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FCRA Amendments Impose Blanket Restrictions, Disproportionate & Harsh : Petitioners Argue Before Supreme Court

Srishti Ojha
29 Oct 2021 4:25 AM GMT
FCRA Amendments Impose Blanket Restrictions, Disproportionate & Harsh : Petitioners Argue Before Supreme Court
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The Supreme Court on Thursday started hearing arguments in petitions filed challenging the Foreign Contributions Regulation (Amendment) Act 2020 and Ministry of Home Affair's notification dated May 18, 2021 extending the date for compliance of specific provisions of the Act.A Bench comprising Justice Khanwilkar, Justice Dinesh Maheshwari and Justice CT Ravikumar heard arguments...

The Supreme Court on Thursday started hearing arguments in petitions filed challenging the Foreign Contributions Regulation (Amendment) Act 2020 and Ministry of Home Affair's notification dated May 18, 2021 extending the date for compliance of specific provisions of the Act.

A Bench comprising Justice Khanwilkar, Justice Dinesh Maheshwari and Justice CT Ravikumar heard arguments advanced by Senior Advocate Gopal Sankaranarayanan on behalf of petitioners and Additional Solicitor General Sanjay Jain for Union of India in the case. 

At the outset, Senior Advocate Gopal Sankaranarayanan informed the Court that he is appearing for petitions which challenge the provisions of FCRA and not the one which supports it.

Referring to the challenged provisions, he stated that after amendment now even if one gets 20,000 blankets, through foreign contribution the same cannot be given to anyone.

" Section 7 is so clear in its prohibition Its probably poor drafting or oversight on their part." He said.

Saying that Section 17 along with 2-3 other provisions are a little harsh, he said that there is no iota of explanation in Centre's counter as to what the hurdle was that such restrictions had to be issued.

Taking the Bench through relevant dates and developments, he stated that to operationalise section 17 the Government came up with a notification dated 7th October 2020. The amendment Act is notified on 29 Sept 2020, the rules came into effect in November 2020,the notifications notifying SBI Delhi Main Branch pursuant to section 17 came on 7th October 2020.

" On14th Oct 2020, there was Ministry's notice with procedure to maintain FCRA account and it said that accounts should be opened by 3st March 2021. So about half of them about 25000 had to immediately transfer and get FCRA account. That was extended again on 18th May till 30th June 2021. The SOP that they issued in November 2020 about how account operation will take place, we have challenged that." He said.

"Today in these 2 petitions there are groups of individuals before you, there are 4 organisations and one individual and in other one 5 organisations. 2 of them have opened those FCRA organisations and rest awaiting court's protection." He added.

Citing the Indian Social Acton Forum case, where certain rules of FCRA were challenged, Mr Sankaranarayanan stated that the Court had in that case observed that a balance has to be drawn between object sought to be achieved by legislation and rights of the voluntary organisation to have access to have  foreign funds. Further the court had held that "Therefore such of the organisations working for social and economic wellbeing of the society cannot be brought within purview of act or rules by enlarging the scope of term 'political interest'" 

Mr Sankaranarayanan submitted that in the recent past, the Supreme Court has said with specific reference to this act and rules, that a balance needs to be achieved and it cant be a prohibition from receiving foreigh aid, as far as organisations not involved to politics are concerned.

Impugned Provisions Blanket In Nature: Petitioners

Mr Sankaranarayanan argued that the impugned provisions are blanket in nature.

"There is a prohibition with reference to me transferring it to any person, it severely inhibits and limits everyone working in this sector, because we are looking at health, education, distribution of medicines, flood and disaster prone areas." He said

Foreign Contributions Helped During Covid, Unfortunate That They're Looked At with Coloured Lens.

Mr Sankaranarayanan added that during Covid, a lot of funding came from foreign sources.

He added that its unfortunate that when we say foreign contributions, we keep looking at it with coloured lens at possibility that these may be terror organisations, people sponsoring money laundering, when a large number of them are Indian citizens abroad.

The Bench however pointed out that the issue is if regulatory measure introduced is too extreme, mid- way or of a manageable standard.

" Issue is not that, issue is if this regulatory measure is too extreme, or mid way or manageable standard, that has to be decided. No one is opposed to Foreign contribution, that is recognised,it has to be done in a manner provided by the Act. You say provision is uncostitutuional as it effects your rights. General issues are not to be gone into by us", the bench said.

We Are Testing A Law Made By Parliament, Assumption Is It's Aware Of All Aspects Yet Decided To Proceed: Bench

The Bench added that what is challenged is not an executive order, it is a law made by the Parliament.

