A
B
C
D
E
F
G
H
895
402 : [2004] 2 SCR 900; People’s Union for Civil
Liberties & Anr. v. Union of India (2004) 9 SCC 580 :
[2003] 6 Suppl. SCR 860; State of Gujarat v. Mirzapur
Moti Kureshi Kassab Jamat & Ors. (2005) 8 SCC 534
: [2005] 4 Suppl. SCR 582; Kerala Bar Hotels
Association & Anr. vs. State of Kerala & Ors. (2015)
16 SCC 421; K.S. Puttaswamy & Anr. v. Union of India
& Ors. (2017) 10 SCC 1 : [2017] 10 SCR 569; Gobind
vs. State of Madhya Pradesh & Anr. (1975) 2 SCC 148
: [1975] 3 SCR 946; Chintamanrao & Anr. v. The State
of Madhya Pradesh AIR 1951 SC 118 : [1950] SCR
759; The State of Madras v. V.G. Row AIR 1952 SC
196 : [1952] SCR 597; Teri Oat Estates (P) Ltd. v. U.T.,
Chandigarh & Ors. (2004) 2 SCC 130 : [2003] 6 Suppl.
SCR 1235; Ramlila Maidan Incident, In re (2012) 5
SCC 1 : [2012] 4 SCR 971; Sahara India Real Estate
Corporation Limited & Ors. v. Securities and Exchange
Board of India & Anr. (2012) 10 SCC 603 : [2012] 12
SCR 256; Excel Crop Care Limited v. Competition
Commission of India & Anr. (2017) 8 SCC 47 : [2017]
5 SCR 901; A.K. Gopalan v. State of Madras AIR 1950
SC 27 : [1950] SCR 88; and Manohar Lal Sharma v.
Union of India & Ors. [2021] 6 SCR 1006 – referred
to.
Joseph Lochner v. People of the State of New York 198
U.S. 45 (1905); New State Ice Company v. Ernest A.
Liebmann 285 U.S. 262 (1932); West Coast Hotel
Company v. Ernest Parrish 300 U.S. 379 (1937); United
States of America v. Carolene Products Company 304
U.S. 144 (1938); American Federation of
Labor,
Arizona State Federation of Labor et al. v. American
Sash & Door Company et al. 335 U.S. 538 (1949) and
Ferguson v. Skrupa 372 U.S. 726 (1963) – referred
to.
Case Law Reference
[2018] 8 SCR 1
distinguished
Para 2 (d)
[2004] 2 Suppl. SCR 64
referred to
Para 3 (a)
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.

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[1954] SCR 1
referred to
Para 3 (b)
[1978] 2 SCR 621
 referred to
Para 3 (b)
[1981] 2 SCR 79
referred to
Para 3 (b)
(1992) 3 Supp SCC 217
referred to
Para 3 (b)
(2002) 8 SCC 481
referred to
Para 3 (b)
[1992] 2 Suppl. SCR 454
referred to
Para 3 (b)
[2016] 3 SCR 579
referred to
Para 3 (b)
[2017] 9 SCR 797
relied on
Para 3 (b)
[2018] 7 SCR 379
referred to
Para 3 (b)
[2020] 1 SCR 812
distinguished
Para 3 (b)
AIR 2020 SC 1363
clarified
Para 3 (b)
[2017] 12 SCR 774
referred to
Para 4 (a)
[1977] 2 SCR 611
referred to
Para 4 (a)
[1981] 3 SCR 92
relied on
Para 5 (l)
[2009] 3 SCR 859 
relied on
Para 5 (l)
[2011] 5 SCR 533
referred to
Para 5 (p)
[2016] 9 SCR 373
referred to
Para 5 (p)
[2017] 1 SCR 658
referred to
Para 5 (p)
[2018] 3 SCR 649
referred to
Para 5 (p)
[2019] 12 SCR 30
relied on
Para 5 (p)
[1970] 3 SCR 530
relied on
Para 5 (q)
[1982] 1 SCR 947
relied on
Para 5 (q)
[1992] 1 SCR 406 
referred to
Para 5 (q)
[1994] 1 SCR 579
referred to
Para 5 (q)
[1996] 2 SCR 767
referred to
Para 5 (q)
[2001] 5 Suppl. SCR 511 
referred to
Para 5 (q)
[2011] 6 SCR 443
referred to
Para 5 (q)
[1950] SCR 869
referred to
Para 5 (r)
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897
[1951] SCR 682
referred to
Para 5 (r)
[1952] SCR 435
referred to
Para 5 (r)
[1952] SCR 737
referred to
Para 5 (r)
[1953] SCR 254
referred to
Para 5 (r)
[1953] SCR 661
referred to
Para 5 (r)
[1954] SCR 30
referred to
Para 5 (r)
[1954] SCR 572
referred to
Para 5 (r)
[1954] SCR 371
referred to
Para 5 (r)
[1955] 1 SCR 1004
referred to
Para 5 (r)
[1955] 1 SCR 1045
referred to
Para 5 (r)
[1955] 1 SCR 1215
referred to
Para 5 (r)
[1955] 1 SCR 1284
referred to
Para 5 (r)
[1955] 2 SCR 531
referred to
Para 5 (r)
[1958] SCR 1052
referred to
Para 5 (r)
[1959] SCR 279
referred to
Para 5 (r)
[1959] SCR 12
referred to
Para 5 (r)
[1963] 3 SCR 809
referred to
Para 5 (r)
[1964] 7 SCR 32
referred to
Para 5 (r)
[1970] 3 SCR 481
referred to
Para 5 (r)
[1975] 3 SCR 220 
referred to
Para 5 (r)
[1991] 1 Suppl. SCR 46
referred to
Para 5 (r)
[1993] 3 SCR 616
referred to
Para 5 (r)
[2002] 2 SCR 902 
relied on
Para 5 (r)
[2003] 6 Suppl. SCR 151
referred to
Para 5 (r)
[2004] 2 SCR 224 
referred to
Para 5 (r)
[1963] Suppl. SCR 789 
referred to
Para 5 (u)
[1955] 1 SCR 707
referred to
Para 5 (v)
[1961] 3 SCR 423
referred to
Para 5 (v)
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
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[2022] 19 S.C.R.
[1963] 2 SCR 73
referred to
Para 5 (v)
[1963] 2 Suppl. SCR 691
referred to
Para 5 (v)
[1969] 3 SCR 447
referred to
Para 5 (v)
[1971] 2 SCR 711
referred to
Para 5 (v)
[1974] 1 SCR 570 
referred to
Para 5 (v)
[1975] Suppl. SCR 169 
referred to
Para 5 (v)
[1986] 2 SCR 700
referred to
Para 5 (v)
[1995] 2 Suppl. SCR 426 
referred to
Para 5 (v)
[1996] 7 Suppl. SCR 487 
referred to
Para 5 (v)
[1997] 3 SCR 861
referred to
Para 5 (v)
[2003] 3 Suppl. SCR 43
referred to
Para 5 (v)
[2004] 2 SCR 900
referred to
Para 5 (v)
[2003] 6 Suppl. SCR 860
referred to
Para 5 (v)
[2005] 4 Suppl. SCR 582
referred to
Para 5 (v)
(2015) 16 SCC 421
referred to
Para 5 (v)
[2017] 10 SCR 569
referred to
Para 5(y)
[1975] 3 SCR 946 
referred to
Para 5(y)
[1950] SCR 759
referred to
Para 5(y)
[1952] SCR 597
referred to
Para 5(y)
[2003] 6 Suppl. SCR 1235
referred to
Para 5(y)
[2012] 4 SCR 971 
referred to
Para 5(y)
[2012] 12 SCR 256
referred to
Para 5(y)
[2017] 5 SCR 901
referred to
Para 5(y)
[1950] SCR 88
referred to
Para 8 (a)
[2015] 5 SCR 963 
distinguished
Para 8 (d)
[2021] 6 SCR 1006
referred to
Para 8 (e)
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CIVIL ORIGINAL JURISDICTION: Writ Petition (C) No. 566
of 2021.
Under Article 32 of The Constitution of India
With
Writ Petition (Civil) Nos. 634 and 751 of 2021.
Gopal Sankaranarayanan, Sr. Adv., Abishek Jebaraj, Ms. Srishti
Agnihotri, Ms. Nupur Raut, Ms. Ishita Chaudhary, Gautam Jha, Pankaj
Kumar, Ms. Sweta Jha, Subhash Chandra, Subhash Chhabra, Bijendra
Singh, Shishit Kumar Saxena, Mosim Ahmed, Ms. Neha Duhoon, Ms.
Himanshi Bhowal, Udit Thakran, Jagdamba Prasad, Praveen Swarup,
Advs. for the Petitioners.
Tushar Mehta, SG, Sanjay Jain, ASG, Udai Khanna, Kanu Agrawal,
Balaji Srinivasan, Rajat Nair, Mrs. Deepabali Dutta, B. V. Balaram Das,
Sanjay Kapur, Arjun Bhatia, Ms. Megha Karnwal, Mrs. Subhra Kapur,
Mrs. Swarupama Chaturvedi, Ms. Saumya Kapoor, Advs. for the
Respondents.
The Judgment of the Court was delivered by
A. M. KHANWILKAR, J.
1. These petitions under Article 32 of the Constitution of India
primarily assail the constitutional validity of the amendments to the
provisions of the Foreign Contribution (Regulation) Act, 20101 vide the
Foreign Contribution (Regulation) Amendment Act, 20202, which has
come into effect on 29.9.2020, in particular, Sections 7, 12(1A), 12A and
17(1), being manifestly arbitrary, unreasonable and impinging upon the
fundamental rights guaranteed to the petitioners under Articles 14, 19
and 21 of the Constitution.
2. Re: Writ Petition (Civil) No. 566 of 2021
(a) Petitioner No. 1 in this petition along with Carol Faison
founded
a trust in the name of “The Care and Share Charitable Trust” in
Vijayawada, India (bearing Registration No. 242/1997), in the year 1997.
It is the case of the petitioners that the Trust is also registered with the
Income Tax authorities and Ministry of Home Affairs, Government of
1 for short, “the 2010 Act” or “the Principal Act”, as the case may be
2 for short, “the 2020 Act” or “the Amendment Act”, as the case may be
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
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India including under the Foreign Contribution (Regulation) Act, 19763
for receipt of foreign funds (FCRA No. 010260151 dated 8.12.1998 and
renewed on 10.8.2016 under the 2010 Act). Petitioner No. 1 is serving
as one of the trustees of the said Trust and petitioner No. 2 (Nigel Mills)
is a social worker and one of the trustees of the stated Trust. The Trust
is engaged in the social upliftment activity such as helping children below
the poverty line in Vijayawada (Andhra Pradesh, India), street children,
children of sex workers, physically challenged kids, shelter orphans,
abandoned babies and assisting juveniles detained in the observation home
(local reformatory). The Trust has built and is running nine schools in
different slums. It has rescued over 1000 street children, 165 infants,
HIV positive and AIDS orphans of Vijayawada. The Trust also engages
in daily milk program for 500 kindergarten children since year 2000. The
Trust has been awarded National Award for Child Welfare by the
Government of India, Ministry of Women and Child Development in the
year 2007, for its exceptional work and contribution in the field of child
welfare.
(b) The petitioner Nos. 3 and 4 are also trustees of National Worker
Welfare Trust (NWWT), which is registered under the Indian Trusts
Act, 18824 in Secunderabad, Telangana on 17.5.2016. Even this trust is
registered with Ministry of Home Affairs, Government of India under
the 2010 Act
for receipt of foreign funds (FCRA Registration No.
010230883). It is engaged in rehabilitation of migrant workers, with
International Labour Organisation (ILO) and addresses the concerns of
women workers from the marginalised communities and prospective
migrant workers (interstate and oversees), families of migrants,
communities, leaders of communities, returnees, women organisations,
trade unions, local panchayats, Mandal, district and State department
connected with labour and administration and governance related to these
workers. Both these trusts, it is urged, are dependent upon foreign
contributions to meet their day-to-day expenses. However, with the
amendments effected in year 2020 to the provisions of the 2010 Act, a
new dispensation has been set forth, which in their opinion, is manifestly
arbitrary. For, it entails in cancellation of certificate5 of the trust permitting
3 for short, “the 1976 Act”
4 for short, “the 1882 Act”
5 The expression “certificate” as defined in Section 2(1)(e) of the 2010 Act as amended,
reads thus:
“2. Definitions.—(1) In this Act, unless the context otherwise requires,—
 (a) to (e) xxxxxx xxx
 (e) “certificate” means certificate of registration granted under sub-section (3) of
section 12;”
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receipt of foreign contributions for being utilised towards the activities
of the concerned trust. Similarly, the operational “FCRA account” will
be barred from receiving foreign contribution. The petitioner-Trusts and
similarly placed persons6 (individuals/non-profit organisations) shall
mandatorily have to shift to new regime and open FCRA account(s) in
the specified branch on or before the designated date. There is no tangible
justification forthcoming for introducing such a change in the dispensation.
(c) The petitioners have referred to the Circular issued by the
Reserve Bank of India (RBI) dated 6.2.2012 in exercise of its power
under Section 36(1)(a) of the Banking Regulation Act, 1949, containing
detailed guidelines for implementation of the provisions of the 2010 Act
including the opening of FCRA accounts in all scheduled commercial
banks (excluding Regional Rural Banks/RRBs) throughout India. Public
notice dated 3.10.2020 issued by the respondent No. 2 after advent of
the changed dispensation owing to the amendment of the provisions of
the 2010 Act in the year 2020 is, therefore, excessive and without
jurisdiction and, thus, unenforceable in law. Further, the amendment of
Section 7 of the 2010 Act prohibits the registered person from transferring
any foreign contribution irrespective of whether such person is duly
registered or not, which was otherwise permitted under the unamended
provision. This change is also arbitrary and directly affects
the
implementation of the social upliftment schemes of the Trusts through
foreign contribution. It is a blanket ban on transfer of foreign contributions,
thus affecting the collaborations in developing eco-system(s), especially
for smaller and less visible grassroot organisations that may not meet
the criteria or be able to submit detailed proposals to get access to grants
from foreign countries. The grassroot organisations, in some cases, may
not have the track record or meet the eligibility criteria to obtain registration
under the Act and are entirely dependent on the funding/transfer by
foundations, such as the petitioner-Trusts. The intermediary organisations,
6 The expression “person” as defined in Section 2(1)(m) of the 2010 Act as amended,
reads thus:
 “2. Definitions.—(1) In this Act, unless the context otherwise requires,—
(a) to (l) xxxxxx xxx
(m) “person” includes—
 (i) an individual;
 (ii) a Hindu undivided family;
 (iii) an association;
 (iv) a company registered under section 25 of the Companies Act, 1956 (1
of 1956);”
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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which provide the necessary identification, monitoring and capability
building of the smaller non-profit organisations, which would be completely
jeopardised because of the changed dispensation. Resultantly, Section 7
read with Section 17(1), as amended, is violative of the rights guaranteed
under Articles 19(1)(c) and 19(1)(a) of the Constitution of India. These
provisions also suffer from the vice of ambiguity and overbreadth or
over-governance, thereby violating Article 14 as well.
(d) The petitioners have also assailed the validity of Section 12A,
whereby it is made mandatory to produce Aadhaar card details of the
office bearers/functionaries/directors of the societies/trusts as
identification document for the purpose of seeking registration, even
though they are expected to file application for grant of certificate under
Section 12 or get their certificate renewed under Section 16. To buttress
this assail, petitioners have relied upon the dictum of Constitution Bench
of this Court in K.S. Puttaswamy (Retired) & Anr. (AADHAAR) vs.
Union of India & Anr.7.
(e) The petitioners have also challenged the validity of Sections
17(1) and 12(1A) on the ground that the same suffer from the vice of
manifest unreasonableness, ambiguity, overbreadth and impose
unreasonable restrictions. Section 17(1) is also discriminatory, as it
mandates opening of “FCRA account” and receiving of foreign
contribution only at one bank at New
Delhi, i.e., New Delhi Main Branch8
of the State Bank of India9, 11, Sansad Marg, New Delhi-110001 on
specious ground of logistical issues for verification of accounts at different
locations. Broadly on these assertions, the petitioners have prayed for
the following reliefs: -
“a. To hold and declare that the impugned Sections 7, 12A, 12(1A)
and 17 as inserted in the FCRA, 2010 by the Foreign
Contribution (Regulation) Amendment Act, 2020 are ultra vires
Articles 14, 19 & 21 of the Constitution of India and the same
be struck down as unconstitutional.
b.
A writ in the nature of certiorari and/or any other writ, order
or direction of like nature setting aside and quashing the
impugned public notice dated 13th October, 2020 issued by the
Respondent No. 2 as illegal and unconstitutional.
7 (2019) 1 SCC 1 (paras 490 and 494)
8 for short, “NDMB”
9 for short, “SBI”
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c. To direct the Respondents not to interfere with the acceptance
and utilisation of foreign contribution, operation of the existing
bank accounts in the scheduled banks and function of the
petitioners and its bonafide members, and
d. Pass such other order/orders as Your Lordships may deem fit
and proper in the facts and circumstances of the case.”
