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  • Paras Sharma

The FCRA Amendment 2020: The Dominance Of “License Raj” Over Philanthropic Activities


Coral Shah, Student, Symbiosis Law School, Pune


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The Foreign Contribution (Regulation) Amendment Act, 2020 (“Act”) is the latest addition to the chronicles of suppression of NGOs in India in spite of their relentless contribution in social reconstruction. India has continually been hostile towards NGOs, in spite of their relentless contribution in social reconstruction from the aftermath of World War to battling the pandemic today. Pandit Jawaharlal Nehru devised a universal egalitarian and humanitarian strategy for aiding countries in need. The credit for the genesis of the iniquitous act ‘Foreign Contribution (Regulation) Act, 1976 goes to Indira Gandhi under the garb of “theory of foreign hand.” Later during Manmohan Singh’s reign, the economic reforms once again opened the doors for the foreign donors. This was short lived as in 2010, FCRA was further amended which repressed the functioning of NGOs. The new regulation, FCRA, 2020, now leaves no breathing space for NGOs and eliminates their independence and increases red tapism with burdensome bureaucratic formalities.

Between the year 2014-2019, 16,743 associations registrations’ have been cancelled due to FCRA violation as compared to 2011-2013, where 3929 licenses were cancelled.[1] Opposition criticsed the introduction of FCRA, 2020 calling it a move to ‘target those who speak against the government” which is ironical as it itself is guilty of such practice through the birth of FCRA regulations 1976 and 2010. A series of amendments with regard to the Foreign Contribution Regulation Act was passed by the Lok Sabha stating the need to strengthen compliance mechanisms and enhance transparency and accountability. To demarcate the genuine NGOs that work towards the welfare of society.

This Act is the third amendment in the history since the genesis of the iniquitous act of 1976. The purpose of the Act as provided under the Statement of Objects and Reasons, is to increase the efficiency by increasing transparency and accountability and ensuring rigid compliance for regulating foreign contribution while expediting functioning of genuine NGOs.[2] The purpose of this essay is to analyse the modifications introduced, examine whether it aligns with the objective it intends to achieve and its impact on the social organisations.

The intent behind prohibiting “public servants” from receiving foreign contributions[3] is to plug loopholes that surfaced in the case where public servant contended acceptance of foreign contributions on the ground that he was not a government servant’.[4] While the amendment is appreciated as a means to check the misuse of power, it possesses certain drawbacks. First, the purpose is already fulfilled under the LokPal Act.[5] Second, this Act fails to account for the formation of NGOs in the name of family thereby rendering the purpose of corruption prevention redundant. Third, there is no prohibition on associating with an NGO on completion of a service tenure.

It also prohibits sub-granting of foreign contributions creating practical difficulties for small NGOs that rely on others for finances.[6] No guidelines have been provided regulating the transfer of funds to partners as provided under Rule 24 of FCRA, 2011. Such a blanket ban is violative of the “Wednesbury principle” which requires a reasonable exercise of discretionary power.[7] Recently, the Supreme Court expressly recognized the right to receive foreign funds when it ruled that this right cannot be restricted.[8]’ Though this provision seeks to uphold the objective that funds must be utilized for the purpose they were given for — as laid down under Section 8(1)(a) of the FCRA, 2010 — it doesn’t fulfil its objective.

The Act has restricted the utilization of foreign funds for administrative purposes from 50% to 20%.[9] The government hasn’t provided any rational nexus for arriving at this limit and how it intends to achieve greater transparency. This provision paralyses the NGOs from achieving their foundational objectives due to limited administrative funds especially research and advocacy based NGOs which depend on such costs and will be forced to shut down.

Section 11, in giving unbridled power to the Central Government to prohibit the utilization of funds pending an inquiry, violates the principle of “innocent until proven guilty”. Such discretionary power that is conferred on the executive must be supplemented by prescribed guidelines which greatly lessen the scope of the arbitrary exercise of administrative actions.[10] The effect of the Act in not listing any standards or criteria for reasonableness is the stymying of the ease of doing business.

Additionally, the requirement of Aadhaar is violative of an individual’s right to privacy,[11] which can only be curtailed on the grounds of national security. The Act, however, demands it as a source of identification. Can foreign contributions be reasonably viewed as a threat to national security and sovereignty of the country?

The provision for voluntary surrendering of FCRA registration is a double edged sword.[12] It’s a welcome move for organizations who don’t require foreign funds but problem for those who have assets generated out of foreign funds as the assets must be given to authorities.

Lastly, the Act mandates the receipt of foreign contributions only through the SBI’s Delhi branch,[13] This will increase the operational cost for the NGOs as they will have to transfer the funds to their own bank. It does not provide the procedure for opening these accounts. The Act also extends the period for suspension of registration certificate to 360 days from the previous 180 days.[14] The legislation has failed to express how these provisions intend to fulfill the objective of the Act. Both the provisions seem arbitrary and require to be struck down.

Prima facie it appears that the introduction of Act is not bona-fide as the PM Care fund is overtly excluded from its ambit. In the past, BJP and Congress, who have always been at loggerheads came together to ‘change the law’ when they couldn’t ‘break the law’, and similarly amended the FCRA regulations retrospectively when FCRA proceedings were instituted against them.

In conclusion, there are several provisions with no relation to the object sought to be achieved and this merely creates administrative hurdles for service-spirited organizations. Even if the Act was introduced in the interest of national security, it fails to explicitly and conclusively achieve it.


[1] Ministry of Home Affairs, Registrations Cancelled List, (March 28, 2021, 1:30PM) [2] The Foreign Contribution (Regulation) Amendment Act, No. 33 of 2020, Statement of Objects and Reasons, (2020) [3] The Foreign Contribution (Regulation) Amendment Act, No. 33 of 2020, § 3, (2020) [4] Lawyers Collective & Ors. v. Central Bureau of Investigation & Anr WP/3841/2019 [5] The Lokpal and Lokayuktas Act, 134-C of 2011 (2013) [6] The Foreign Contribution (Regulation) Amendment Act, No. 33 of 2020, § 7, (2020) [7] Associate Picture House v. Wednesbury Corporation (1947) 2 All ER 74 (CA) [8] Indian Social Action Forum (INSAF) v. Union of India, Civil Appeal No. 1510 of 2020 [9] The Foreign Contribution (Regulation) Amendment Act, No. 33 of 2020, § 8, (2020) [10] State of West Bengal v. Anwar Ali AIR 1952 SC 175 [11] K.S. Puttaswamy v. Union of India (2017) 10 SCC 1 [12] The Foreign Contribution (Regulation) Amendment Act, No. 33 of 2020, § 14, Cl.4, (2020) [13]The Foreign Contribution (Regulation) Amendment Act, No. 33 of 2020, § 17, Cl.A (2020); The Foreign Contribution (Regulation) Amendment Act, No. 33 of 2020, § 13, (2020) [14] The Foreign Contribution (Regulation) Amendment Act, No. 33 of 2020, § 13, (2020)


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