" We are testing a law made by the Parliament. When it is law made by parliament we've to proceed on assumption that parliament is aware about all aspects yet they decided to proceed, its a policy matter. Start with there. If that law is conflicting with article 14,21 etc anywhere, that test we will apply." the Bench said

Amendment Is Manifestly Arbitrary: Petitioners

Mr Sankaranarayanan submitted that the amendment is manifestly arbitrary, and 'an Article 14 challenge' is being made. He added that the prohibition that they have enforced is manifestly arbitrary, it gouges out heart of the Act.

"It is not that when foreign direct investment comes in we keep amending the companies act, there has to be a logical constitutional basis for why they are amending and making it stricter and harsher." Mr Sankaranarayanan said.

"There's no rational nexus between choosing one branch in one bank, in one city and saying that is necessary to subserve sovereignty and national interest." He added.

Based On Pegasus Judgement, If Centre Argues National Security, They Have To Establish How its Affected

Mr Sankaranarayanan submitted that as stated by Supreme Court in its judgement relating to the Pegasus controversy, if national security argument is being brought by Centre in their counter affidavit, it has been made clear, that they don't  get a free pass saying national security is effected, they have to establish how national security is affected and they have to show of its subserving terrorism etc

Restrictions Imposed Are Unreasonable & Disproportionate: Petitioners

Mr Sankaranarayanan submitted that the restriction imposed are unreasonable and disproportionate restrictions if it is a valid act at all. He added that the respondents have to show it is in public interest that the restrictions have been brought since for last 40 years there hasn't been a problem

"Your reasonable restrictions under 19(6) can be enforced only when public interest is served. Infact public interest will be served if you allow us the elbow room to function in manner we were functioning. Even if public interest is being served it has to be through reasonable restriction. Its unreasonable & disproportionate is what i am saying" Mr Sankaranarayanan said.

Parliament Has Taken Reins Away From Centre As well: Petitioners 

Mr Sankaranarayanan submitted that "If I were to read section 7 on its own terms and compare it to what 7 was before, earlier prohibition wasn't a prohibition it was a restriction and a reasonable restriction. It said i could transfer it to another organisation similarly registered."

He added that the earlier situation allowed large organisations to transfer only to organisations which were registered and they would carry out the work.

"Then I couldn't transfer it to any organisation not registered, and if it was approved by Central Government, it could be done. Now reins have been taken it away from Centre also, Parliament has taken away. Parliament has said nobody can interfere in this. It's a complete and outright ban." He said.

He added " The minute a prohibition comes in those two aspects that made it reasonable go out! Makes it an absolute prohibition is my argument, and an absolute prohibition of this nature, needs both 19 and 14 because now money, goods security have come in and they are stuck with me, I can't do anything with it, even if the other person is registered, even if details are given, even if auditing is done.I communicate my transaction within 24 hours to Central Government, but the Central Government is also bound now, they don't have an option. The registered entity cant take it further, that registered entity and i both will be prosecuted."

"The court has seen so many challenges with 14 and 19 but If this isn't manifestly arbitrary i ask myself what is!" He remarked

Mr Sankaranarayanan then referred to Supreme Court's yesterday's judgement issued in the Pegasus case where it was held that "It is a settled position of law that in matters pertaining to national security, the scope of judicial review is limited. However, this does not mean that the State gets a free pass every time the spectre of "national security" is raised. National security cannot be the bugbear that the judiciary shies away from, by virtue of its mere mentioning. Although this Court should be circumspect in encroaching upon the domain of national security, no omnibus prohibition can be called for against judicial review"

He also relied on the Pegasus order to the extent that it stated " it is incumbent on the State to not only specifically plead such constitutional concern or statutory immunity but they must also prove and justify the same in Court on affidavit. The Respondent­ Union of India must necessarily plead and prove the facts which indicate that the information sought must be kept secret as their divulgence would affect national security concerns."

Relating the present case to the Pegasus order, Mr Sankaranarayanan submitted that "There's a limited affidavit in this case also. I believe that in this limited affidavit they've given no rationale or explanation as to why this is required, they've given no data as to what caused this seismic change after 40 years."

The Bench said "while testing action of Executive, maybe affidavit explanation may be very useful, but when we are testing of validity of act made by the Parliament can affidavit make difference to the approach in testing validity?"

"As long as they don't give an explanation we have to go only words of the act" Mr Sankaranarayanan responded.

"Can affidavit explain wisdom of the Parliament? