Explained : Changes Brought To Foreign Contributions Regulation Act

The Parliament last week passed the Foreign Contribution (Regulation) Amendment Bill, 2020 ("the Bill") to amend the Foreign Contribution (Regulation) Act, 2010 ("the FCRA or the Act"). As per the 'Statement of Objects' of the Bill, "the annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilised the same for the purpose for which they were registered or granted prior permission under the said Act." The Ministry observed that many organizations failed to ensure basic statutory compliances and this had led to a situation where the Central Government had to cancel certificates of registration of more than 19,000 recipient organizations. With this in mind, the object of the Centre seems to be streamlining the provisions of the FCRA "by strengthening the compliance mechanism, enhancing transparency and accountability in the receipt and utilisation of foreign contribution" and "facilitating genuine non-Governmental organisations" working for the welfare of the society". Changes : By amending section 3(c) of the Act, the Bill proposes to bar public servants from receiving any foreign funding. Though the FCRA, 2010 did place restrictions on the transfer of foreign funds received by any registered individual or organization to another entity, it did not however impose a complete embargo on such a process. The proviso to section 7 of the Act read with Rule 24 of the Foreign Contribution (Regulation) Rules, 2011 ("the FCRR") as amended vide the Amendment Rules, 2012[1], shows that foreign contribution not exceeding ten percent of the total value of such proceeds may be transferred. Those intending to carry out such a transfer had to make an application to the Central Government (in Form FC5[2]), which would finally be subject to the Central Government's approval. Furthermore, the requirement to seek the Government's approval for the transfer was waived in the cases where the said transfer was taking place between two persons (inclusive of any association or organisations) with a certification of registration or prior permission under the Act. The Amendment Bill, 2020 however completely does away with providing any such relaxations, and no transfer of foreign contributions is allowed either to a registered or unregistered person. Amendment to section 8 of the Act deals with restrictions to utilize foreign contribution for administrative purposes. Whereas under the FCRA, NGOs and other associations registered under the Act could use up to 50% of their foreign contributions received to meet expenses for administrative purposes, this limit has been proposed to be reduced to 20% under the Bill. If any registered or unregistered person was found guilty of violating the provisions of the Act, they were barred under section 11(2) of the FCRA from further utilizing or receiving any foreign funding before obtaining the Government's permission. The Bill, however, makes a substantial change as it proposes that "on the basis of any information or report" if the Centre "has reason to believe" that the person has acted in violation, then "pending inquiry", the Centre may freeze the accounts of the person or association. The Bill seeks to insert a provision [section 12(1A)] into the Act by which, every person seeking to obtain a registration certificate or prior permission for receiving foreign contributions will be required to open an FCRA account in a State Bank of India branch in New Delhi (to be notified by the Government). Any and all foreign remittances can be received only in this New Delhi Branch of SBI. The person can open an FCRA account in a scheduled FCRA bank elsewhere if they wish to transfer the funds received in the New Delhi branch account for further utilisation. In addition to this, section 12A has been sought to be inserted which mandates that for obtaining the Certificate of Registration (section 12) or Renewal of Licenses under the Act (section 16), all Office Bearers and key functionaries of the Organisation need to disclose their AADHAR numbers (or copy of the Passport or Overseas Citizen of India Card, in case of a foreigner). Under the Act, the Central Government can cancel the certificate of any person for reasons such as wrongful statement made in the application for the certification or its renewal, violation of provisions of the Act, or if it was deemed fit by the Government to do so "in the public interest", among others (section 14). The amendment to section 13 (Suspension of Certificate) lays down that such a suspension was valid for a period of 180 days or to such further period (beyond 180 days), where the extended period did not exceed 180 days – thus increasing the validity of the suspension period. By seeking to insert section '14A', the Government seeks to permit registered persons to surrender their certificates granted under this Act, once it...

Explained : Changes Brought To Foreign Contributions Regulation Act

Arunima Bhattacharjee

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