3. Re: Writ Petition (Civil) No. 751 of 2021
(a) Petitioner Nos. 1 to 4 in this petition claim to be non-profit
organisations/Trusts from all over the country having registration under
the 2010 Act and petitioner No. 5 is an individual. The petitioner-Trusts
are voluntary organisations, duly registered under the unamended 2010
Act. They are engaged in carrying out social, educational and/or religious
charitable activities for persons across communities. Their activities range
from providing educational and vocational training and food, clothing
and medicine for the destitute, to support the disabled and the aged,
conducting AIDS awareness camps and taking care of the needs of
widows and orphaned children. They claim to have played pivotal role in
COVID-19 relief efforts. Reliance is placed on the dictum of this Court
in Public Union for Civil Liberties vs. State of T.N. & Ors.10, as to the
recognition by this Court regarding indispensable role played by non-
profit organisations.
(b) Even these petitioners have assailed amended provisions of
the 2010 Act, in particular, Section 17 of the Act being violative of
Articles
14, 19(1)(c), 19(1)(g) and 21 of the Constitution of India insofar as it
requires opening of primary FCRA account in SBI, NDMB only. It is
their case that non-profit organisations and voluntary organisations such
as the petitioner organisations contribute enormously to India’s GDP
and provide livelihood to millions of people through direct employment
and social welfare activities undertaken by them. Their role ranges from
service delivery and welfare activities and welfare works for community
development, promoting democracy, human rights, equitable governance
and citizens’ participation. They focus their activities particularly in low
social sector spending in India by tapping into global philanthropy. It is
stated that foreign contributions have increased from Rs.10,282 crore in
2009-2010 to Rs.16,343 crore in 2018-2019, which is a significant
contribution through foreign funds. The amended provisions of the 2010
10 (2004) 12 SCC 381 (para 5)
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Act, however, have altered the compliance procedure including the
registration of the Trusts receiving foreign contributions. That change,
however, is manifestly arbitrary, irrational and unreasonable. The purpose
of provisions such as Section 17 (unamended) and the relevant Rules
framed under the Act served the cause of effective monitoring of foreign
contribution received, in order to prevent misutilisation of such funds.
However, the amended provision is excessive, irrational, arbitrary and
falls foul of test of proportionality. It suffers from the vice of
disproportionate restrictions and failure to provide fair procedure. To
buttress the grounds of challenge, reliance is placed on K.C. Gajapati
Narayan Deo & Ors. vs. State of Orissa11; Maneka Gandhi vs. Union
of India & Anr.12; Ajay Hasia & Ors. vs. Khalid Mujib Sehravardi
& Ors.13; Indra Sawhney & Ors. vs. Union of India & Ors.14; T.M.A.
Pai Foundation & Ors. vs. State of Karnataka & Ors.15; Natural
Resources Allocation, In Re, Special Reference No.1 of 201216;
Modern Dental College and Research Centre & Ors. vs. State of
Madhya Pradesh & Ors.17; Shayara Bano vs. Union of India &
Ors.18; Navtej Singh Johar & Ors. vs. Union of India19; K.S.
Puttaswamy20; Anuradha Bhasin vs. Union of India & Ors.21; and
Indian Social Action Forum (INSAF) vs. Union of India22.
(c) On such assertion, the petitioners have prayed for the following
reliefs: -
“a.
A writ of mandamus or
any other writ/order declaring that
Section 17 of the FCRA is violative of Articles 14, 19(1)(c),
19(1)(g) and 21 of the Constitution, in so far as it requires
that the primary FCRA account is to be opened exclusively
in a branch of the State Bank of India, New Delhi, as notified
by the Respondent No. 1;
11 AIR 1953 SC 375
12 (1978) 1 SCC 248
13 (1981) 1 SCC 722 (para 16)
14 1992 Supp (3) SCC 217
15 (2002) 8 SCC 481 (para 25)
16 (2012) 10 SCC 1 (para 107)
17 (2016) 7 SCC 353 (paras 60)
18 (2017) 9 SCC 1 (para 101)
19 (2018) 10 SCC 1
20 supra at Footnote No.7 (para 157)
21 (2020) 3 SCC 637 (paras 78 to 80)
22 AIR 2020 SC 1363 (for short, “INSAF”) (para 15)
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b.
A writ of certiorari or any other writ/order quashing the
MHA Notification No. S.O. 3479(E) dated 7 October 2020
issued by Respondent No. 1 as being violative of Articles
14, 19(1)(c), 19(1)(g) and 21 of the Constitution;
c.
A writ of certiorari or any other writ/order quashing the
public notice bearing F.No. II/21022/23/(35)/2019-FCRA-
III dated 13 October 2020 as being violative of Articles 14,
19(1)(c), 19(1)(g) and 21 of the Constitution;
d.
A writ of certiorari or any other writ/order quashing the
public notice bearing II/21022/36/(58)/2021-FCRA-III dated
18 May 2021 as being violative of Articles 14, 19(1)(c),
19(1)(g) and 21 of the Constitution.
e.
Any other orders as deemed fit in the interests of justice.”
4. Re: Writ Petition (Civil) No. 634 of 2021
(a) This petition is filed as public interest litigation under Article
32 of the Constitution, challenging the decision of the competent authority
in extending the timeline for registration and compliance as per the
amended provisions of the 2010 Act being unnecessary and in excess of
the authority. It is a counter action filed by an individual for issuing
direction and peremptory writ of mandamus against the respondent No.
1 (Union of India) to desist from granting further extension to Non-
Governmental Organisations23 for complying with the provisions of the
2020 Act; and to maintain register of all NGOs receiving funds from the
foreign countries strictly as per the provisions of amended 2010
Act.
This petitioner is also relying upon the dictum in INSAF24; adverting to
the objective of the 2010 Act. Reliance is also placed on the elucidation
of this Court in In Re: Distribution of Essential Supplies and Services
During Pandemic25, for issuing a peremptory writ. Also, reliance is
placed on the decision in Teesta Atul Setalvad vs. State of Gujarat26,
to urge that in the past instances have come to the fore regarding
misappropriation of funds by NGOs. Lastly, reliance is placed on Rev.
Stainislaus vs. State of Madhya Pradesh & Ors.27.
23 for short, “NGOs”
24 supra at Footnote No.22 (para 18)
25 2021 SCC OnLine SC 339 (Suo Moto Writ Petition (C) No.3 of 2021)
26 (2018) 2 SCC 372
27 (1977) 1 SCC 677
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(b) The principal relief claimed in this petition, however, does not
survive for consideration. For, the date of last extension granted by the
competent authority has expired; and no further extension had been
granted thereafter during the pendency of this writ petition. Nevertheless,
we reproduce the reliefs claimed in this writ petition, which read thus: -
“A. Issue a Peremptory Writ of Mandamus directing Respondent
No. 1 not to grant any further extension to the NGOs from
complying with the mandate of the FCRA (Amendment) Act,
2020.
B.
Direct Respondent No. 1 and Respondent No. 2 to maintain
a register of all NGOs who are involved in the receiving of
funds received under FCRA, particularly during Covid times.
C.
Direct the Respondent No. 3 to place on record all information
about the steps taken by it with regard to the FCRA violation
by NGOs, in the context of Child Rights?
D. Pass such other Order or directions as this Hon’ble Court
may deem fit in the facts and circumstances of the case for
doing complete justice in the matter.”
5. Common reply of Respondent-Union of India
(a) Respondents have filed a common affidavit in response to the
averments made in the three writ petitions. The thrust of their plea is
that the amendment does not bar any person to transact in foreign
contribution provided it is compliant with the parameters predicated in
the 2010 Act including concerning FCRA registration or prior
permission.
The amendments were necessitated owing to past experience of the
executive and is a matter of legislative wisdom. The amendments are
intended to ensure effective regulatory measures regarding inflow and
utilisation of foreign funds. These are uniformly applicable and do not
discriminate any NGO receiving foreign contribution from foreign donors
and its utilisation. It is stated that the amendments, in no manner, impact
the fundamental rights, much less under Articles 14, 19(1)(c), 19(1)(g)
and 21 of the Constitution, as contended.
(b) The 2010 Act lays down a clear legislative policy of strict
control in respect of foreign contributions and its utilisation for specified
activities in the country. This is so because the inputs from concerned
stakeholders and duty-holders made it evident that the foreign contribution
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owing to its nature and vast expanse was being abused by some registered
organisations. Indisputably, no absolute right inheres in any one, much
less to receive foreign contribution outside the framework delineated by
the Parliament and implemented by the executive. Every person receiving
foreign contribution is obliged to comply with the regulatory and procedural
preconditions. The regulatory and procedural preconditions have been
specified by law in the form of the 2010 Act and amendments made
thereto vide the 2020 Act. The same being quintessence are required to
be fulfilled for acceptance of foreign contribution and its utilisation.
(c) Notably, in these petitions, no challenge is set forth in respect
of amended provisions, as obtained prior to coming into force of the
2020 Act. The same were complied with by all concerned without any
demur.
(d) The purpose behind the amendment of 2020, is to make
meaningful and effective regulatory arrangement and real-time reporting
of utilisation of the foreign contribution for the activity for which it has
been earmarked and permitted to be so used in terms of the registration
certificate or prior permission of the competent authority.
(e) The permission to receive foreign contribution is granted to
persons for a definite cultural, economic, educational or social programme
meant for the benefit of the society, as mandated in Sections 11 and 12
of the 2010 Act. The dispensation envisaged in the Act is to seek
registration or prior permission of the competent authority to receive
and utilise foreign contribution. The person having obtained such
certificate of registration or prior permission, cannot complain about the
regulatory provisions regarding utilisation thereof for the prescribed
activities. For, the legislative intent behind enactment of the 2010 Act is
that foreign contribution cannot be allowed unless it is tightly regulated
and controlled.
(f) The implementation of the 2010 Act increasingly revealed that
certain NGOs were involved primarily in routing of foreign contributions
only. They received and utilised foreign contribution by transferring it to
other NGOs, thereby establishing a principal-client relationship. To
overcome this mischief, it became necessary to amend the provisions
for effective regulatory and control measures in respect of receipt and
utilisation of foreign contribution. These amendments were necessitated
because of large-scale transfers of foreign contribution and sudden rise
in the inflow thereof in the recent past creating several operational
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difficulties and malpractices, that threatened to defeat the very purpose
of the 2010 Act. The regulatory agencies were finding it difficult to
monitor the ultimate utilisation of foreign contribution by the transferee.
To stop such violations and malpractices and to fix accountability, it was
considered necessary to stop the transfer of foreign contribution and
thus ensure that the recipient of the foreign contribution itself utilises the
same.
(g) The need to mandate the utilisation of foreign contribution by
the recipient NGO itself, is also on account of the purport of Sections 11
and 12 of the Act. The same predicate that FCRA registration be offered
to an association28 having definite programme to spend the foreign
contribution on purposes useful to society. The NGOs merely indulging
in transfer of foreign contribution to other NGOs albeit registered or
persons having prior permission, is not the scheme of the 2010 Act. In
order to ensure that the purported legitimate activities of NGOs do not
result in foreign contribution being diverted from one area of activity to
other area leading to its misuse including threatening the sovereignty
and integrity of the country, the Parliament opted the strict dispensation
of restricted utilisation of foreign contribution by the recipient NGOs
itself for the permitted activities. The amended provisions are intended
to remedy the mischief of endless chain of transfers of
foreign contribution
from the recipient NGOs to other registered NGOs creating layered
trail of money making it difficult to trace the flow and legitimate utilisation
thereof.
(h) The successive multiple chain of transfers not only create a
layered trail of money, but also lead to substantive portion of foreign
contribution being utilised as administrative expenditure by the concerned
entity by claiming it as its own allowance for administrative expenditure
to the extent of 50 per cent of the receipt. The aggregate of such
administrative expenditure, if reckoned with the aggregate quantum of
inflow of funds by the original recipient, would, in a given situation, far
exceed the statutory bar of 50 per cent of total contribution received by
28 The expression “association” as defined in Section 2(1)(a) of the 2010 Act as amended,
reads thus:
 “2. Definitions.—(1) In this Act, unless the context otherwise requires,—
 (a) “association” means an association of individuals, whether incorporated or not,
having an office in India and includes a society, whether registered under the Societies
Registration Act, 1860 (21 of 1860), or not, and any other organisation, by whatever
name called;”
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the NGO from abroad. Further, the wisdom of the Parliament was also
in favour of reducing the permissibility of administrative expenditure by
limiting it to 20 per cent, so that maximum benefit is reaped by the society
at large due to its utilisation for permissible activities of the NGO.
(i) The subject amendment became necessary also to obliterate
the mischief of foreign powers and foreign State and non-State actors
indulging in activities resulting in interference in the internal polity of the
country with ulterior designs. Resultantly, sub-Section (1A) has been
inserted in Section 12 of the 2010 Act, making it essential to furnish
details of FCRA account. This is in consonance with the manner specified
in Section 17 of the Act. In other words, insertion of sub-Section (1A)
was to infuse compatibility with other provisions of the 2010 Act. To that
end, a new section – Section 12A has also been inserted requiring
furnishing of Aadhaar card details in lieu of identification document. It is
urged that the petitioners have misapplied the exposition of the
Constitution Bench in K.S. Puttaswamy29. The said decision does not
completely rule out the possibility of intrusion into the privacy of a person,
which is backed by a just law.
(j) The core intent behind the provisions such as Section 12A is to
facilitate proper identification of person and associations with which the
persons are connected and also purposeful real-time monitoring of
activities for
ensuring that the same are not detrimental to the national
interest. As a matter of fact, the 2010 Act (unamended) itself mandates
that benami and fictitious activities are prohibited under the Act. Thus,
proper identification of person at the time of registration would ensure
proper identification of functionaries of FCRA/NGOs. Such a provision
ought to stand the test of legitimate aim and also proportionality test.
(k) The amended Section 17(1) specifies receipt of foreign
contribution in designated FCRA account in the SBI, NDMB. An NGO
is required to open such account for the purpose of remittances of foreign
contribution. The proviso to Section 17(1) envisages that the FCRA
account holder is free to add any FCRA account in any of the scheduled
bank of his choice for the purpose of receipt and utilisation of foreign
funds received in his FCRA account with the specified branch of the
SBI at New Delhi i.e., SBI, NDMB. The operation of the FCRA account
would be controlled by the account holder itself. The stipulation only
requires the inflow of foreign contribution through designated channel
29 supra at Footnote No.7
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which is to ensure effective implementation of proper regulatory and
controlled measures. Sufficient time was given to the FCRA account
holder to comply with the formalities as per the new dispensation.
(l) Initially, a public notice was issued on 13.10.2020 providing for
procedure and operation of the designated FCRA account, giving time
till 31.3.2021, which came to be extended from time to time until
December, 2021. It is stated that the respondent No. 1 also informed all
the FCRA registered associations/organisations through SMS and e-mail
on their registered mobile number and e-mail address about the public
notice dated 13.10.2020. The competent authority also amended the
Foreign Contribution (Regulation) Rules, 201130. It is urged that some
individual hardship may be caused to the registered associations on
account of the change, but that cannot be the basis to declare the law
made by the Parliament, vide the 2020 Act, invalid. Reliance is placed
on M/s. Laxmi Khandsari & Ors. vs. State of U.P. & Ors.31 and All
India Council for Technical Education vs. Surinder Kumar Dhawan
& Ors.32, wherein this Court held that the Court must refrain from
interfering with policy matters on the specious ground of individual
hardship to some persons.
(m) It is further stated that the 2010 Act mandates Ministry of
Home Affairs33 to regulate the receipt and utilisation of foreign
contributions in the country. That process involves
multiple steps including
audit, inspection and filing of annual return and monitoring of fund flow.
Accordingly, a systematic monitoring of FCRA bank account is imperative
part of the regulatory measures provided in the Act and the rules made
thereunder. It is elaborated that presently there are about 22,600 NGOs
holding registration or prior permission for specific project/programme.
These NGOs used to receive foreign contribution in an exclusive bank
account of their choice in any bank in India. That resulted in opening of
multiple accounts in hundreds of branches spread across the country.
This inevitably caused enormous difficulty in monitoring of inflow or
outflow of amount from the respective accounts and also during audit
process. Even though the mandate of law obliges the NGOs to file
periodical annual return, however, the inflow and outflow details at a
30 for short, “the 2011 Rules”
31 (1981) 2 SCC 600
32 (2009) 11 SCC 726
33 for short, “the MHA”
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particular point of time or on real-time basis, association-wise, as well
as, cumulatively, for all such organisations was not forthcoming and
monitoring thereof due to scattered distribution of the FCRA accounts
across the country seriously affected the monitoring process. Notably,
keeping in mind the convenience of the registered associations, they
have been given choice to open another FCRA account in any scheduled
bank/branch of their choice after opening of FCRA account in SBI,
NDMB, for receiving foreign contribution from any foreign source. It is
urged that the legislative intent behind the 2010 Act and the object sought
to be achieved is to curb misuse of foreign contribution threatening the
sovereignty and integrity of the nation including impacting the polity. As
aforesaid, the amendments were necessitated on account of past
experience and to curb the mischief which was prevalent despite the
tight regulatory measures under the 2010 Act.
