RSTV: THE BIG PICTURE- NGOS FOREIGN FUNDING &

RISKS
insightsonindia.com/2020/03/24/rstv-the-big-picture-ngos-foreign-funding-risks

Insights March 24,

Editor 2020

Watch Video At: https://youtu.be/A6Cak3mThmk

Introduction:

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The Supreme Court ruled that the Centre cannot deprive NGOs of their right to receive
foreign money by declaring them as political organisations if they use legitimate means
of dissent to support public causes. Section 5 of the Foreign Contribution (Regulation)
Act, 2010 gives the Union government “unchecked and unbridled powers” to declare an
organisation as being one of political nature and deny it access to funds from sources
abroad. The Apex Court observed – “It is clear from the provision itself that bandhs,
hartals, rasta rokos, etc. are treated as common methods of political action.” Any
organisation that supports the cause of a group of citizens agitating for their rights
without a political goal or objective cannot be penalised by being declared an
organisation of political nature,” the court observed. The court also made it clear that
organisations used for channeling foreign funds by political parties cannot escape the
rigour of FCRA.

FRCA and NGO’s:

NGOs play an important role in the upliftment of the weaker sections of the society
and their overall development.
This is especially true in the case of India, where a vast majority of its population
continues to remain under the poverty line and have little or no access to even
basic facilities provided by the government.
Every NGO registered or having prior approval under the Act must file an annual
report with the Authority in the prescribed form.
This report must be accompanied by an income and expenditure statement,
receipt and payment account, and balance sheet for the relevant financial year.
For financial years where no foreign contribution is received, a ‘NIL’ report must be
furnished with the Authority.
In case of non-compliance with provisions of the FCRA, the government can
penalize an NGO. For example, if these NGOs don’t file annual returns, the
government can issue a show-cause notice and subsequently, suspend or cancel
their foreign funding licenses.
In the last two years, licenses of around 20000 NGOs have been cancelled by the
central government after they were found violating various provisions of FCRA act.
Hence those NGOs were barred from receiving any foreign funds.

SC’s Judgement:

The government cannot prevent NGOs and other social outfits from getting foreign
funds just because they used political means to mobilise and awaken people.
The statute that prevents organisations of a political nature from receiving foreign
funds is to ensure that the administration is not influenced by foreign funds.
On the other hand, voluntary organisations which have absolutely no connection
with either party politics or active politics cannot be denied access to foreign
contributions by enlarging the scope of the term ‘political interests’, it said.

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 Any organisation which habitually engages itself in or employs common methods
of political action like ‘bandh’ or ‘hartal’, ‘rasta roko’, ‘rail roko’ or ‘jail bharo’ in
support of public causes can also be declared as an organisation of political nature,
according to rules under the FCRA.
The judges, however, said organisations which were not involved in active politics
or party politics would not come under these rules.
Support to public causes by resorting to legitimate means of dissent such as bandh
and hartal cannot deprive an organisation of its legitimate right of receiving foreign
contribution, the bench said. It is clear from the provision itself that bandh, hartal,
rasta roko etc., are treated as common methods of political action, it added.
The rule would, however, apply to organisations used by political parties for
channelling foreign funds provided there was concrete material to prove that, the
court said.

What is ‘public interest’?

The FCRA regulates the receipt of funding from sources outside of India to NGOs
working in India.
It prohibits receipt of foreign contribution “for any activities detrimental to the
national interest”.
The Act specifies that NGOs require the government’s permission to receive
funding from abroad.
The government can refuse permission if it believes that the donation to the NGO
will adversely affect “public interest” or the “economic interest of the state”.
This condition is manifestly overbroad. There is no clear guidance on what
constitutes “public interest”.

Government’s accusation against NGOs:

A government could construe any disagreement with, or criticism of, any of its
policies as being against public interest.
For example, in 2014, several groups including Greenpeace were accused by the
Intelligence Bureau of stalling India’s economic development.
In the government’s narrow view, public interest is interpreted as being equivalent
to its priorities. That is simply not the case.
Thus, an environmental or human rights organisation criticising the government
can be accused of “acting against public interest”.

Foreign Funding:

The Foreign Contribution (Regulation) Act, 2010 and rules framed under it (the
“FCRA” or “Act”) regulate the receipt and usage of foreign contribution by non-
governmental organisations (“NGOs”) in India.
The intent of the Act is to prevent use of foreign contribution or foreign hospitality
for any activity detrimental to the national interest.

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 It has a very wide scope and is applicable to a natural person, body corporate, all
other types of Indian entities (whether incorporated or not) as well as NRIs and
overseas branches/subsidiaries of Indian companies and other entities formed or
registered in India.
It is implemented by the Ministry of Home Affairs, Government of India.
Prohibits acceptance and use of foreign contribution or foreign hospitality by a
certain specified category of persons such as a candidate for election, judge,
journalist, columnist, newspaper publication, cartoonist and others.
Regulates the inflow to and usage of foreign contribution by NGOs by prescribing a
mechanism to accept, use and report usage of the same.
It defines the term ‘foreign contribution’ to include currency, article other than gift
for personal use and securities received from foreign source. While foreign
hospitality refers to any offer from a foreign source to provide foreign travel,
boarding, lodging, transportation or medical treatment cost.
The Act permits only NGOs having a definite cultural, economic, educational,
religious or social programme to accept foreign contribution, that too after such
NGOs either obtain a certificate of registration or prior permission under the Act.
In order to be registered under the FCRA, an NGO must be in existence for at least
three years and must have undertaken reasonable activity in its field for which the
foreign contribution is proposed to be utilised. Further, it must have spent at least
INR 1,000,000 over three years preceding the date of its application on its activities.
The registration certificate is valid for a period of five years and must be thereafter
renewed in the prescribed manner.
NGOs not eligible for registration can seek prior approval from FCRA for receiving
foreign funding. This permission is granted only for a specific amount of foreign
funding from a specified foreign source for a specific purpose. It remains valid till
receipt and full utilisation of such amount.

Way forward:

The SC has sought to draw a distinction between the overtly political activity and
normal activity of the NGO.
A National Accreditation Council consisting of academicians, activist, retired
bureaucrats should be made to ensure compliance by NGOs.
There should be better coordination between Ministries of Home Affairs and
Finance in terms of monitoring and regulating illicit and unaccounted funds.
A regulatory mechanism to keep a watch on the financial activities of NGOs and
voluntary organizations is the need of the hour.
Foreign funding will delay our strategic activity so there should be monitoring but
there cannot be blanket ban on receiving of foreign funds.
Citizens today are keen to play an active role in processes that shape their lives and
it is important that their participation in democracy go beyond the ritual of voting
and should include promotion of social justice, gender equity, inclusion etc.

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