Covid's Clarion Call For Foreign Contribution

Adv. Abhishek Gupta

26 April 2020 4:33 AM GMT

  • Covids Clarion Call For Foreign Contribution

    The ubiquitous Covid-19 has taken the planet by a storm with its imperious influence being felt everywhere. The crisis has compelled some far-reaching steps by all nations to arrest the progression of the pandemic. India, too, has been steamrollered into undertaking unprecedented measures to tackle Covid-19 and put brakes on the rising corona-curve. One such measure has...

    The ubiquitous Covid-19 has taken the planet by a storm with its imperious influence being felt everywhere. The crisis has compelled some far-reaching steps by all nations to arrest the progression of the pandemic.

    India, too, has been steamrollered into undertaking unprecedented measures to tackle Covid-19 and put brakes on the rising corona-curve. One such measure has been invocation of foreign aid and donations to combat Covid-19 pandemic; a shift from a decade-and-a-half-old stance of not accepting foreign assistance during calamities. In furtherance of the Government's intent, the Prime Minister's Citizen Assistance and Relief in Emergency Situations (PM CARES) Fund has been granted exemption from the rigmaroles of the Foreign Contribution Regulation Act, 2010 ("FCRA", for short) for facilitating the receipt of foreign donations and aid by the fund.

    What is FCRA and how does FCRA work:

    FCRA aims to consolidate and regulate the law relating to the acceptance and utilization of foreign contribution or foreign hospitality by individuals, associations and companies. The receipt of 'Foreign contribution' forms the cornerstone of the Act, and is defined as the donation, delivery or transfer made by any foreign source of any article, not being an article given to a person as a gift for his personal use; or, of any currency, whether Indian or foreign; or of any security[1]. The definition includes interest or any other income accrued on foreign contribution deposited in any bank as well as any foreign contribution received by one or more organizations within India directly or through intermediaries. It excepts the fee received from any foreign source (including fees charged by an educational institution in India from foreign student) or the cost of goods or services rendered by a person in the ordinary course of his business, trade or commerce within India or outside India. The other two significant expressions to deconstruct the scheme of the Act, are 'foreign source' and 'person'. A foreign source encompasses the Government of any foreign country and any agency of such government; any international agency, not being the United Nations or any of its organs; a foreign company; a corporation incorporated in a foreign country; a multi-national corporation; a trade union in any foreign country; a foreign trust or a foundation; a society, club or other association of individuals formed or registered outside India; a citizen of a foreign country; and lastly, an Indian company with more than 50% of its nominal share capital held by any of the above. This definition of foreign source was diluted to some extent in the year 2016 with the amendment of Section 2(1)(j)(vi), and consequently, the companies with foreign shareholding over 50% were excluded from the application of FCRA, provided such foreign investment was within the limits specified under FEMA, 1999, thereby paving the way for bigwigs like ICICI Bank, Vedanta, Infosys etc. to make foreign contributions sans prior permission or registration. A 'person' includes an individual; a Hindu undivided family; an association; or a company registered under section 25 of the Companies Act, 1956 (now Section 8 of Companies Act, 2013). FCRA extends to whole of India, and also applies to citizens of India outside India as well as the foreign subsidiaries or associate branches of companies or bodies corporate registered or incorporated in India[2]. As per the scheme of the Act, contributions made by a citizen of India living in another country (i.e. NRIs) from his personal savings is outside the purview of foreign contribution, however, any contribution made by a PIO, an OCI, or an Indian origin person who has acquired foreign citizenship is treated as foreign contribution.

    For the purpose of acceptance of foreign contribution, the Act contemplates two kinds of recipients, one who are registered with the Central Government and the others not so registered, but having prior permission from the Central Government only valid for a specific purpose and from a specific source[3]. Detailed conditions and requirements for the grant of registration and prior permission are laid out u/s 12(4) of the Act. It is noteworthy that Section 3(1) of the Act disentitles certain persons/associations from receiving foreign contribution, such as, election candidates; judges; political parties or their office-bearers; correspondents, columnists, cartoonists, editors, owners, printers or publishers of a newspaper; members of any legislature, to name a few. However, by virtue of Section 4 of the said Act, the said prohibition ceases in respect of receipt of foreign contribution by way of salary, wages, or remuneration; payment made in the ordinary course of business, or in the course of international trade or commerce; gift, presentation, remittances or scholarship. By virtue of Section 9, the Government is empowered to prohibit the receipt of foreign contribution, if it is satisfied that such acceptance is likely to affect prejudicially the sovereignty and integrity of India; or public interest; or freedom of fairness of election to any Legislature; or friendly relations with any foreign state; or harmony between religious, racial, social, linguistic or regional groups, castes or communities. The Act, inter alia, also mandates filing of annual returns by FCRA associations, maintenance of separate accounts w.r.t. receipt and utilization of foreign contribution, receipt of foreign contribution in the exclusive single FC account of the Scheduled Bank, furnishing intimation of the amount of each foreign contribution received, its source and form of receipt, and transfer of foreign contribution to any other person only on certain conditions; failure or non-compliance of above may invite penalties stipulated under the Act, or may even lead to suspension or cancellation of registration/prior permission.

    Foreign Contribution to aid Covid-19 efforts:

    The Uttar Pradesh Government in following the cue of the PM CARES fund has applied for the necessary permission under FCRA in its bid to accept foreign donations into its coronavirus dedicated Covid Care Fund. This comes close on the heels of the exemption granted to the PM CARES fund from the FCRA provisions.

    The overseas governments and companies have been prompt in responding to the Indian overtures, with the US Government providing $2.9 million financial support to India[4] and donations of essential medical supplies from the Alibaba foundation[5].

    The Government recognizes the role played by the NGOs and CSOs in the Covid relief and mitigation efforts, and has elicited their participation and contribution to enhance community operation in districts and supplement the efforts of the Government and local administration[6]. The MHA has also called upon all the FCRA associations to submit a Covid-19 response detailing their cumulative total support on COVID-19 efforts by 15th of every month[7]. This comes in the wake of the press release of Ministry of Consumer Affairs, Food and Public Distribution, directing FCI to provide Wheat and Rice at the Open Market Sale Scheme (OMSS) rates to the NGOs and Charitable Organizations to facilitate their quest to provide cooked food to poor and needy people during the nationwide lockdown[8]. Even the Niti Aayog has written to NGOs/ CSOs, appealing for assistance in identifying hotspots and deputing volunteers and caregivers to deliver services to the elderly, PWDs, children, transgender persons, and other vulnerable groups; to create awareness; to provide shelter to homeless, daily wage workers, and urban poor families; set up community kitchens for migrants[9].


    Albeit the Central Government has reposed confidence and faith in the NGOs and CSOs to provide aid in the concerted crusade against Covid-19, it must also ensure that these associations are not unduly harassed in the garb of 'politically motivated donations' and are not unreasonably restrained with the fetters of FCRA. The Apex Court's judgment in 'Indian Social Action Forum (INSAF) vs. Union of India[10]' is felicitous in this regard, and checks some possible abuse of FCRA by reading down the Rules 3 (v) and (vi) of the Foreign Contribution (Regulation) Rules, 2011 and holding that, "Support to public causes by resorting to legitimate means of dissent like bandh, hartal etc. cannot deprive an organisation of its legitimate right of receiving foreign contribution.". It further holds that the voluntary organisations which are working for the social and economic welfare of the society and have absolutely no connection with either party politics or active politics cannot be denied access to foreign contributions.

    With the state machinery, the law and order enforcement agencies, the healthcare and consumer staples sector being over-burdened and overworked, the state-civil society collaboration becomes more valuable and necessary than ever

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