(n) The legislative history has also been highlighted in the common
reply filed by respondents. To address the scourge of foreign contribution
impacting the national interest was taken note of by way of the 1976
Act. Certain changes were brought about to that Act in the year 1985,
making it more effective. The 2010 Act had been the outcome of a bill
drafted in 2006. The Statement of Objects and Reasons, as mentioned
in the said Bill titled as “Foreign Contribution (Regulation) Bill, 2006”
recognised that
significant developments had taken place since 1984,
such as change in internal security scenario, an increased influence of
voluntary organisations, spread of use of communication and information
technology, quantum jump in the amount of foreign contribution being
received and large-scale growth in the number of registered organisations,
necessitating comprehensive legislative approach. The Bill was referred
to the Department–related Parliamentary Standing Committee on Home
Affairs. Eventually, the 2010 Act was perceived. This legislative history
has been taken note of in the case of INSAF34. The amendments effected
in the year 2020 had become necessary to ensure that the object of the
Act is achieved efficiently.
(o) It is urged that the 2010 Act cannot be equated with any other
general legislation. The object behind this Act is to insulate the democratic
polity and public institutions and individuals working in the national
democratic space from being unduly influenced with the aid of foreign
contribution or foreign hospitality received from foreign source. The object
34 supra at Footnote No.22
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behind the Act is to secure the sovereignty and integrity of India including
public order and public interests. This wisdom of the Parliament cannot
be lightly brushed aside being a legislative policy. Reliance is placed on
Rajeev Suri vs. Delhi Development Authority & Ors.35 to buttress
this argument. Reliance is also placed on Joseph Lochner vs. People
of the State of New York36; New State Ice Company vs. Ernest A.
Liebmann37;West Coast Hotel Company vs. Ernest Parrish38; United
States of America vs. Carolene Products Company39; American
Federation of Labor, Arizona State Federation of Labor et al. vs.
American Sash & Door Company et al.40; and Ferguson vs. Skrupa41.
It is urged that the doctrine that prevailed in Joseph Lochner42 that due
process authorises Courts to hold laws unconstitutional whenever they
believe the legislature has acted unwisely - has long since been discarded.
(p) After having said so, reliance is also placed on the decision of
this Court in State of Himachal Pradesh & Ors. vs. Himachal Pradesh
Nizi Vyavsayik Prishikshan Kendra Sangh43; Ravindra
Ramachandra Waghmare vs. Indore Municipal Corporation &
Ors.44; State of Himachal Pradesh & Ors. vs. Satpal Saini45; and
Union of India vs. Indian Radiological & Imaging Association &
Ors.46, in support of the argument that Court should be loath in interfering
with the wisdom of the legislature adopting a particular policy. Further,
the Court cannot
substitute such wisdom in the guise of exercise of the
power of judicial review. Reliance is also placed on the enunciation in
Dr. Ashwani Kumar vs. Union of India & Anr.47 to contend that the
Constitution predicates that legislature is supreme and has a final say in
matters of legislation when it reflects on alternatives and choices with
inputs from different quarters, with a check in the form of democratic
accountability and a further check by the Courts which exercise the
35 2021 SCC Online 7 (paras 570 and 571)
36 198 U.S. 45 (1905)
37 285 U.S. 262 (1932)
38 300 U.S. 379 (1937)
39 304 U.S. 144 (1938)
40 335 U.S. 538 (1949)
41 372 U.S. 726 (1963)
42 supra at Footnote No.36
43 (2011) 6 SCC 597 (para 21)
44 (2017) 1 SCC 667 (para 46)
45 (2017) 11 SCC 42 (para 6)
46 (2018) 5 SCC 773 (para 16)
47 (2020) 13 SCC 585 (paras 25-27)
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power of judicial review. It is further held in this decision that it is not for
the Judges to seek to develop new all-embracing principles of law in a
way that reflects the stance and opinion of the individual judges when
the society/legislature as a whole are unclear and substantially divided
on the relevant issues.
(q) Reliance is also placed on Rustom Cavasjee Cooper vs. Union
of India48, restating the above principle and observing that the Court
will not sit in appeal over the policy of Parliament in enacting a law.
Reliance is also placed on R.K. Garg vs. Union of India & Ors.49,
wherein it has been observed that the Courts have only the power of
destroying and not to reconstruct. Further, in respect of economic
regulation being replete with complexity, self-limitation needs to be
exercised by the Courts, thereby following the path of judicial wisdom.
Reliance is also placed on Peerless General Finance and Investment
Co. Limited & Anr. vs. Reserve Bank of India50; Premium Granites
& Anr. vs. State of T.N. & Ors.51;Delhi Science Forum & Ors. vs.
Union of India & Anr.52; BALCO Employees’ Union (Regd.) vs.
Union of India & Ors.53; and State of Madhya Pradesh vs. Narmada
Bachao Andolan & Anr.54. Relying on said decisions, it is urged that
the gravamen of grievance of the writ petitioners is essentially about the
operational inconvenience being caused to them. That cannot be the
basis to declare the amended provisions being violative of fundamental
rights and more so, because the same are necessitated to overcome the
misuse of foreign contribution from foreign sources threatening the
sovereignty of the nation.
(r) Dealing with the plea regarding amended provisions being
violative of Article 14 of the Constitution, it is urged that the Constitution
does not predicate that all laws must be general in character and universal
in application. On the other hand, it is open to the legislature to distinguish
and classify persons or things for the purposes of legislation. Indeed,
such discrimination and classification should not be arbitrary and ought
to be in conformity with the intelligible differentia having a reasonable
48 (1970) 1 SCC 248 (para 63, 70)
49 (1981) 4 SCC 675 (para 8)
50 (1992) 2 SCC 343 (para 31)
51 (1994) 2 SCC 691 (para 54)
52 (1996) 2 SCC 405 (para 7)
53 (2002) 2 SCC 333 (para 38)
54 (2011) 7 SCC 639 (para 36)
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relation to the object sought to be achieved by the law in question. The
impugned amendments of 2020 are fully compliant. The amendments
fulfil the “twin test of classification” founded on the factum of
classification between Indian citizens and foreigners, so much so, Indian
contribution and foreign contribution. The amendments fulfil the
permissible classification principle and are founded on intelligible
differentia and distinguish contributions to be received by the NGO. In
other words, if an NGO intends to receive foreign contribution, it must
fulfil the necessary conditions and comply with the formalities specified
therefor. Thus understood, the exposition in Shayara Bano55, pressed
into service by the writ petitioners, will be of no avail. Whereas,
classification by law is not forbidden. It is not open to belittle the legislative
intent behind the amendments by giving it the colour of manifest
arbitrariness. The argument that the law suffers from the vice of manifest
arbitrariness, must be examined on the touchstone of the enunciation by
this Court in series of judgments. Reliance is placed on Charanjit Lal
Chowdhury vs. The Union of India & Ors.56; The State of Bombay
& Anr. vs. F.N. Balsara57; Kathi Raning Rawat vs. State of
Saurashtra58; Gurbachan Singh vs. State of Bombay & Anr.59; The
State of Punjab vs. Ajaib Singh & Anr.60; Habeeb Mohamed vs. The
State of Hyderabad61; Kedar Nath Bajoria vs. The State of
West
Bengal62; Baburao Shantaram More vs. Bombay Housing Board &
Anr.63; Harman Singh & Ors. vs. Regional Transport Authority,
Calcutta Region & Ors.64; Sakhawant Ali vs. State of Orissa65;
Budhan Choudhry & Ors. vs. State of Bihar66; D.P. Joshi vs. State
of Madhya Bharat & Anr.67; Hans Muller of Nurenburg vs.
Superintendent, Presidency Jail, Calcutta & Ors.68; Kishan Singh
55 supra at Footnote No.18
56 AIR 1951 SC 41 (paras 8-10, 18, 27-29, 61-65)
57 AIR 1951 SC 318 (paras 37-42, 47, 62)
58 AIR 1952 SC 123 (paras 7, 19, 32-36, 45-48)
59 AIR 1952 SC 221 (paras 3-6, 8)
60 AIR 1953 SC 10 (para 22)
61 AIR 1953 SC 287 (paras 4-6)
62 AIR 1953 SC 404 (paras 6-16)
63 AIR 1954 SC 153 (para 6)
64 AIR 1954 SC 190 (para 7)
65 AIR 1955 SC 166 (paras 9-10)
66 AIR 1955 SC 191 (paras 5, 7, 9)
67 AIR 1955 SC 334 (paras 14-16)
68 AIR 1955 SC 367 (paras 14, 24-25)
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& Ors. vs. State of Rajasthan & Ors.69; P. Balakotaiah vs. Union of
India & Ors.70; Shri Ram Krishna Dalmia vs. Shri Justice S.R.
Tendolkar & Ors.71; Express Newspaper (Private) Ltd., & Anr. vs.
Union of India & Ors.72; Khandige Sham Bhat vs. Agricultural
Income-tax Officer, Kasaragod & Anr.73; Raja Bira Kishore Deb,
hereditary Superintendent, Jagannath Temple vs. The State of
Orissa74; Ganga Ram & Ors. vs. Union of India & Ors.75; Anant
Mills Co. Ltd. vs. State of Gujarat & Ors.76; Mohan Kumar
Singhania & Ors. vs. Union of India & Ors.77; Venkateshwara
Theatre vs. State of Andhra Pradesh & Ors.78; Ombalika Das vs.
Hulisa Shaw79; Dharam Dutt & Ors. vs. Union of India & Ors.80;
and Basheer @ N.P. Basheer vs. State of Kerala81.
(s) In substance, it is the case of the respondents that during
implementation of the 2010 Act, it was experienced that there was need
to streamline the provisions, so as to achieve the desired objective of the
Act by improving the compliance mechanism, enhancing transparency
and accountability in the receipt and utilisation of foreign contribution
through effective monitoring and facilitating genuine NGOs or associations
working for the welfare of the society in ensuring maximum benefit to
the intended population. Indisputably, all the registered associations have
been treated equally in respect of receipt of foreign contribution and its
utilisation for the purpose for which it is so received. The law permits
utilisation of foreign
contribution by the recipient NGO itself and ensures
that the spending of administrative expenses should not exceed 20 per
cent of such receipts, so that substantial portion of the foreign contribution
is spent on the activities for which it has been so received and benefits
the targeted population. The amendment mandating receipt of foreign
contribution only in a designated FCRA account with the SBI, NDMB is
69 AIR 1955 SC 795 (paras 3-5)
70 AIR 1958 SC 232 (para 13(IIa), 14-16)
71 AIR 1958 SC 538 (paras 11-17)
72 AIR 1958 SC 578 (paras 210-218)
73 AIR 1963 SC 591 (paras 7-9)
74 AIR 1964 SC 1501 (para 5)
75 (1970) 1 SCC 377 (para 2)
76 (1975) 2 SCC 175 (paras 24-25)
77 1992 Supp. (1) SCC 594 (paras 127, 130)
78 (1993) 3 SCC 677 (paras 20-23, 29)
79 (2002) 4 SCC 539 (para 11)
80 (2004) 1 SCC 712 (para 56)
81 (2004) 3 SCC 609 (paras 20, 23)
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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to facilitate access of data of foreign contribution from one source for
effective monitoring of fund flow received through foreign contribution.
This legislative intent, by no means, can be said to be in conflict with the
object of the Principal Act and in any case, cannot be labelled as manifestly
arbitrary as well. This is also because Section 17(1) of the 2010 Act
would permit the registered NGOs to open and operate another FCRA
account in any scheduled bank/branch of their choice in the country.
Accordingly, it is urged that the argument regarding amended provisions
being violative of Article 14, is devoid of merits.
(t) While countering the challenge on the ground of Article 19(1)(c)
and 19(1)(g), it is stated that there exists no right to seek a foreign
contribution without regulation. Further, the 2010 Act does not prohibit
the foreign contributions or the right to form the associations itself or the
right to practice any profession. Rather, it merely seeks to provide
efficacious regulatory regime regarding foreign contributions to be
received by such associations. The rights under Article 19(1)(c) and
19(1)(g), therefore, remain unaffected. It is urged that right to form an
association and right to freedom of trade and profession do not include
right to receive unbridled and unregulated foreign contributions and more
so its utilisation for activities other than permissible activities. In other
words, the law
in question is squarely covered by the exceptions provided
for within the meaning of Article 19(4) and 19(6) of the Constitution.
(u) The challenge to the amendments made on the touchstone of
Article 19(1)(c), needs to be considered in light of the object of the
Principal Act. It is an Act to protect umbrella terms of “sovereignty and
integrity of India” and “public order”. Reliance is placed on O.K. Ghosh
& Anr. vs. E.X. Joseph82, wherein it has been noted that clause (4) of
Article 19 refers to the restriction imposed in the interests of public
order. The restriction, proximate and direct, must have causal connection
with public order.
(v) Reliance is also placed on exposition in following decisions: -
Saghir Ahmad & Anr. vs. State of U.P. & Ors.83; Babulal
Parate vs. The State of Maharashtra & Ors.84; Daya vs. Joint Chief
Controller of Imports & Exports & Anr.85; Akadasi Padhan vs. State
82 AIR 1963 SC 812 (paras 9-10)
83 AIR 1954 SC 728 (para 23)
84 AIR 1961 SC 884 (paras 26, 28-32)
85 AIR 1962 SC 1796 (paras 14-19)
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of Orissa & Ors.86; Municipal Committee, Amritsar & Ors. vs. State
of Punjab & Ors.87; Madhu Limaye vs. Sub-Divisional Magistrate,
Monghyr & Ors.88; Daruka & Co vs. Union of India & Ors.89; Md.
Serajuddin & Ors. vs. State of Orissa90; Municipal Corporation of
the City of Ahmedabad & Ors. vs. Jan Mohammed Usmanbhai and
Anr.91; Sushila Saw Mil vs. State of Orissa and Ors.92; Laxmikant
vs. Union of India & Ors.93; Krishnan Kakkanth vs. Government of
Kerala & Ors.94; Indian Handicrafts Emporium & Ors. vs. Union
of India & Ors.95; Om Prakash & Ors. vs. State of U.P. & Ors.96;
People’s Union for Civil Liberties & Anr. vs. Union of India97; State
of Gujarat vs. Mirzapur Moti Kureshi Kassab Jamat & Ors.98; Kerala
Bar Hotels Association & Anr. vs. State of Kerala & Ors.99;and
Anuradha Bhasin100.
(w) It is urged that the impugned amendments are directly related
to the object sought to be achieved by the 2010 Act. The object behind
the Principal Act is to secure the interests of sovereignty and integrity of
the country, public order and interests of general public. That objective
being consistent part of the legislative policy of the country for the past
five decades, is beyond judicial review. As the impugned amendments
have a direct and proximate relationship with the stated object of the
Principal Act, they are fully protected within the meaning of Article 19(4)
and 19(6).
(x) It is further contended that right to life and liberty within the
meaning of Article 21
of the Constitution, cannot and does not include
the right to receive unregulated funds and contributions; misuse of which
inevitably threatens the polity and sovereignty and integrity of the country.
86 AIR 1963 SC 1047 (paras 1, 14-15)
87 (1969) 1 SCC 475 (paras 10, 14)
88 (1970) 3 SCC 746 (paras 12-16, 24, 26-28, 46)
89 (1973) 2 SCC 617 (paras 16-20, 24-25)
90 (1975) 2 SCC 47 (para 28)
91 (1986) 3 SCC 20 (paras 15-24)
92 (1995) 5 SCC 615 (para 4)
93 (1997) 4 SCC 739 (para 10)
94 (1997) 9 SCC 495 (paras 27-29)
95 (2003) 7 SCC 589 (paras 31-41)
96 (2004) 3 SCC 402 (paras 31-40)
97 (2004) 9 SCC 580 (paras 40-45)
98 (2005) 8 SCC 534 (paras 73-79, 135-137)
99 (2015) 16 SCC 421 (paras 30-38)
100 supra at Footnote No.21 (paras 154-159)
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
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The amended provisions, by no stretch of imagination, prohibit the inflow
of foreign contributions or the right to form associations itself or the right
to practice any profession. The same merely provide for tight regulatory
mechanism to ensure that the foreign contribution received from foreign
source is utilised only for the purpose by the recipient itself for which it
has been so permitted, and that restriction is only to secure the sovereignty
and integrity of the nation and public order. In any case, it (regulatory
mechanism) being procedural matter, would come within the purview of
procedure established by law. Being a reasonable restriction for
accomplishing the objectives of the Principal Act and founded on intelligible
differentia, it must be regarded as rational and proportionate, and as
furthering the State interests.
(y) The respondents have also placed reliance on K.S. Puttaswamy
& Anr. vs. Union of India & Ors.101 in support of the argument that
the amended provisions are in furtherance of the legitimate State interests
encompassed in the regulatory measures provided for in the Principal
Act. Reliance is also placed on Gobind vs. State of Madhya Pradesh
& Anr.102, wherein this Court had observed that even though privacy
and dignity claims must receive scrutiny with due care, but that claims
will necessarily have to go through a process of case-by-case
developments. Reliance is also placed on
Chintamanrao & Anr. vs.
The State of Madhya Pradesh103; The State of Madras vs. V.G. Row104;
Teri Oat Estates (P) Ltd. vs. U.T., Chandigarh & Ors.105; Ramlila
Maidan Incident, In re106; Sahara India Real Estate Corporation
Limited & Ors. vs. Securities and Exchange Board of India &
Anr.107; and Excel Crop Care Limited vs. Competition Commission
of India & Anr.108 to contend that Article 21 is extremely wide. Whereas,
the prohibition on transfer of foreign contribution and receipt of foreign
contribution in the manner specified in the amended provisions are
intended to improve compliance mechanism, enhance transparency and
accountability in the receipt and utilisation thereof. In that sense, it does
not impinge upon the fundamental rights of the petitioners, much less
101 (2017) 10 SCC 1 (paras 310-311, 377, 380, 526, 558, 582 and 639)
102 (1975) 2 SCC 148 (paras 22-23, 28)
103 AIR 1951 SC 118 (para 7)
104 AIR 1952 SC 196 (para 15)
105 (2004) 2 SCC 130 (paras 40, 44-46, 49)
106 (2012) 5 SCC 1
107 (2012) 10 SCC 603
108 (2017) 8 SCC 47 (paras 29, 92, 94-95)
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Article 21 of the Constitution. The regulation and control are directly
relatable to activities/programmes detrimental to the sovereignty and
integrity of India, public order and interests of general public and for
matters connected therewith or incidental thereto. It being a reasonable
and proportionate restriction having clear nexus with the object of the
Principal Act without impacting the right of the registered associations
to continue to receive foreign contribution from foreign donors and also
utilise the same by opening accounts in different scheduled banks/
branches of their choice in the country, by no stretch of imagination, can
be said to impinge upon the fundamental rights of the registered
associations or persons having prior permission of the competent authority.
(z) As regards the grievance of the writ petitioners being forced
to open and operate account in the designated bank and branch i.e., SBI,
NDMB, it is stated in the reply affidavit that for outstation FCRA
organisations located in remote areas and for operational ease of any
FCRA organisation, MHA and SBI have put in place a system to enable
the associations/FCRA organisations/NGOs to open main bank account
in SBI, NDMB without any need to physically come to Delhi. It certainly
dispels and redresses the principal grievance of the writ petitioners about
they being forced to visit Delhi to open account in the designated branch
coupled with the enabling provision allowing the
registered associations
to utilise and transact from any scheduled bank/branch of their choice in
the country. The fundamental basis of assail to the amended provisions,
therefore, falls to the ground.
(aa) The respondents have relied on the Standard Operating
Procedure (SOP) issued by the appropriate authority in regard to the
opening of FCRA account in the designated branch (SBI, NDMB) to
receive the inflow of foreign contribution including to permit the registered
associations to open FCRA account in other scheduled banks/branches
of their choice across the country. Further, it is asserted that until the
filing of the common response in October, 2021, around 19,000 accounts
were already opened in the designated branch at New Delhi. That was
possible even without physical visit of the authorised persons of the
concerned associations to New Delhi. This facility of opening account
in the designated bank and branch is provided on free/gratis basis without
any bank charge on real-time basis by the SBI on the instructions of the
recipient organisations through digital or internet banking. As aforesaid,
these arrangements are necessitated for the purposes of effective
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
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enforcement and operational angle and to monitor the flow of foreign
contributions and information concerning the same on real-time basis
from one centralised location. This has reasonable nexus and proximate
relationship with the object sought to be achieved by the Act and to
ensure transparency and accountability of all concerned. The registered
associations/NGOs are not put to any undue hardship or extra financial
costs/compliance burden. The challenge to the amended provisions,
therefore, is based on tenuous assertions.
(bb) It is also asserted that application for effecting any change
of details furnished while opening the main account in the designated
branch (i.e., SBI, NDMB) is to be submitted only through online mode
on the FCRA web portal i.e., fcraonline@nic.in. It is highlighted that the
assertion made by the writ petitioners that there are close to 50,000
persons registered under FCRA, is false and misleading. In fact, the
FCRA website itself would reveal that out of close to 50,000 persons
registered under FCRA, registration certificates of less than 23,000 are
active. Further, registration of 20,600 non-compliant persons has already
been cancelled. Furthermore, following the changed dispensation as per
the amended provisions (of 2020 Act), over 19,000 accounts have already
been opened in the designated branch (i.e., SBI, NDMB) until October,
2021. It is, thus, urged that the amended provisions are
intended to further
the object of the Principal Act and are regulatory in nature concerning
the receipt and utilisation of foreign contribution or foreign hospitality by
certain individuals or associations or companies and incidental matters;
and are consistent with the underlying principles expounded in the Principal
Act.
(cc) After having said as above, the affidavit goes on to highlight
that none of the amended provisions even remotely permit or attempt to
oversee the banking functions. The amended provisions of the Act, as
well as, the Regulations, are intended to only bring out clarity on crucial
role assigned to the banks in respect of the implementation of the Principal
Act of 2010. Similarly, the stated circular is only an administrative guidance
for better implementation of the provisions of the 2010 Act.
(dd) The respondents have, thus, prayed for dismissal of the writ
petitions109 filed by the registered associations, consequently leaving
nothing for consideration in the writ petition filed by Vinay Vinayak
Joshi110.
109 W.P. (C) No.566 of 2021 and W.P. (C) No.751 of 2021
110 W.P. (C) No.634 of 2021
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6. Counter affidavit filed by respondent No. 3-SBI111
(a) SBI has also filed counter affidavit dated 20.10.2021 in Writ
Petition (C) No.751 of 2021 sworn by one Anjana Tandon, Dy. General
Manager, SBI, New Delhi Main Branch. This affidavit essentially deals
with the issues concerning SBI. It is stated that SBI is the largest public
sector bank in India with network of 22,219 branches in India and spread
across the length and breadth of the country, including rural and urban
areas/branches. SBI also has 223 foreign offices and about 230 overseas
branches in around 40 countries.
(b) It is stated that FCRA account is not a normal current/savings
account. The transactions effected in this account ought to be strictly
regulated, as predicated in the 2010 Act. SBI works in tandem with the
instructions issued by the Government of India in that regard. The
Government of India has issued a Standard Operating Procedure (SOP)
with regard to opening and operation of FCRA account. The information
in that regard has been disseminated to account holders and is in public
domain, including by conducting Webinars from time to time. The main
Branch of SBI has created a dedicated cell having over forty officials to
deal with all the FCRA accounts at SBI, NDMB. They exclusively deal
with FCRA accounts and have been provided with requisite
infrastructure. SBI has made internal arrangements regarding sharing
of details of 23,000 entities with branches of SBI all over India;
liaising
with foreign offices of SBI for credential verification of the overseas
stakeholders; and have designated Nodal Officer up to the rank of
Assistant General Manager in 17 local Head Offices, spread all over
India for operating FCRA accounts. By this affidavit, SBI has refuted
the grievance of the writ petitioners/registered associations about
operational and other difficulties being faced by them in transacting/
opening account in the designated Branch at New Delhi.
(c) It is emphatically stated that the entities, desirous of opening
FCRA account or for accessing funds, are not required to visit Delhi as
has been clearly indicated in the communication dated 9.6.2021. This is
also duly notified on the official website of the MHA. SBI has streamlined
the entire process for the convenience of the organizations to open/
operationalize FCRA accounts. It is stated that the entities can do banking
activities including internet banking activity anywhere and anytime, aided
with the power and convenience of the internet. The entities can avail
111 in W.P. (C) No.751 of 2021
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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CINB and may customize their authority matrix for making any financial
transactions. It is also open to the entities to open and operate FCRA
account (utilization account) at one or more branches of scheduled banks
of their choice. Alternatively, they are free to use their previous accounts
as utilization accounts, to which funds can be transferred from the
designated FCRA account at SBI, NDMB.
(d) It is also asserted that the entities are not required to maintain
minimum balance in FCRA accounts. Further, they are free to operate
their account without physically approaching SBI Branch on regular basis
as in the case of any other normal account holder, if they intend to access
internet banking facility. It is denied that the registered associations/
concerned entities are required to appoint a designated person in New
Delhi and make frequent trips for offline KYC verification as alleged.
Instead, they can approach the nearest SBI Branch and get the offline
verification of document done at the said Branch itself. In other words,
the argument of inconvenience put forth by the writ petitioners and
similarly placed persons have not only been refuted, but information
regarding sufficient logistical arrangements made by the respondent-
Bank (SBI) to facilitate opening as well as operating of FCRA account
by authorised persons has been delineated in the response filed before
this Court. The same is indicative of the fact
that the services are offered
to the concerned entities at the local level itself without requiring the
FCRA account holders to visit the main Branch at New Delhi.
(e) This affidavit also reveals that SBI has more than two lakh
employees working in branches in different parts of the country with
network all over the country as well as abroad. It is stated that for the
purposes of operating 23,000 FCRA accounts, there is no need to incur
high administrative expenses. Instead, the Bank has augmented additional
infrastructure required for that purpose in the designated Branch at New
Delhi.
(f) It is further stated that by the time the affidavit was filed,
about 20,000 FCRA accounts have already been opened, out of
approximately 23,000 active organizations, and that the remaining
registered associations were in the process of getting their accounts
opened by approaching the main Branch at New Delhi. It is urged that
the respondent-Bank (SBI) is offering all banking facilities as requested/
demanded by the concerned account holder. SBI has denied that there
is any delay in the process of opening of account and receiving of foreign
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remittances due to the volume of transactions or that it does not have
necessary infrastructural capacity to handle queries from thousands of
organizations, as alleged by the writ petitioners. At the same time, it has
been fairly accepted that during the second phase of COVID-19, due to
extraordinary situation, there may have been delay in some cases, but all
the accounts have been made operational and are being accessed by the
concerned FCRA account holders. The affidavit also mentions about
the steps taken to streamline the operational issues in respect of FCRA
accounts. The substance of this affidavit is to demonstrate that no
inconvenience is being caused to the FCRA account holders, in any
manner; and the Bank is fully equipped to handle the logistical issues
concerning FCRA accounts in the main Branch as well as other branches
across the country.
7. Rejoinder affidavit filed by the writ petitioners
(a) The writ petitioners have filed rejoinder affidavit whereby
assertions made in the writ petitions are reiterated. The emphasis is
essentially in respect of grounds to assail the validity of the amended
provisions of the 2010 Act, in particular Sections 7, 12(1A), 12A and
17(1). The rejoinder affidavit also points out the reason for rejection of
application for registration and opening of bank account. Those matters,
however, cannot be the basis to test the validity of the provisions. Hence,
it is not necessary to elaborate the same. They are more in
the nature of
inconvenience caused in respect of process of registration and of operating
the FCRA accounts.
8. Submissions of the writ petitioners112
(a) The registered associations/writ petitioners would urge that
the argument of legislative policy being inviolable cannot be countenanced.
For, this Court in A.K. Gopalan vs. State of Madras113, noted that the
Court is obliged to consider the effect of the law on the citizens and
whether the same impacts the fundamental rights guaranteed under Part
III of the Constitution.
(b) It is urged that this Court in INSAF114 has already recognised
the right to receive foreign contribution. Thus, it is not open to contend
that no fundamental right exists to receive foreign contribution. The
112 in Writ Petition (C) Nos.566 and 751 of 2021
113 AIR 1950 SC 27
114 supra at Footnote No.22 (paras 18 to 22)
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
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amended provisions are arbitrary and overbroad restrictions on the right
to receive foreign funding, thus, it is violative of Article 14 of the
Constitution. Further, this Court in the case of INSAF115 did not examine
the effect of the impugned provisions on the fundamental rights under
Article 19 of the Constitution as there was no petitioner in individual
capacity before the Court. The amendments effected vide the 2020 Act
are not only hit by the vice of Article 14 of the Constitution, but also
Article 19(1)(a), 19(1)(c) and 19(1)(g) as well as Article 21 of the
Constitution.
(c) As regards Section 7 of the Act, it is submitted that pre-
amendment, transfer of foreign contribution to other person duly
registered and had been granted the certificate or obtained the prior
permission under the 2010 Act was permissible. The proviso permitted
the transfer of foreign contribution by the recipient registered association.
This has been completely prohibited by the amended provision, which is
overbroad restriction. For, this prohibition would inevitably impact the
funding of the entities who were otherwise allowed to receive foreign
contribution. Having so permitted, the regulatory measures at best can
be to ensure that the foreign contribution is eventually utilised for the
purpose for which it has been so permitted. The total prohibition in terms
of the amended Section 7 is manifestly arbitrary and has no causal
connection with the object sought to be achieved by the Principal Act or
the Amendment Act. In support of this contention, reliance is placed on
K.S. Puttaswamy116. In that, being a case of total prohibition, it impacts
the very utilisation of foreign contribution by any organisation. The
expression “person” in Section 2(1)(m) of the Act posits an expansive
meaning. Thus, post amendment transfer of foreign contribution to
individual or organisation will be affected. Significantly, the word “transfer”
has not been defined. In other words, there is no clarity about the manner
of utilisation of foreign contribution by the registered entities who had
been allowed to receive the same for utilisation for specified purposes.
The ordinary meaning of expression “utilisation” would include transfer
of foreign contribution to another entity; and, thus, there is apparent
conflict between Section 7 and Section 8 of the Act. As a result, amended
Section 7 is not only absurd, but defeat the very object of the Principal
Act, which allows regulated use of foreign contribution. In absence of
any definition of expressions “transfer” and “utilisation”, use of foreign
115 supra at Footnote No.22
116 supra at Footnote No.7 (paras 105 and 106)
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contribution by the entity would be risking violation of the provisions of
the Act.
(d) It is urged that Section 7 is overbroad and vague. There is
ambiguity as to what constitutes various social or educational or cultural
or economic or religious purpose under Section 11(1) of the Act and at
the same time, Section 35 of the Act invites punishment for contravention
of any provision of the Act. For that reason, Section 7 suffers from the
vice of manifest arbitrariness and hit by Article 14 of the Constitution.
To buttress this argument, reliance is placed on the enunciation of this
Court in Shreya Singhal vs. Union of India117. Further, the amended
Section 7 would not permit collaboration between registered non-profit
organisations to serve larger social needs across the country with any
other entity or person. That is bound to hamper work of grassroot
organisations which receive sub-grants in India from a consortium lead
partner in international development projects. Those projects will be
affected at the grassroot level where the registered organisations may
not be able to cater on its own.
(e) It is then urged that even if the purpose of Section 7 is to
prevent misutilisation of funds, it violates the fundamental rights
guaranteed in Article 19(1)(a), 19(1)(c) and 19(1)(g) under Part III of
the Constitution, being an unreasonable restriction. Such restriction serves
no legitimate Government purpose. It has no rational nexus with the
object of the
enactment, including the Principal Act. The unamended
provision was less restrictive and was working very well, serving the
objective of the Principal Act. Furthermore, being a case of complete
prohibition, the registered organisations would not be able to continue
collaboration with other entities at the grassroot level, even if those entities
are also duly registered under the Act. This is bound to denude the recipient
(registered organisation) of foreign contribution from reaching out and
undertaking specified activities at the grassroot level through such entity.
Such onerous restriction does not stand the test of proportionality or
being reasonable restriction as held in the case of K.S. Puttaswamy118.
Reliance is also placed upon a recent decision of this Court in Manohar
Lal Sharma vs. Union of India & Ors.119, to contend that the State
had failed to specifically establish national security issues to justify the
amendments to the 2010 Act. In absence thereof, no omnibus prohibition
117 (2015) 5 SCC 1
118 supra at Footnote No.7 (paras 157 and 158)
119 W.P. (Crl.) No.314 of 2021 etc., decided on 27.10.2021 (paras 49 and 50)
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
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can be validated by the Court. It is urged that Section 7, being manifestly
arbitrary and lacking any determining principle, is wholly unreasonable
and, therefore, violative of Article 21 of the Constitution.
(f) On similar lines, Section 12(1A) read with Section 17(1) has
been assailed, being manifestly arbitrary and unreasonable. The challenge
is limited to the stipulation of opening a bank account only at one specific
branch of SBI at New Delhi for all organisations across the country
receiving foreign contribution. Such a requirement is absurd, irrational
and serves no legitimate purpose under the 2010 Act or any other law. It
is urged that the challenge is not to the amended sub-Section (2) of
Section 17 requiring reporting to the authority. That being a Bank’s
obligation can be taken forward by the Bank. No tangible logic is
forthcoming to justify the need for Section 12(1A) read with Section
17(1), as to how national interest would be jeopardised by not adhering
to that regime especially when all the scheduled banks are regulated by
the Reserve Bank of India, including other Government owned public
sector banks or even local branches of SBI. Each one of them is obliged
to report all such transactions within 48 hours to the MHA. Such a
provision, therefore, is simply absurd and irrational.
