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Analysis of the Foreign Contribution (Regulation) Amendment Act, 2020

Analysis of the Foreign Contribution (Regulation) Amendment Act, 2020

The Foreign Contribution (Regulation) Amendment Act, 2020 (hereinafter Amendement Act), has brought several technical and structural changes to the Foreign Contribution (Regulation) Act of 2010 (hereinafter Principal Act). Back in 2010, the Principal Act was given the shape of a legislature in order to consolidate the law that can regulate the acceptance and utilization of foreign contribution or foreign hospitality and to prevent the use of the same for any activities which can be detrimental to the national interest.[1]Preamble of the Principal Act

The Amendement Act has the legislative intent to strengthen the compliance mechanism, enhance transparency, and accountability in the receipt and utilization of foreign contribution, and to facilitate genuine non-governmental organizations or associations who are working for the welfare of the society.[2]Statement of Objects and Reasons of Amendement Act . The AmendmentAct came as a backdrop of a distraught situation where the Central government had to cancel certificate of registration of more than 19,000 recipient organizations in the last 10 years because of misusing the foreign contribution which has been received by them[3]Paragraph 3, Page 4 of the Therefore, the government through this amendment Act wants to curb such misuse of the funds by those entities who are registered with the Government and are entitled to use the foreign contribution. Thus, it is necessary to critically analyse the relevance of Amendment Act that has sought to make the Principal Act stronger and more operationable. 

Major Amendments

Transfer of Foreign Contribution– Earlier, as per Section 7 of the Principal Act, a person who receives foreign contribution and who has been registered and granted a certificate or has obtained prior permission under the Act, was allowed to transfer such foreign contribution to any other person who is also registered and has been granted the certificate or has obtained the prior permission under this Act. However, the Amendement Act completely prohibs such transfer of foreign contribution to any other person in all circumstances. 

Reduction in usage of Foreign Contribution for administration expenses- As per Section 8(b) of the Principal Act, fifty percent (50%) of the foreign contribution received in a financial year was permitted to be used for the purposes of administrative expenses. However, the Amendement Act has now lowered the percentage mark to 20 percent (20%) of the foreign contribution received in a financial year. Therefore, now only 20 percent of the contribution received in a financial year can be used for administrative expenses like paying salaries, traveling expenses, etc. 

Restriction in utilization of funds- Section 11 of the Principal Act states that if a person has been found guilty of the violation of any of the provisions of this Act or even of the Foreign Contribution (Regulation) Act, 1976, the unutilized or unreceived amount of foreign contribution shall not be utilized or received by the same person without taking approval of the Central Government. Hence, this provision earlier dealt with only those cases where the person has already found guilty. However, the Amendement Act has significantly changed the position. Now, the Central government has got the power to take such actions even in cases where the inquiry is pending and yet to be concluded. The only condition which is required is that the Central Government, based on information or report, and after holding a summary inquiry, has reasons to believe that such a person who has earlier been granted permission is now contravening the provision(s) of the Act.

Prohibition on ‘public servant’ from receiving foreign contribution- Under Section 3 of the Principal Act, a list has been provided in regard to those persons who are prohibited to accept the foreign contributions. Under clause (c) of Section 3, restrictions have been put on Judges, Government servants, or employees of any corporation or any other body controlled or owned by the Government to accept foreign contributions. Through the Amendement Act, the list has now been expanded as the term “public servant” is also now inserted under clause (c) of Section 3. The term ‘public servant’ here refers to the same meaning of the term ‘public servant’ as defined under Section 21 of the Indian Penal Code.  

Surrender of Certificate- In the Principal Act, there is no such provision for surrendering the certificate, however, through the Amendement Act, Section 14-A has been added which now deals with the power of the Central Government to permit any person to surrender the certificate if, after making such inquiry, it is satisfied that such person has not contravened any of the provision of the Principal Act and that the management of foreign contribution has been vested in the authority as prescribed by the Government. 

Provision of inquiry before the renewal of certificate- As per Section 16 of the Principal Act, every person who has been granted a certificate shall have such certificate renewed within six months before its expiry period. However, while renewing the certificate there was no such provision available in the Principal Act for the government to make another inquiry to satisfy itself that such person has fulfilled all conditions that are necessary for the grant of certificate. Through the Amendement Act, a new proviso has been added after Section 16 of the Principal Act that allows the Central Government to conduct an inquiry to satisfy that all the conditions as specified under Section 12(4) of the Principal Act are fulfilled before the renewal of a certificate.  

FCRA Account- As per Section 17 of the Principal Act, every person who has been granted a certificate shall receive foreign contribution in a single account only through such one of the branches of that bank which he has specified in his application for the grant of certificate. However, the Amendement Act has regulated the issue and has declared that all such foreign contribution can only be received in an account which is designated as ‘FCRA Account’ by the bank. This account shall be opened by him for the purpose of remittances of foreign contribution in such a branch of the State Bank of India at New Delhi which the Central Government will specify through notification. Nonetheless, the person can also open another FCRA account in any other scheduled bank of his choice for the purpose of keeping or utilizing the foreign contribution received in the FCRA account as opened in the SBI at New Delhi. 

Conclusion

After going through the respective amendments that have been incorporated in the Principal Act, it is manifestly evident that these amendments are in line with the aim to prevent dilution and diversification of foreign funds for any ulterior purposes. The amendments enforced clearly shows its harmony with the legislative intent that the Amendement Act has mentioned.  Hence, it can be asserted that the Amendment Act is a step ahead towards ensuring maximum utilization of the foreign contribution to achieve the respective goals rather than exploiting the contributions  for any  ulterior purposes. It is expected that through this amendments, the transperency and accountability will increase and there will be a significant reduction in diversification of funds. Hence, the legislature has make certain that the national security and sovereignity is not been threatened in any circumstances.

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