Petition seeking extension for creating FCRA accounts by NGOs receiving foreign aids

Petition seeking extension for creating FCRA accounts by NGOs receiving foreign aids

The Foreign Contribution Regulation Act, 2010 (hereinafter referred to as “FCRA, 2010”) was created by the 42nd amendment made by the parliament to make improvements and eliminate the flaws in the previous act dating 1976. This act is to regulate the acceptance and utilization of contributions from foreign sources. The act also seeks to prevent the misutilization of the funds via activities that might be detrimental for India. This act applies to all the non-governmental organizations that seek assistance from foreign sources. Therefore, such organizations must have an FCRA, 2010 account from the State Bank of India, main branch by 21st April 2021 to validate the funds received thereto. The same has been instructed by the Ministry of Home Affairs.

Recently, a petition has been submitted by the NGOs to the High Court of New Delhi praying to seek an amendment in section 17 of the Foreign Contribution Regulation Act and an order issued by the Central Home Ministry to be read with the same. The plea is to extend the deadline for six months and to be able to get the FC6C certificates or approvals from the MHA in an easier way.

The case was heard by Justice Pratibha M. Singh. The petitioners were NGOs operating from Telangana and Andhra Pradesh.

It had been observed by the court that the amendment to section 17 of the Foreign Contribution Regulation Act was not a necessity. Section 17 of the act says that all the foreign contributions received by the non-governmental organizations will be valid only after having created an FCRA, 2010 account as mentioned under section 12 of the same act and in a way in which the act has prescribed the utilization of the funds within the restricted deadline. The court has observed that the extension to the deadline may be considered by the Central authorities as the concerns faced by the petitioners be genuine. The exact extent of such an extension will be intimated by further notice. Till then the NGOs can continue to receive and utilize the funds from foreign sources so long as they maintain proper records of the same and function appropriately.

The concerns addressed by the NGOs are: Once the permission has been granted, the NGOs can receive and utilize the funds but only from a designated bank account and nowhere else. An audited annual report of the same bank account has to be submitted by the FCRA, 2010 department. This although sounds reasonable in the case of a small-scale NGO, is not applicable when we talk about larger, multi-dimensional, and multi-locational organizations. Such organizations have to make payments for not only the salaries of their staff but also for the construction of infrastructures related to their project. such operations are usually spanned over a large area and require different bank accounts for the easement of the payment process. This is the main problem being faced by the NGOs. Another rule in the act says that an organization that has been functioning for at least three years and having an annual turnover of at least ten lakh rupees will be able to get an account registered for the procurement of funds for the next five years. This extent was perpetual earlier but has now been restricted to five years only. The organizations might find it difficult to show the details of the expenditure incurred while registering. This might force them to take a huge number of donations from small Indian sources in the initial years. 

The terms of cancellation of the registration are the following:

  1. Violation of any of the terms of the Foreign Contribution Regulation Act. 
  2. Non-compliance with the regulations of the Foreign Contribution Regulation Act.
  3. Non- receipt of any foreign contribution for a prolonged period of a minimum of two years.

Upon cancellation, a non-profit organization will have to re-apply after the expiry of six months dating from the time of cancellation.

Once the cancellation has been done, the assets of the organization go under the possession of the District Magistrate. The funds received till then are frozen and the bank accounts are sealed as well. Such terms and the extended period for a re-application seem to be too stringent for the non-profits especially during this pandemic situation from their point of view. During the second wave of COVID-19, there is an extensive need for the supply of oxygen, PPE kits as well as other equipment a lot of which are provided by the NGOs, in the absence of enough capability of the government. Under such a situation it becomes necessary for the government to help the organizations so that we can overcome these difficult times together.

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