(g) It is argued that the impact of amended provisions is to denude
the registered associations to have physical access to
their primary
account at Delhi along with a host of other restrictions. It is further
urged that the amended provision does not stand the test of legitimate
goal for which such dispensation is necessary nor spells out the causal
connection for compelling the persons seeking foreign contribution to
open bank accounts only in specified branch at New Delhi and how it
would further the cause of the State interests. Even, the principle of
necessity has not been substantiated by the State, especially when there
are already existing restrictions and proper mechanism to achieve the
object of the Principal Act whereunder each organisation is mandated to
open a FCRA account in a scheduled bank of its choice, which account
details were required to be reported to the MHA and linked to the FCRA
registration number of the organisations. All the registered organisations
were already complying with that requirement and have been registered
on an electronic portal known as ‘DARPAN’ having unique ID provided
to them. Further, the registered organisations were also obliged to submit
regular returns as specified in Section 18 read with Rule 17 of the 2011
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Rules. The said dispensation requires furnishing of necessary details
and reporting within 48 hours to the appropriate authority. The specious
plea of national security cannot be countenanced. The same has not
been substantiated and there can be no presumption in that regard in
favour of the legislation.
(h) Further, respondent No.3-SBI has admitted that only 40
personnel are assigned with the work of operating FCRA accounts at
the main Branch. It is unfathomable as to how such a low number of
personnel would be able to handle the workload of transaction of thousands
of persons for 23,000 registered organisations. Relying on the expositions
in Anuradha Bhasin120 and Maneka Gandhi121, it is urged that Section
12(1A) read with Section 17(1) is unconstitutional, being manifestly
arbitrary and irrational.
(i) Even, the provision in the form of Section 12A is violative of
fundamental rights guaranteed to the office bearers of the registered
organisations as it requires mandatory disclosure of Aadhaar number as
an identity document for grant of FCRA certificate under Section 12, or
renewal under Section 16 or to open a bank account under Section 17.
Such a provision clearly falls foul of the test of proportionality as held in
K.S. Puttaswamy122. Inasmuch as, overseas citizens of India or foreign
nationals serving as office bearers can provide an identity alternate to
the Aadhaar card for the same purposes. There is no legitimate goal set
forth for inserting
Section 12A in the Principal Act. It is urged that even
this provision has no nexus with the object sought to be achieved under
the Principal Act and suffers from the vice of violation of Article 19 of
the Constitution.
9. We have heard Mr. Gopal Sankaranarayanan, learned senior
counsel and Mr. Gautam Jha, learned counsel for the petitioners and Mr.
Tushar Mehta, learned Solicitor General and Mr. Sanjay Jain, learned
Additional Solicitor General for the respondents.
Legislative History
10. In the first place, we must advert to the legislative history
culminating with the 2010 Act, as amended in 2020. A Bill was introduced
in the Rajya Sabha in the year 1973 titled as “the Foreign Contribution
120 supra at Footnote No.21
121 supra at Footnote No.12
122 supra at Footnote No.7
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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(Regulation) Bill, 1973”. The Statement of Objects and Reasons
appended to the said Bill read thus: -
“STATEMENT OF OBJECTS AND REASONS
There has been widespread concern about the unregulated
receipt of funds from foreign agencies by individuals and
organisations in the country. The Bill seeks to regulate the
acceptance and utilisation of foreign contribution or hospitality
with a view to ensuring that our parliamentary institutions, political
associations, academic and other voluntary organisations as well
as individuals working in important areas of national life may
function in a manner consistent with the values of a sovereign
democratic republic.”
(emphasis supplied)
On 19.2.1974, the House referred the Bill to a Joint Committee of
the Houses consisting of 60 members, of whom 20 were to be nominated
from Rajya Sabha. While introducing the Bill, the Minister outlined the
contours of the regulatory measures felt essential in respect of the foreign
contributions. He adverted to three options. The first of outright
prohibition; the second being acceptance subject to prior permission of
Government; and the third of acceptance subject to intimation being
given to Government. He expressed that the Government felt that it was
an important measure and believed that the deliberations in the Joint
Committee of both the Houses would enable formulation of a well-
conceived Bill, on the basis of informed representative public
opinion
desirous of securing the objectives, as stated in the Bill. There was broad
unanimity between the members that the issue needed in-depth
examination.
11. The then Minister of Home Affairs presented the
recommendation of the Rajya Sabha before the Lok Sabha on 25.3.1974.
The motion was duly adopted by the Lok Sabha and 40 members of the
said House were nominated to the Joint Committee of the Houses.
12. The report of the Joint Committee on the Bill to regulate the
acceptance and utilisation of foreign contribution or hospitality by certain
persons or associations and for matters connected therewith or incidental
thereto, was presented before the Lok Sabha on 6.1.1976. Similarly, the
report of the Joint Committee of the Houses on the Bill was presented in
the Rajya Sabha on 6.1.1976.
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13. The deliberations regarding the proposed Bill and the report
of the Joint Committee took place in the Lok Sabha on 29.3.1976. During
the discussion, there was unanimity amongst all members cutting across
party lines that the penetration of foreign money into country is a serious
threat and danger to the sovereignty of the country. The members
variously expressed concern about the unregulated inflow of foreign
contribution. It was noted that its penetration was so widespread that
generally, anyone interested in the sovereignty of our country and in
democracy was bound to feel concerned about the same. The experience
of other countries was also discussed by the members. The members
mentioned about the inflow of foreign contribution from many countries
and noted that some times it was being received directly and some times
indirectly, through other countries. It was coming in many forms including
receipt by religious organisations. It was agreed that the foreign
contribution can be permitted in regulated manner without completely
prohibiting the inflow thereof. Eventually, to address the mischief of
growing foreign influence owing to influx of foreign donations in our
country, the Bill was passed which took the form of the Act i.e., the
Foreign Contribution (Regulation) Act, 1976. This Act came into force
on 5.8.1976123 as a shield in our legislative armoury. The preamble of
the 1976 Act reads as under:
“An Act to regulate the acceptance and utilization
of foreign
contribution or foreign hospitality by certain persons or
associations, with a view to ensuring that parliamentary
institutions, political associations and academic and other
voluntary organisations as well as individuals working in
the important areas of national life may function in a manner
consistent with the values of a sovereign democratic
republic, and for matters connected therewith or incidental
thereto.”
(emphasis supplied)
Over the course of time, this Act came to be amended. One such
amendment was in 1985. The Statement of Objects and Reasons of the
stated amendment read thus:
123 Vide notification No. GSR 755(E), dated 5.8.1976 published in the Gazette of India,
Extraordinary, Part-II, section 3(i)
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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“STATEMENT OF OBJECTS AND REASONS
The Foreign Contribution (Regulation) Act, 1976, seeks to regulate
the acceptance and utilisation of foreign contribution or foreign
hospitality by certain categories of persons or associations. To
remove certain inadequacies and practical difficulties in the
administration of the Act, a Bill to amend the Act was introduced
in the Rajya Sabha in May, 1984. The Bill was passed by the
Rajya Sabha with certain amendments. But it could not be passed
by the Lok Sabha before it adjourned at the end of its Monsoon
Session and the Bill has now lapsed. As it was considered
necessary to give effect to the provisions of the Bill as passed by
the Rajya Sabha urgently, the Foreign Contribution (Regulation)
Amendment Ordinance, 1984, was promulgated by the President
on the 20th October, 1984. The said Ordinance, inter alia, made
the following amendments in the Act, namely:—
(i) The definition of “foreign contribution”, as
contained in the Act, included only the donation, delivery
or transfer made by any foreign source. It did not include
donation or contribution received by an organisation from
another organisation from out of foreign contribution
received by the latter organisation. The definition was
enlarged to include such contributions also for the purpose
of tracing the utilisation of foreign contribution down the
line.
(ii)The definition of “political party”, as contained in
the Act, did
not include political parties in the State of Jammu
and Kashmir and political parties which are not covered by
the Election Symbols (Reservation and Allotment) Order,
1968. The Ordinance amended this definition to include
such political parties also.
(iii)Section 6(1) of the Act provided that every
association having a definite cultural, economic, educational,
religious or social programmes, may receive foreign
contribution, but was required to send intimation regarding
such receipt to the Central Government within such time
and such manner to be prescribed by the rules made under
the Act. It had been observed that a number of associations
had not sent such intimation. In order to effectively monitor
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the receipt of foreign contribution, this sub-section was
amended to provide that associations referred to therein
shall accept foreign contribution only after they are
registered with the Central Government specifically for the
purpose and accept such contributions only through a
specified branch of a bank. They would, however, be
required to give, within such time and in such manner as
may be prescribed, intimation to the Central Government
as to the amount of foreign contribution received by them,
the source from which and the manner in which such foreign
contribution was received by them, etc. Where any
registered association does not accept foreign contribution
through the specified branch of a specified bank or does
not submit intimations, etc., in time, the Central
Government has been empowered to direct that such
association shall not accept foreign contribution without the
prior permission of the Central Government. A new sub-
section (1A) had also been included in this section to
provide that an association not so registered with the
Central Government shall obtain prior permission of the
Central Government before accepting any foreign
contribution and also give intimation to the Central
Government as to the amount of contribution received by
it.
(iv)The Act only enabled the Central Government to
inspect the accounts of certain persons or associations. It
did not provide for any power to audit the accounts of any
organisation if it is considered
necessary to do so. The
Ordinance amended the Act by inserting a new section 15A,
to take specific power to audit the accounts of certain
persons, organisations or associations, if the prescribed
returns are not furnished in time by such persons,
organisations or associations or the returns so furnished
by them are not in accordance with law or their scrutiny
gives room for suspicion that the provisions of the Act have
been contravened.
(v) A new section 25A had also been inserted in the Act to
provide that where any person is convicted of an offence relating
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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to the acceptance or utilisation of foreign contribution for a second
time, he shall be prohibited from accepting any foreign contribution
for a period of three years from the date of the second conviction.
2. The Bill seeks to replace the aforesaid Ordinance.”
(emphasis supplied)
14. After the coming into force of the 1976 Act including the
subsequent amendments thereto, the experience gained and the significant
developments having taken place since 1984 such as change in internal
security scenario, an increased influence of voluntary organisations, spread
of use of communication and information technology, quantum jump in
the amount of foreign contribution being received and large-scale growth
in the number of registered organisations, a Bill known as “the Foreign
Contribution (Regulation) Bill, 2006” came to be introduced. The proposal
in the Bill was to repeal the 1976 Act and replace it with the provisions
of the proposed Bill. The Statement of Objects and Reasons for the Bill
are as under:
“STATEMENT OF OBJECTS AND REASONS
The Foreign Contribution (Regulation) Act, 1976 was
enacted to regulate the acceptance and utilisation of foreign
contribution or hospitality with a view to ensuring that our
parliamentary institutions, political associations, academic
and other voluntary organisations as well as individuals
working in important areas of national life may function in a
manner consistent with the values of a
sovereign democratic
republic. The Act was amended in 1984 to extend the
provisions of the Act to cover second and subsequent
recipients of foreign contribution and to the members of
higher judiciary, besides introducing the system of grant of
registration to the associations receiving foreign
contribution.
2. Significant developments have taken place since 1984
such as change in internal security scenario, an increased
influence of voluntary organisations, spread of use of
communication and information technology, quantum jump
in the amount of foreign contribution being received, and
large scale growth in the number of registered
organisations. This has necessitated large scale changes
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in the existing Act. Therefore, it has been thought
appropriate to replace the present Act by a new legislation
to regulate the acceptance, utilisation and accounting of
foreign contribution and acceptance of foreign hospitality
by a person or an association.
3. The Foreign Contribution (Regulation) Bill, 2006 provides, inter
alia, to —
(i) consolidate the law to regulate, acceptance and utilisation of
foreign contribution or foreign hospitality and prohibit the same
for any activities detrimental to the national interests;
(ii) prohibit organisations of political nature, not being political parties
from receiving foreign contribution;
(iii) bring associations engaged in production or broadcast of audio
news or audio visual news or current affairs through any electronic
mode under the purview of the Bill;
(iv) prohibit the use of foreign contribution for any speculative
business;
(v) cap administrative expenses at fifty per cent. of the receipt of
foreign contribution;
(vi) exclude foreign funds received from relatives living abroad;
(vii) make provision for intimating grounds for refusal of registration
or prior permission under the Bill;
(viii) provide arrangement for sharing of information on receipt of
foreign remittances by the concerned agencies to strengthen
monitoring;
(ix) make registration to be valid for five years with a provision
for renewal thereof, and also to provide for cancellation or
suspension of registration;
(x) make provision for
compounding of certain offences.
4. The Bill seeks to achieve the above objects.”
(emphasis supplied)
Finally, the Bill after being scrutinised by the Committee appointed
by the House, presented it in the Lok Sabha on 27.8.2010, titled as
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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“Foreign Contribution (Regulation) Act, 2010”. The members expressed
that India is an emerging economic power and the Bill, as propounded,
was a welcome step towards prohibiting organisations with political
agenda from destabilising the country through foreign funding. The
members shared their experience and finally accepted the Bill which
became the 2010 Act. This Act repealed the 1976 Act. The introduction
for the 2010 Act recognised that some of the foreign countries were
funding individuals, associations, political parties, candidates for elections,
correspondents, columnists, editors, owners, printers or publishers of
newspapers. They were also extending hospitality. The introduction of
the Act reads thus: -
“It had been noticed that some of the foreign countries were
funding individuals, associations, political parties,
candidates for elections, correspondents, columnists,
editors, owners, printers or publishers of newspapers. They
were also extending hospitality. The effects of such funding
and hospitality were quite noticeable and to have some
control over such funding and hospitality and to regulate
the acceptance and utilisation of foreign contribution or
foreign hospitality by certain persons or associations, with
a view to ensuring that Parliamentary institutions, political
associations and academic and other voluntary
organisations as well as individuals working in the important
areas of national life
may function in a manner consistent
with the values of a sovereign democratic republic the
Foreign Contribution (Regulation) Act, 1976 (49 of 1976)
was enacted. Since its enactment in 1976 several deficiencies
had been found and it was proposed to enact a fresh law on the
subject by repealing the Act 49 of 1976. Accordingly the Foreign
Contribution (Regulation) Bill was introduced in the Parliament.”
(emphasis supplied)
It will be useful to advert to the preamble of the 2010 Act. The
same reads thus: -
“An Act to consolidate the law to regulate the acceptance and
utilisation of foreign contribution or foreign hospitality by certain
individuals or associations or companies and to prohibit acceptance
and utilisation of foreign contribution or foreign hospitality for any
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activities detrimental to the national interest and for matters
connected therewith or incidental thereto.”
The underlying reason discernible from the Statement of Objects
and Reasons and the concerns expressed by the members during the
debate in the concerned Houses, make it amply clear that there was
need to strictly regulate the inflow of foreign contribution in the manner
specified by the Act. Intrinsic in the regulatory provisions of the 2010
Act is to permit inflow of foreign contribution only in the manner specified
in the Act including its utilisation; and any activity inconsistent with the
2010 Act was to visit with penal consequences. The preamble of the
2010 Act restates the need to strictly regulate the inflow of foreign
contribution, as lack of it would inevitably affect the national interests
including the sovereignty and integrity of the country.
15. The 2010 Act came to be amended on two occasions until
recently, vide Finance Act, 2016 (28 of 2016) and Finance Act, 2018
(13 of 2018).
16. The Central Government in exercise of powers conferred by
Section 48 of the 2010 Act framed the 2011 Rules, which came into
force on 1.5.2011. Further, the Central Government also framed rules
known as “The Foreign Contribution (Acceptance or Retention of Gifts
or Presentations) Rules, 2012”, which came into force on 17.6.2012.
The 2011 Rules were amended by (Amendment) Rules, 2020. We shall
advert to these Rules including the amended provisions at the
appropriate
place.
17. In the present cases, we are concerned with the challenge to
the latest amendment effected vide the Foreign Contribution (Regulation)
Amendment Act, 2020, which has come into effect from 29.9.2020.
Vide the 2020 Act, clause (c) in Section 3(1) came to be amended. The
amendment has been effected also to Sections 7, 8, 11, 12, 13, 15, 16 and
17 of the 2010 Act. The assail is limited to the amended provisions (vide
Amendment Act of 2020) on the ground of abridgement of fundamental
rights of the petitioners guaranteed under Articles 14, 19(1)(a), 19(1)(c),
19(1)(g) and 21 of the Constitution of India.
18. Notably, we are called upon to deal with the validity only of
amendment concerning Sections 7, 12(1A), 17 and insertion of Section
12A in the Act. The unamended Sections 7, 12 and 17 read thus: -
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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“7. Prohibition to transfer foreign contribution to other
person.- No person who — (a) is registered and granted a
certificate or has obtained prior permission under this Act; and
(b) receives any foreign contribution,
shall transfer such foreign contribution to any other person unless
such other person is also registered and had been granted the
certificate or obtained the prior permission under this Act:
Provided that such person may transfer, with the prior
approval of the Central Government, a part of such foreign
contribution to any other person who has not been granted a
certificate or obtained permission under this Act in accordance
with the rules made by the Central Government.
***
12. Grant of certificate of registration.- (1) An application by
a person, referred to in section 11 for grant of certificate or giving
prior permission, shall be made to the Central Government in such
form and manner and along with such fee, as may be prescribed.
(2) On receipt of an application under sub-section (1), the
Central Government shall, by an order, if the application is not in
the prescribed form or does not contain any of the particulars
specified in that form, reject the application.
(3) If on receipt of an application for grant of certificate or
giving prior permission and after making such inquiry as the Central
Government deems fit, it is of the opinion that the conditions
specified in sub-section (4) are
satisfied, it may, ordinarily within
ninety days from the date of receipt of application under sub-
section (1), register such person and grant him a certificate or
give him prior permission, as the case may be, subject to such
terms and conditions as may be prescribed:
Provided that in case the Central Government does not grant,
within the said period of ninety days, a certificate or give prior
permission, it shall communicate the reasons therefor to the
applicant:
Provided further that a person shall not be eligible for grant
of certificate or giving prior permission, if his certificate has been
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suspended and such suspension of certificate continues on the
date of making application.
(4) The following shall be the conditions for the purposes
of sub-section (3), namely: —
(a) the person making an application for registration or grant
of prior permission under sub-section (1),—
(i) is not fictitious or benami;
(ii) has not been prosecuted or convicted for indulging in
activities aimed at conversion through inducement or force,
either directly or indirectly, from one religious faith to another;
(iii) has not been prosecuted or convicted for creating communal
tension or disharmony in any specified district or any other
part of the country;
(iv) has not been found guilty or diversion or mis-utilisation of
its funds;
(v) is not engaged or likely to engage in propagation of sedition
or advocate violent methods to achieve its ends;
(vi) is not likely to use the foreign contribution for personal
gains or divert it for undesirable purposes;
(vii) has not contravened any of the provisions of this Act;
(viii) has not been prohibited from accepting foreign contribution;
(b) the person making an application for registration under sub-
section (1) has undertaken reasonable activity in its chosen filed
for the benefit of the society for which the foreign contribution is
proposed to be utilised;
(c) the person making an application for giving prior permission
under sub-section (1) has prepared a reasonable project for the
benefit of the society for which the
foreign contribution is proposed
to be utilised;
(d) in case the person being an individual, such individual has neither
been convicted under any law for the time being in force nor any
prosecution for any offence pending against him;
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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(e) in case the person being other than an individual, any of its
directors or office bearers has neither been convicted under any
law for the time being in force nor any prosecution for any offence
is pending against him;
(f) the acceptance of foreign contribution by the person referred
to in sub-section (1) is not likely to affect prejudicially—
(i) the sovereignty and integrity of India; or
(ii) the security, strategic, scientific or economic interest of the
State; or
(iii) the public interest; or
(iv) freedom or fairness of election to any Legislature; or
(v) friendly relation with any foreign State; or
(vi) harmony between religious, racial, social, linguistic, regional
groups, castes or communities;
(g) the acceptance of foreign contribution referred to in sub-section
(1),—
(i) shall not lead to incitement of an offence;
(ii) shall not endanger the life or physical safety of any person.
(5) Where the Central Government refuses the grant of
certificate or does not give prior permission, it shall record in its
order the reasons therefor and furnish a copy thereof to the
applicant:
Provided that the Central Government may not communicate
the reasons for refusal for grant of certificate or for not giving
prior permission to the applicant under this section in cases where
is no obligation to give any information or documents or records
or papers under the Right to Information Act, 2005.
(6) The certificate granted
under sub-section (3) shall be
valid for a period of five years and the prior permission shall be
valid for the specific purpose or specific amount of foreign
contribution proposed to be received, as the case may be.
***
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17. Foreign contribution through scheduled bank.- (1) Every
person who has been granted a certificate or given prior permission
under section 12 shall receive foreign contribution in a single
account only through such one of the branches of a bank as he
may specify in his application for grant of certificate:
Provided that such person may open one or more accounts
in one or more banks for utilising the foreign contribution received
by him:
Provided further that no funds other than foreign contribution
shall be received or deposited in such account or accounts.
(2) Every bank or authorised person in foreign exchange
shall report to such authority as may be specified—
(a) prescribed amount of foreign remittance;
(b) the source and manner in which the foreign remittance
was received; and
(c) other particulars,
in such form and manner as may be prescribed.”
19. As aforementioned, the need to amend certain provisions of
the 2010 Act was felt necessary, as is discernible from the Statement of
Objects and Reasons appended to Bill No. 123/2020, which finally
culminated in the Amendment Act of 2020. The same reads thus: -
“STATEMENT OF OBJECTS AND REASONS
The Foreign Contribution (Regulation) Act, 2010 was enacted to
regulate the acceptance and utilisation of foreign contribution or
foreign hospitality by certain individuals or associations or
companies and to prohibit acceptance and utilisation of foreign
contribution or foreign hospitality for any activities
detrimental to
the national interest and for matters connected therewith or
incidental thereto.
2. The said Act has come into force on the 1st day of May,
2011 and has been amended twice. The first amendment was
made by section 236 of the Finance Act, 2016 and the second
amendment was made by section 220 of the Finance Act, 2018.
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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3. The annual inflow of foreign contribution has almost
doubled between the years 2010 and 2019, but many
recipients of foreign contribution have not utilised the same
for the purpose for which they were registered or granted
prior permission under the said Act. Many of them were
also found wanting in ensuring basic statutory compliances
such as submission of annual returns and maintenance of
proper accounts. This has led to a situation where the
Central Government had to cancel certificates of
registration of more than 19,000 recipient organisations,
including non-Governmental organisations, during the
period between 2011 and 2019. The criminal investigations
also had to be initiated against dozens of such non-
Governmental organisations which indulged in outright
misappropriation or mis-utilisation of foreign contribution.
4. Therefore, there is a need to streamline the
provisions of the said Act by strengthening the compliance
mechanism, enhancing transparency and accountability in
the receipt and utilisation of foreign contribution worth
thousands of crores of rupees every year and facilitating
genuine non-Governmental organisations or associations
who are working for the welfare of the society.
5. The Foreign Contribution (Regulation) Amendment Bill,
2020, inter alia, seeks to provide for—
(a) amendment of clause (c) of sub-section (1) of section 3
to include “public servant” also within its ambit, to provide
that no foreign contribution shall be accepted by any public
servant;
(b) amendment of section 7 to prohibit any transfer of foreign
contribution to any association/person;
(c) amendment of sub-section (1) of section 8 to reduce
the limit for defraying administrative expenses from existing
“fifty per cent.” to “twenty per cent.”;
(d) insertion of a new section 12A empowering the Central
Government to require Aadhaar number, etc., as
identification document;
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(e) insertion of a new section 14A enabling the Central
Government to permit any person to surrender the certificate
granted under the Act;
(f) amendment of section 17 to provide that every person
who has been granted certificate or prior permission under
section 12 shall receive foreign contribution only in an
account designated as ‘‘FCRA Account’’ which shall be
opened by him in such branch of the State Bank of India at
New Delhi, as the Central Government may, by notification,
specify and for other consequential matters relating thereto.
6. The Bill seeks to achieve the above objects.”
(emphasis supplied)
When the Bill proposed for amendment to the said provisions was
being considered, the members expressed their concern about the volume
of inflow of foreign contribution. It was noted that NGOs have been
formed, who in turn receive foreign contribution and spend the funds as
per their own desire and the same is being misused, threatening the
security apparatus and sovereignty of the country.
20. Consequent to the 2020 Act, the relevant provisions including
the newly inserted clauses read thus: -
“7. Prohibition to transfer foreign contribution to other
person.- No person who —
(a) is registered and granted a certificate or has obtained prior
permission under this Act; and
(b) receives any foreign contribution,
shall transfer such foreign contribution to any other person.
***
12. Grant of certificate of registration.- (1) An application by
a person,
referred to in section 11 for grant of certificate or giving
prior permission, shall be made to the Central Government in such
form and manner and along with such fee, as may be prescribed.
(1A) Every person who makes an application under sub-
section (1) shall be required to open “FCRA Account” in the
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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manner specified in section 17 and mention details of such account
in his application.
(2) On receipt of an application under sub-section (1), the
Central Government shall, by an order, if the application is not in
the prescribed form or does not contain any of the particulars
specified in that form, reject the application.
(3) If on receipt of an application for grant of certificate or
giving prior permission and after making such inquiry as the Central
Government deems fit, it is of the opinion that the conditions
specified in sub-section (4) are satisfied, it may, ordinarily within
ninety days from the date of receipt of application under sub-
section (1), register such person and grant him a certificate or
give him prior permission, as the case may be, subject to such
terms and conditions as may be prescribed:
Provided that in case the Central Government does not grant,
within the said period of ninety days, a certificate or give prior
permission, it shall communicate the reasons therefor to the
applicant:
Provided further that a person shall not be eligible for grant
of certificate or giving prior permission, if his certificate has been
suspended and such suspension of certificate continues on the
date of making application.
(4) The following shall be the conditions for the purposes
of sub-section (3), namely: —
(a) the person making an application for registration or grant
of prior permission under sub-section
(1),—
(i) is not fictitious or benami;
(ii) has not been prosecuted or convicted for indulging in
activities aimed at conversion through inducement or force,
either directly or indirectly, from one religious faith to another;
(iii) has not been prosecuted or convicted for creating
communal tension or disharmony in any specified district
or any other part of the country;
(iv) has not been found guilty or diversion or mis-utilisation
of its funds;
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(v) is not engaged or likely to engage in propagation of sedition
or advocate violent methods to achieve its ends;
(vi) is not likely to use the foreign contribution for personal
gains or divert it for undesirable purposes;
(vii) has not contravened any of the provisions of this Act;
(viii) has not been prohibited from accepting foreign
contribution;
(b) the person making an application for registration under sub-
section (1) has undertaken reasonable activity in its chosen filed
for the benefit of the society for which the foreign contribution is
proposed to be utilised;
(c) the person making an application for giving prior permission
under sub-section (1) has prepared a reasonable project for the
benefit of the society for which the foreign contribution is proposed
to be utilised;
(d) in case the person being an individual, such individual has neither
been convicted under any law for the time being in force nor any
prosecution for any offence pending against him;
(e) in case the person being other than an individual, any of its
directors or office bearers has neither been convicted under any
law for the time being in force nor any prosecution for any offence
is pending against him;
(f) the acceptance of foreign contribution by the person referred
to in sub-section (1) is not likely to affect prejudicially—
(i) the sovereignty and integrity of India; or
(ii) the security, strategic, scientific or economic interest of the
State; or
(iii) the public
interest; or
(iv) freedom or fairness of election to any Legislature; or
(v) friendly relation with any foreign State; or
(vi) harmony between religious, racial, social, linguistic, regional
groups, castes or communities;
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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(g) the acceptance of foreign contribution referred to in sub-section
(1),—
(i) shall not lead to incitement of an offence;
(ii) shall not endanger the life or physical safety of any person.
(5) Where the Central Government refuses the grant of
certificate or does not give prior permission, it shall record in its
order the reasons therefor and furnish a copy thereof to the
applicant:
Provided that the Central Government may not communicate
the reasons for refusal for grant of certificate or for not giving
prior permission to the applicant under this section in cases where
is no obligation to give any information or documents or records
or papers under the Right to Information Act, 2005.
(6) The certificate granted under sub-section (3) shall be
valid for a period of five years and the prior permission shall be
valid for the specific purpose or specific amount of foreign
contribution proposed to be received, as the case may be.
***
12A. Power of Central Government to require Aadhaar
number, etc., as identification document.- Notwithstanding
anything contained in this Act, the Central Government may require
that any person who seeks prior permission or prior approval under
section 11, or makes an application for grant of certificate under
section 12, or, as the case may be, for renewal of certificate under
section 16, shall provide as identification document, the Aadhaar
number of all its office bearers or Directors or
other key
functionaries, by whatever name called, issued under the Aadhaar
(Targeted Delivery of Financial and Other Subsidies, Benefits and
Services) Act, 2016 (18 of 2016), or a copy of the Passport or
Overseas Citizen of India Card, in case of a foreigner.
***
17. Foreign contribution through scheduled bank.- (1) Every
person who has been granted certificate or prior permission under
section 12 shall receive foreign contribution only in an account
designated as “FCRA Account” by the bank, which shall be opened
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by him for the purpose of remittances of foreign contribution in
such branch of the State Bank of India at New Delhi, as the
Central Government may, by notification, specify in this behalf:
Provided that such person may also open another “FCRA
Account” in any of the scheduled bank of his choice for the
purpose of keeping or utilising the foreign contribution which has
been received from his “FCRA Account” in the specified branch
of State Bank of India at New Delhi:
Provided further that such person may also open one or
more accounts in one or more scheduled banks of his choice to
which he may transfer for utilising any foreign contribution received
by him in his “FCRA Account” in the specified branch of the
State Bank of India at New Delhi or kept by him in another “FCRA
Account” in a scheduled bank of his choice:
Provided also that no funds other than foreign contribution
shall be received or deposited in any such account.
(2) The specified branch of the State Bank of India at New
Delhi or the branch of the scheduled bank where the person
referred to in sub-section (1) has opened his foreign contribution
account or the authorised person in foreign exchange, shall report
to such authority as may be specified,—
(a) the prescribed amount of foreign remittance;
(b) the source and manner in which the foreign remittance
was received; and
(c) other particulars,
in such form and manner as may be prescribed.”
21. It is well-established that rights guaranteed
under Part III of
the Constitution and Article 19 in particular, are not absolute rights. The
same are subject to reasonable restrictions, as predicated in clauses (2)
and (6) of Article 19. For, it is open to the State to make a law, so as to
impose reasonable restrictions on the exercise of such right [under Article
19(1)(a)] in the interests of the sovereignty and integrity of India, the
security of the State, friendly relations with Foreign States, public order,
decency or morality or in relation to contempt of Court, defamation or
incitement to an offence; in case of Article 19(1)(c) - in the interests of
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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the sovereignty and integrity of India, public order or morality; and in
case of Article 19(1)(g) - in the interests of the general public. It is
rightly urged by the respondents that whenever the challenge is to the
amended provisions, the scope of enquiry, inter alia, ought to be as to
whether the same is in consonance with the Principal Act, achieve the
object and purpose of the Principal Act and are otherwise just, rational
and reasonable. Further, there is no fundamental right vested in anyone
to receive foreign contribution (donation) or foreign exchange; and that
the purport of the Principal Act and the impugned amendments are only
to provide a regulatory framework and not one of complete prohibition.
22. Indisputably, serious concern about the impact of widespread
inflow of foreign contribution on the values of a sovereign democratic
republic had been repeatedly expressed at different levels including in
the Parliament. To that end, the Bill was introduced in the Parliament in
1973. The legislative intent behind the enactment of the 1976 Act has
remained unchanged even to this day — nay it has become more relevant
now. In that, the experience gained aftermath implementation of the
1976 Act revealed that more stringent dispensation was needed to
minimise the negative impact owing to the surge in the inflow of foreign
donation and for upholding the values of a sovereign democratic republic,
for which the 2010
Act came to be enacted. In that, even the amendment
effected in 1985 to the 1976 Act was found to be insufficient to deal
with the shortcomings in the law in force, for regulating the inflow and
sustained moderate utilisation of foreign contribution. For that reason,
the Parliament eventually decided to replace the regulatory dispensation
by enacting a new law (the 2010 Act) to address the mischief.
23. In due course of time, however, it was realised that the
dispensation enunciated in the 2010 Act was also not yielding the desired
result. This impelled the Parliament to amend the 2010 Act (vide 2020
Act) to make it more stringent and effective to subserve the cause and
intent of the Principal Act — not only in regard to the modality of
acceptance of foreign contribution in the prescribed manner but also
making it imperative for the recipient of foreign contribution to utilise the
same “itself” for the designated or specified purposes for which it was
so permitted.
24. Philosophically, foreign contribution (donation) is akin to
gratifying intoxicant replete with medicinal properties and may work like
a nectar. However, it serves as a medicine so long as it is consumed
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(utilised) moderately and discreetly, for serving the larger cause of
humanity. Otherwise, this artifice has the capability of inflicting pain,
suffering and turmoil as being caused by the toxic substance (potent
tool) — across the nation. In that, free and uncontrolled flow of foreign
contribution has the potentials of impacting the sovereignty and integrity
of the nation, its public order and also working against the interests of
the general public.
25. To eradicate misuse and abuse of foreign contribution in the
past, despite the firm regime in place in terms of the 2010 Act, the
Parliament in its wisdom has now (vide Amendment Act of 2020) adopted
the path of moderation by making it mandatory for all to accept foreign
contribution only through one channel and to utilise the same “itself” for
the purposes for which permission has been accorded. Undeniably, the
sovereignty and integrity of India ought to prevail and the rights enshrined
in Part III of the Constitution must give way to the interests of general
public much less public order and the sovereignty and integrity of the
nation. It must be borne in mind that the legislation under consideration
must be understood in the context of the underlying intent of insulating
the democratic polity from the adverse influence of foreign contribution
remitted by foreign sources.
26. The Statement of Objects and Reasons for the Amendment
Act of 2020 makes it amply clear that the annual inflow of foreign
contribution had almost doubled between the years 2010 and 2019 and
many recipients of foreign contribution had not utilised the same for the
purposes for which they were registered or granted prior permission
under the Act. Further, many recipients had also failed to adhere to and
fulfil the statutory compliances — which resulted in cancellation of as
many as 19,000 certificates of concerned persons/organisations during
the stated period, including initiation of criminal investigation concerning
outright misappropriation or misutilisation of foreign contribution. It was
increasingly reported that some of the NGOs were primarily involved in
routing of foreign contribution accepted by them and not utilising the
same itself for the purposes for which certificate of registration was
issued. Such transfer created several operational issues bordering on
malpractices impacting the very intent of the Principal Act. For, routing
of foreign contribution entails in diverting it to another area of activity
including misuse thereof. There had been cases of successive transfers
and creation of a layered trail of money making it difficult to trace the
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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flow and final utilisation. In this backdrop, to strengthen the compliance
mechanism and enhancing transparency and accountability in the matter
of acceptance and utilisation of foreign contribution, the Parliament had
to once again step in to restructure the dispensation, making it more
meaningful and effective, so as to deal with the increasing impact of
foreign contribution.
27. It is unnecessary to underscore the distinction between foreign
contribution and foreign investment. By its very nature, foreign
contribution is a donation accepted from a foreign source purportedly
for definite cultural, economic, educational, religious or social programme
and to serve the cause of humanity. The expression “foreign contribution”
has been defined in Section 2(1)(h) of the 2010 Act to mean donation,
which can be in the form of delivery or transfer made by any foreign
source of any article, currency, security, etc.
28.It is open to a sovereign democratic nation to completely prohibit
acceptance of foreign donation on the ground that it undermines the
constitutional morality of the nation, as it is indicative of the nation being
incapable of looking after its own affairs and needs of its citizens. The
third world countries may welcome foreign donation, but it is open to a
nation, which is committed and enduring to be self-reliant and variously
capable of shouldering its own needs, to opt for a policy of complete
prohibition
of inflow/acceptance of foreign contribution (donation) from
foreign source. This was the first option noted by the Parliament while
considering the Bill concerning the 1976 Act.
29. When the 1976 Act was enacted, the Parliament had discussed
about three options. The first was of outright prohibition; the second
being acceptance subject to prior permission of Government; and the
third — acceptance subject to intimation being given to Government.
The Parliament opted for the second option and that continues to this
day in the form of 2010 Act, as amended in 2020. At the same time,
from the experience gained aftermath implementation of the dispensation
predicated for regulating the inflow of foreign contribution from foreign
source and its utilisation, the need to make it more stringent was felt.
The amendments vide the 2020 Act, are the product of that experience
and the Parliament, for accomplishing the objectives of the Principal Act
and to uphold the sovereignty and integrity of the nation as well as public
order and in the interests of the general public, introduced the regime
requiring acceptance of foreign contribution from foreign source only
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through one channel and utilising the same by the recipient itself for the
activities for which prior permission has been granted to him in that
regard.The permission to be granted by the Central Government can be
a general permission for definite cultural, economic, educational, religious
or social programme or a special permission in respect of particular
activity in that regard. In either case, it has to be a prior permission in
the form of obtaining certificate of registration from the Central
Government or obtaining prior permission of the Central Government
for the specific purpose by person not so registered.
30. Suffice it to observe that considering the legislative history
and the need for the Parliament to periodically intervene to arrest the
increasing influence on the polity of the nation due to the high volume of
inflow of foreign contribution and large-scale improper utilisation and
misappropriation thereof, as noticed by the authorities and keeping in
mind the objective of the principal enactment being to uphold the values
of sovereign democratic republic, the dispensation as altered to make it
more strict compliance mechanism for ensuring that the foreign funds
are accepted in the prescribed manner and utilised by the recipient itself
and more so, for the purposes for which it was allowed to be received
by that person, the amended provisions ought to pass the musterof
reasonable restriction. Certainly, such a change cannot be labelled as
irrational much less manifestly arbitrary, especially when it applies
uniformly to a class of persons without any discrimination. We need to
remind ourselves the dictum of this Court in Rustom CavasjeeCooper124
and also R.K. Garg125 – that it is not for the Court to consider relative
merits of the different political theories or economic policies including
that an economic legislation may be troubled with crudities, inequities,
uncertainties or the possibility of abuse cannot be the basis for striking it
down.
31. It must follow that acceptance of foreign contribution is
otherwise prohibited by law and violation of such restriction has been
made an offence under Chapter VIII of the 2010 Act. Nothing prevents
the organisations interested in doing charitable work in raising contribution
within the country. In that sense, the 2010 Act deals with a class of
persons accepting foreign contribution from foreign source. All such
persons are treated equally and without any discrimination.
124 supra at Footnote No.48
125 supra at Footnote No.49
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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Relevant provisions of the 2010 Act as amended
32. We may now broadly delineate the contours of the provisions
of the 2010 Act before we proceed to examine the challenge specific to
the amended provisions vide the 2020 Act. Chapter I of the 2010 Act
deals with short title, extent, application and commencement of the Act
as well as definitions of certain expressions referred to therein.
33. Chapter II is about regulation of foreign contribution and foreign
hospitality. Section 3126 deals with prohibition to accept foreign
126 3. Prohibition to accept foreign contribution.—(1) No foreign contribution shall
be accepted by any—
(a) candidate for election;
(b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of
a registered newspaper;
(c) public servant, Judge, Government servant or employee of any corporation
or any other body controlled or owned by the Government;
(d) member of any Legislature;
(e) political party or office-bearer thereof;
(f) organisation of a political nature as may be specified under sub-section (1)
of section 5 by the Central Government;
(g) association or company engaged in the production or broadcast of audio
news or audio visual news or current affairs programmes through any electronic
mode, or any other electronic form as defined in clause (r) of sub-section (1) of
section 2 of the Information Technology Act, 2000 (21 of 2000) or any other
mode of mass communication;
(h)
correspondent or columnist, cartoonist, editor, owner of the association or
company referred to in clause (g).
Explanation.1—For the purpose of clause (c), “public servant” means a public servant
as defined in section 21 of the Indian Penal Code (45 of 1860).
Explanation 2.—In clause (c) and section 6, the expression “corporation” means a
corporation owned or controlled by the Government and includes a Government
company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of
2013).
(2) (a) No person, resident in India, and no citizen of India resident outside India, shall
accept any foreign contribution, or acquire or agree to acquire any currency from a
foreign source, on behalf of any political party, or any person referred to in sub-section
(1), or both.
(b) No person, resident in India, shall deliver any currency, whether Indian or foreign,
which has been accepted from any foreign source, to any person if he knows or has
reasonable cause to believe that such other person intends, or is likely, to deliver such
currency to any political party or any person referred to in sub-section (1), or both.
(c) No citizen of India resident outside India shall deliver any currency, whether Indian
or foreign, which has been accepted from any foreign source, to—
(i) any political party or any person referred to in sub-section (1), or both; or
(ii) any other person, if he knows or has reasonable cause to believe that such
other person intends, or is likely, to deliver
such currency to a political party or
to any person referred to in sub-section (1), or both.
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contribution by specified persons. Section 4127 is to declare that nothing
in Section 3 shall apply to the acceptance, by any person specified in
that section, of any foreign contribution where such contribution is
accepted by him, subject to the provisions of Section 10 in respect of
matters provided therein. Section 5 is about the procedure to notify an
organisation of a political nature. Section 6 deals with restriction on
acceptance of foreign hospitality. Section 7 is about prohibition on transfer
of foreign contribution to other persons. Section 8128 is about restriction
(3) No person receiving any currency, whether Indian or foreign, from a foreign source
on behalf of any person or class of persons, referred to in section 9, shall deliver such
currency—
(a) to any person other than a person for which it was received, or
(b) to any other person, if he knows or has reasonable cause to believe that
such other person intends, or is likely, to deliver such currency to a person other than
the person for which such currency was received.
127 4. Persons to whom section 3 shall not apply.—Nothing contained in section 3
shall apply to the acceptance, by any person specified in that section, of any foreign
contribution where such contribution is accepted by him, subject to the provisions of
section 10,—
(a) by way of salary, wages or other remuneration due to him or to any group
of persons working under him, from any foreign source or by way of payment
in the
ordinary course of business transacted in India by such foreign source; or
(b) by way of payment, in the course of international trade or commerce, or in
the ordinary course of business transacted by him outside India; or
(c) as an agent of a foreign source in relation to any transaction made by such
foreign source with the Central Government or State Government; or
(d) by way of a gift or presentation made to him as a member of any Indian
delegation, provided that such gift or present was accepted in accordance with
the rules made by the Central Government with regard to the acceptance or
retention of such gift or presentation; or
(e) from his relative; or
(f) by way of remittance received, in the ordinary course of business through
any official channel, post-office, or any authorised person in foreign exchange
under the Foreign Exchange Management Act, 1999 (42 of 1999); or
(g) by way of any scholarship, stipend or any payment of like nature:
Provided that in case any foreign contribution received by any person
specified under section 3, for any of the purposes other than those specified
under this section, such contribution shall be deemed to have been accepted in
contravention of the provisions of section 3.
128 8. Restriction to utilise foreign contribution for administrative purpose.—(1)
Every person, who is registered and granted a certificate or given prior permission
under this Act and receives any foreign contribution,—
(a) shall utilise such contribution for the
purposes for which the
contribution has been received:
Provided that any foreign contribution or any income arising out of it
shall not be used for speculative business:
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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Provided further that the Central Government shall, by rules, specify
the activities or business which shall be construed as speculative business for
the purpose of this section;
(b) shall not defray as far as possible such sum, not exceeding twenty per cent.
of such contribution, received in a financial year, to meet administrative expenses:
Provided that administrative expenses exceeding twenty per cent. of
such contribution may be defrayed with prior approval of the Central
Government.
(2) The Central Government may prescribe the elements which shall be included
in the administrative expenses and the manner in which the administrative
expenses referred to in sub-section (1) shall be calculated.
129 9. Power of Central Government to prohibit receipt of foreign contribution,
etc., in certain cases.—The Central Government may—
(a) prohibit any person or organisation, not specified in section 3, from
accepting any foreign contribution;
(b) require any person or class of persons, not specified in section 6, to
obtain prior permission of the Central Government before accepting any foreign
hospitality;
(c) require any person or class of persons not specified in section 11, to
furnish intimation within such time and in such manner as may be prescribed as to the
amount of any foreign contribution received by such person or class of persons as the
case may be, and the source from which and the manner in which such
contribution was
received and the purpose for which and the manner in which such foreign contribution
was utilised;
(d) without prejudice to the provisions of sub-section (1) of section 11,
require any person or class of persons specified in that sub-section to obtain prior
permission of the Central Government before accepting any foreign contribution;
(e) require any person or class of persons, not specified in section 6, to
furnish intimation, within such time and in such manner as may be prescribed, as to the
receipt of any foreign hospitality, the source from which and the manner in which such
hospitality was received:
Provided that no such prohibition or requirement shall be made unless the
Central Government is satisfied that the acceptance of foreign contribution by such
person or class of persons, as the case may be, or the acceptance of foreign hospitality
by such person, is likely to affect prejudicially—
(i) the sovereignty and integrity of India; or
(ii) public interest; or
(iii) freedom or fairness of election to any Legislature; or
(iv) friendly relations with any foreign State; or
(v) harmony between religious, racial, social, linguistic or regional groups,
castes or communities.
130 10. Power to prohibit payment of currency received in contravention of the
Act.—Where the Central Government is satisfied, after making such inquiry as it may
deem fit, that any person has in his custody or control any article or currency or
to utilise foreign contribution for
administrative purpose. Section 9129
speaks about power of Central Government to prohibit receipt of foreign
contribution and matters connected therewith. Section 10130 is about the
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power of the Central Government to prohibit payment of currency
received in contravention of the Act.
34. The provisions of Chapter III deal with the subject of
registration. Section 11131 is about registration of certain persons with
Central Government. Section 12 is about grant of certificate of registration
security, whether Indian or foreign, which has been accepted by such person in
contravention of any of the provisions of this Act, it may, by order in writing, prohibit
such person from paying, delivering, transferring or otherwise dealing with, in any
manner whatsoever, such article or currency or security save in accordance with the
written orders of the Central Government and a copy of such order shall be served
upon the person so prohibited in the prescribed manner, and thereupon the provisions
of sub-sections (2), (3), (4) and (5) of section 7 of the Unlawful Activities (Prevention)
Act, 1967 (37 of 1967) shall, so far as may be, apply to, or in relation to, such article
or currency or security and references in the said sub-sections to monies, securities or
credits shall be construed as references to such article or currency or security.
131 11. Registration of certain persons with Central Government.— (1) Save as
otherwise provided in this Act, no person having a definite cultural, economic,
educational, religious or social programme shall accept foreign contribution unless such
person obtains a certificate of registration from the Central
Government:
Provided that any association registered with the Central Government under
section 6 or granted prior permission under that section of the Foreign Contribution
(Regulation) Act, 1976 (49 of 1976), as it stood immediately before the commencement
of this Act, shall be deemed to have been registered or granted prior permission, as the
case may be, under this Act and such registration shall be valid for a period of five years
from the date on which this section comes into force.
(2) Every person referred to in sub-section (1) may, if it is not registered with the
Central Government under that sub-section, accept any foreign contribution only after
obtaining the prior permission of the Central Government and such prior permission
shall be valid for the specific purpose for which it is obtained and from the specific
source:
Provided that the Central Government, on the basis of any information or
report, and after holding a summary inquiry, has reason to believe that a person who
has been granted prior permission has contravened any of the provisions of this Act, it
may, pending any further inquiry, direct that such person shall not utilise the unutilised
foreign contribution or receive the remaining portion of foreign contribution which has
not been received or, as the case may be, any additional foreign contribution, without
prior approval of the Central Government:
Provided further that if the person referred to in sub-section (1) or in this
sub-section has been
found guilty of violation of any of the provisions of this Act or
the Foreign Contribution (Regulation) Act, 1976 (49 of 1976), the unutilised or unreceived
amount of foreign contribution shall not be utilised or received, as the case may be,
without the prior approval of the Central Government.
(3) Notwithstanding anything contained in this Act, the Central Government may, by
notification in the Official Gazette, specify—
(i) the person or class of persons who shall obtain its prior permission before
accepting the foreign contribution; or
NOEL HARPER & ORS. v. UNION OF INDIA & ANR.
[A. M. KHANWILKAR, J.]
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and the procedure therefor. Section 12A has been inserted vide the 2020
Act providing for power of Central Government to require Aadhaar
number etc., as identification document at the time of registration or for
renewal of certificate. Section 13 deals with situations where certificate
of registration can be suspended and Section 14132 is about cancellation
of such certificate. Section 15 deals with issues of management of foreign
contribution of person whose certificate has been cancelled and Section
16133 is about the process of renewal of certificate of registration.
(ii) the area or areas in which the foreign contribution shall be accepted and
utilised with the prior permission of the Central Government; or
(iii) the purpose or purposes for which the foreign contribution shall be utilised
with the prior permission of the Central Government; or
(iv) the source or sources from which the foreign contribution shall be accepted
with the prior permission of the Central Government.
132 14. Cancellation of certificate.—(1) The Central Government may, if it is satisfied
after making such inquiry as it may deem fit, by an order, cancel the certificate if—
(a) the holder of the certificate has made a statement in, or in relation to, the
application for the grant of registration or renewal thereof, which is incorrect or
false; or
(b) the holder of the certificate has violated any of the terms and conditions of
the
certificate or renewal thereof; or
(c) in the opinion of the Central Government, it is necessary in the public
interest to cancel the certificate; or
(d) the holder of certificate has violated any of the provisions of this Act or
rules or order made thereunder; or
(e) if the holder of the certificate has not been engaged in any reasonable activity
in its chosen field for the benefit of the society for two consecutive years or has
become defunct.
(2) No order of cancellation of certificate under this section shall be made
unless the person concerned has been given a reasonable opportunity of being
heard.
(3) Any person whose certificate has been cancelled under this section shall not
be eligible for registration or grant or prior permission for a period of three
years from the date of cancellation of such certificate.
133 16. Renewal of certificate.—(1) Every person who has been granted a certificate
under section 12 shall have such certificate renewed within six months before the
expiry of the period of the certificate.
Provided that the Central Government may, before renewing the certificate,
make such inquiry, as it deems fit, to satisfy itself that such person has fulfilled all
conditions specified in sub-section (4) of section 12.
(2) The application for renewal of the certificate shall be made to the Central Government
in such form and manner and accompanied by such fee as may be prescribed.
(3) The Central Government shall renew the certificate, ordinarily within
ninety days
from the date of receipt of application for renewal of certificate subject to such terms
and conditions as it may deem fit and grant a certificate of renewal for a period of five
years:
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35. We are not so much concerned with the other Chapters, namely,
Chapters IV to IX of the 2010 Act, except Section 17 (in Chapter IV)
which deals with foreign contribution through scheduled bank. The other
provisions in Chapter IV are about accounts, intimation, audit and disposal
of assets, etc.
36. As aforesaid, the 2010 Act is to regulate foreign contribution
as defined in Section 2(1)(h). As the petitioners are desirous of engaging
in definite cultural, economic, educational, religious or social programme
and for doing so accept foreign contribution, they had to seek certificate
of registration from the Central Government in terms Section 11. The
certificate of registration refers to definite activities which will be
undertaken by the concerned organisation/trust for utilisation of foreign
contribution. Having shown interest in obtaining such certificate of
registration or for renewal thereof, it is obligatory for the organisation to
comply with the formalities, including as specified in Sections 7, 12(1A)
read with Section 17 or Section 12A. We shall deal with this aspect in
detail a little later.
37. Besides complying with the formalities for registration under
Section 11, the persons interested in receipt/acceptance of foreign
contribution from foreign source after grant of such certificate of
registration, are obliged to do so only through the FCRA account which
is required to be opened under Section 17 being a precondition for grant
of
certificate of registration or renewal thereof, in terms of Section 12(1A)
read with Section 17 of the 2010 Act. That apart, after grant of certificate
of registration and acceptance of foreign contribution from foreign source
through the specified account, the same is required to be utilised by the
recipient itself only for the purposes for which such permission had been
granted, with prohibition to transfer such foreign contribution to any other
person by virtue of Section 7 of the 2010 Act.
Validity of Section 7
38. Having said this, now we may revert to the grounds on which
Section 7, as amended vide the 2020 Act, has been challenged. It is
Provided that in case the Central Government does not renew the certificate
within the said period of ninety days, it shall communicate the reasons therefor to the
applicant:
Provided further that the Central Government may refuse to renew the
certificate in case where a person has violated any of the provisions of this Act or rules
made thereunder.
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[A. M. KHANWILKAR, J.]
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urged that the unamended provision though restricted the transfer of
foreign contribution, yet it did not completely prohibit the same unlike the
amended Section 7. The amended Section 7 postulates complete
prohibition on the transfer of foreign contribution to other person — not
even to a person having certificate of registration under the Act. In
other words, a person who is registered and granted a certificate or has
obtained prior permission under the Act to receive foreign contribution
will henceforth be required to utilise the amount “itself” and not through
any other person.
39. Be it noted that the proviso to the unamended Section 7
envisaged that if a part of foreign contribution was to be transferred to
some other person who had not been granted a certificate or obtained
prior permission under the 2010 Act, that could be made possible by
obtaining prior approval of the Central Government. Even that option is
done away with on account of the amended Section 7.
40. This plea has been countered by the respondents on the
argument that the Parliament in its wisdom has decided to introduce a
strict regime in the backdrop of the experience gained from the
implementation of the unamended Section 7 of the 2010 Act; and to
eradicate the mischief which had unfolded. Hence, the new dispensation
became necessary to introduce a stricter regime (amended Section 7).
Indisputably, the new regime does not completely prohibit
the inflow of
foreign contribution as such. Whereas, it is a firm dispensation regarding
utilisation of the funds so accepted/received from foreign source only
for the purposes for which the recipient is registered and granted a
certificate or had been given prior permission under the Act in that regard.
41. The expressions “foreign contribution”134 and “foreign
134 2. Definitions.—(1) In this Act, unless the context otherwise requires,—
(a) to (g) xxx xxx xxx
(h) “foreign contribution” means the donation, delivery or transfer made by
any foreign source,—
(i) of any article, not being an article given to a person as a gift for his personal
use, if the market value, in India, of such article, on the date of such gift, is not
more than such sum as may be specified from time-to-time, by the Central
Government by the rules made by it in this behalf;
(ii) of any currency, whether Indian or foreign;
(iii) of any security as defined in clause (h) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956) and includes any foreign security
as defined in clause (o) of section 2 of‘ the Foreign Exchange Management Act,
1999 (42 of 1999).
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source”135 have been defined in Sections 2(1)(h) and 2(1)(j) of the 2010
Act as amended.
Explanation 1.—A donation, delivery or transfer of any article, currency or
foreign security referred to in this clause by any person who has received it
from any foreign source, either directly or through one or more persons, shall
also be deemed to be foreign contribution within the meaning of this clause.
Explanation 2.—The interest accrued on the foreign contribution deposited in
any bank referred to in sub-section (1) of section 17 or any other income
derived from the foreign contribution or interest thereon shall also be deemed to
be foreign contribution within the meaning of this clause.
Explanation 3.—Any amount received, by any person from any foreign source
in India, by way of fee (including fees charged by an educational institution in
India from foreign student) or towards cost in lieu of goods or services rendered
by such person in the ordinary course of his business, trade or commerce
whether within India or outside India or any contribution received from an
agent of a foreign source towards such fee or cost shall be excluded from the
definition of foreign contribution within the meaning of this clause;
135 2. Definitions.—(1) In this Act, unless the context otherwise requires,—
(a) to (i) xxx xxx xxx
(j) “foreign source” includes,—
(i) the Government of any foreign country or territory and any agency of
such Government;
(ii) any international agency,
not being the United Nations or any of its
specialised agencies, the World Bank, International Monetary Fund or such
other agency as the Central Government may, by notification, specify in
this behalf;
(iii) a foreign company;
(iv) a corporation, not being a foreign company, incorporated in a foreign
country or territory;
(v) a multi-national corporation referred to in sub-clause (iv) of clause (g);
(vi) a company within the meaning of the Companies Act, 1956 (1 of 1956),
and more than one-half of the nominal value of its share capital is held,
either singly or in the aggregate, by one or more of the following, namely:—
(A) the Government of a foreign country or territory;
(B) the citizens of a foreign country or territory;
(C) corporations incorporated in a foreign country or territory;
(D) trusts, societies or other associations of individuals (whether
incorporated or not), formed or registered in a foreign country or
territory;
(E) foreign company;
Provided that where the nominal value of share capital is within the limits
specified for foreign investment under the Foreign Exchange Management Act,
1999 (42 of 1999), or the rules or regulations made thereunder, then,
notwithstanding the nominal value of share capital of a company being more
than one-half of such value at the time of a company being more than one-half
of such value at the time of making the contribution, such company shall not be
a foreign source;
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42. Section 11 of the Act, as applicable vide the Amendment Act
of 2020, is in one sense complete prohibition to receive foreign contribution
unless have obtained certificate of registration or prior permission from
the Central Government in that regard. Further, Section 11 allows receipt
or acceptance of foreign contribution only for definite purposes such as
cultural, economic, educational, religious or social programme.
43. A person desirous of receiving/accepting foreign contribution
for such definite purposes had to seek a certificate of registration from
the Central Government even under the unamended provision. After
obtaining such certificate of registration, the recipient of foreign
contribution could transfer it to another person who is also registered
and had been granted a certificate or obtained prior permission under
the 2010 Act. However, that is not permissible under the new dispensation
(amended Section 7). For, the legislative intent is now one of complete
prohibition regarding transfer of foreign contribution to third party.
44. Significantly, as per the scheme of the 2010 Act, a certificate
of registration is not granted for acting as an intermediary between the
donor (foreign source) and the grassroot level organisation. The amended
provision, therefore, completely rules out such transfer of foreign
contribution by the person who has received/accepted the same in the
first place. That does not
prevent the recipient from utilising the foreign
contribution “itself” for the purposes for which he has been granted a
certificate of registration or obtained prior permission under the Act.
45. The expression “transfer” has not been defined in the Act.
The meaning of expression “transfer” in the subject enactment would
presuppose giving away of the foreign contribution in whole or in part to
third person without retaining any control thereon; and such change of
hands is obviously without offering any services in return, namely, free
of costs. The third person would then be free to deal with such transferred
foreign contribution in the manner he chooses to do so, whilst adhering
to the conditions specified in his certificate of registration or the conditions
specified in the prior permission under the Act, as the case may be. In
(vii) a trade union in any foreign country or territory, whether or not registered
in such foreign country or territory;
(viii) a foreign trust or a foreign foundation, by whatever name called, or such
trust or foundation mainly financed by a foreign country or territory;
(ix) a society, club or other association of individuals formed or registered
outside India;
(x) a citizen of a foreign country;
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this scenario, it had been possible that the transferor (who had accepted
the foreign contribution) may have persuaded the foreign source to donate
for one permitted purpose, but without consulting the donor (foreign
source) could transfer the whole or part amount (foreign donation) to
third person (transferee) for being utilised for altogether another purpose,
which in a given case may not be acceptable to the donor. It, thus, paved
way for misutilisation of foreign contribution and the possibility of abuse
thereof.
46.There is no restriction regarding utilisation of foreign contribution,
leave alone complete prohibition. The rationale of Section 7 as amended,
inter alia, is that the donor (foreign source) is made fully aware of the
definite purposes already declared by the recipient and permitted by the
competent authority and corresponding obligation upon the recipient
regarding utilisation of the funds itself for stated purposes and none else.
47. Indeed, even the expression “utilisation” has not been defined
in the Act. The ordinary meaning of expression “utilisation” must be
understood in the context of the purpose for which a certificate of
registration or prior permission under the Act has been granted by the
Central Government. If the foreign contribution is utilised for such definite
purposes136, including administrative expenses permissible under Section
136 Illustrative  list  of  activities  permitted  as  mentioned  in  the  Annual  Report
(2004-2005)  prepared  by Ministry of Home Affairs, Foreigners’ Division, FCRA
Wing read thus:
“1. Religious
• Celebrations of religious functions/festivals etc.; • Construction/repair/maintenance
of places of worship, religious schools.; • Education of priests and preachers
(dissemination of the message of good will etc. from the holy books).; • Publication and
distribution of religious books/ literature.; · Maintenance of priests / preachers / other
religious functionaries.; • Any other activities related to the above.
2. Educational
• Construction and maintenance of schools/colleges.; • Construction and running of
hostels for poor students.; • Grant of stipends/ scholarships/ assistances in cash or
kind to poor/deserving children.; • Purchase and supply of educational material-books,
notebooks etc.; • Conducting adult literacy programs.; • Conducting research.; • Non-
formal education/schools for the mentally challenged.; • Non-formal education projects/
coaching classes.; • Any other activities related to the above.
3. Economic·
• Following but not being commercial or profit making activities: • Micro-finance
projects, including setting up banking co-operatives and self-help groups.; • Self-
sustaining income generation projects/schemes. • Agricultural activities.; • Rural
development programmes/schemes.; • Animal husbandry projects.; • Setting up and
running handicraft centres/cottages and khadi industry/social forestry projects.; •
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8, even though it may theoretically entail in transfer of foreign
contribution, it would not be a case attracting the rigors of Section 7. In
other words, Section 7 may be attracted if the utilisation is not for the
definite or permitted purposes for which the certificate of registration or
permission under the Act has been granted by the competent authority.
Indeed, if the recipient of foreign contribution engages services of some
third party or outsources its certain activities to third person, whilst
undertaking definite activities itself and had to pay therefor, it would be
a case of utilisation. The transfer within the meaning of Section 7,
therefore, would be a case of per se (simplicitor) transfer by the recipient
of foreign contribution to third party without requiring to engage in the
Vocational training, tailoring, motor repairs, computers etc.; • Projects for income generation
activities or any other developmental projects for urban slum development.; • Any other
activities related to the above, not being commercial activities.
4. Social
• Construction/running of hospitals/dispensaries/clinics.; • Construction of community
halls etc.; • Construction and management of old age homes.; • Welfare of the old aged
persons or widows.; • Construction and management of orphanage.; • Welfare of the
orphans.; • Construction and management of dharamshalas/shelters.; • Holding of free
medical/health/family
welfare/immunisation camps.; • Supply of free medicine, and
medical aids, including hearing aids, visual aids, family planning aids etc.; • Provision of
aids such as tricycles, callipers etc. to the handicapped.; • Treatment/rehabilitation of
drug addicts.; • Welfare/empowerment projects/schemes for women.; • Welfare of
children.; • Provision of free clothing/food to the poor, needy and destitutes.; • Relief/
rehabilitation of victims of natural calamities.; • Help to the victims of riots/other social
disturbances.; • Digging of bore wells.; • Sanitation including community toilets etc.; ·
Awareness camps/  seminars/  workshops  / meetings / conferences.; • Providing free
legal aids/running legal aid centres.; • Holding sports meet.; • Promoting  awareness
about Acquired Immune Deficiency Syndrome (AIDS)/treatment and rehabilitation of
persons affected by AIDS.; • Welfare of the physically and mentally challenged.; ·
Welfare of the Schedules Castes.; • Welfare of the Scheduled Tribes.;  • Welfare of the
Backward Classes.; • Environmental programs.; • Survey for socio-economic  and  other
welfare programs.; • Preservation and maintenance of wild life.; • Preservation of natural
resources.; • Awareness against social evils.; • Rehabilitation of victims of heinous
crimes.; • Rehabilitation of beggars, bootleggers, child labour etc.; • Creating awareness
of Government schemes & laws to general public.; • Any other activities related to the
above.
5. Cultural·
Celebration of
national events (Independence/Republic day/festivals).; • Theatre/films/
puppet show/road show etc.; • Maintenance of places of historical and cultural
importance.; • Preservation of ancient/tribal art forms.; • Preservation and promotion of
cultural heritage orliterature of India.; • Cultural shows.; • Any other activities related
to the above.”
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definite activities of cultural, economic, educational or social programme
of the recipient of foreign contribution, for which the recipient had
obtained a certificate of registration from the Central Government. On
this interpretation, it must follow that the argument regarding amended
Section 7, being ultra vires, must fail.
48. Concededly, Section 8 permits the recipient of foreign
contribution to utilise only specified portion thereof for administrative
purposes, to the extent permissible. As per Section 8, the administrative
expenses qua foreign contribution received by the registered person
ought not to exceed twenty per cent (instead of fifty per cent under the
unamended provision) of such contribution in the concerned financial
year. The proviso to Section 8(1), however, enables spending beyond
twenty per cent towards administrative expenses with prior approval of
the Central Government. Be it noted, the validity of amended Section 8
is not put in issue in these petitions.
49. On conjoint reading of Sections 7 and 8, as amended, the
legislative intent of mandating utilisation of foreign contribution by the
recipient itself for the purposes for which it had been permitted gets
reinforced. Additionally, Sections 12(4)(b) and 18 of the 2010 Act also
reinforce such a view — which predicates that the person who has
been granted certificate of registration or given prior approval under the
Act, is obliged to give intimation to the Central Government and
such
other authorities as may be specified by the Central Government as to
the amount of each foreign contribution received by it, the source from
which and the manner in which such foreign contribution was received,
and the purposes for which, and the manner in which such foreign
contribution was utilised by him. This information may facilitate inquiry
mechanism and to reassure that the foreign contribution accepted by the
person has been utilised for definite purposes permitted by the competent
authority. Any breach of this stipulation may entail in penal action under
the Act.
50. It was vehemently urged before us that since the transferee
would also possess certificate of registration and bound by the provisions
of the 2010 Act, it would serve no legitimate purpose by prohibiting transfer
of foreign contribution to such person. Accepting this argument would
be completely glossing over the legislative intent for which the amendment
has been effected. The legislative intent is to introduce strict dispensation
qua the recipient of foreign contribution to utilise the same “itself” for
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the purposes for which it has been permitted as per the certificate of
registration or permission granted under the Act by the Central
Government. In addition, by the same Amendment Act, utilisation of
foreign contribution for administrative purpose by the recipient has been
lowered to twenty per cent only with a view to ensure maximum spending
on the purposes for which the foreign contribution has been accepted by
the recipient having certificate of registration.
51. Absent such stringent provision, some of the recipient
organisations were reportedly indulging in successive chain of transfers
to other organisations, thereby creating a layered trail of money and also
utilisation of funds towards administrative costs of successive transfers
upto fifty per cent leaving very little funds for spending on the purposes
for which it was permitted. Hence, providing complete restriction on
transfer simplicitor, was the just option to fix accountability of the recipient
organisation and maximise utilisation for the permitted purposes. Such
being the avowed objective and purpose of the amendment, the challenge
to the amended Section 7 must fail.
52. Be that as it may, the fact that earlier transfer of foreign
contribution was permitted as per the unamended provision, that by itself
cannot be the basis to challenge the validity of the amended provision.
For, it is open to the Parliament to change the benchmark of restriction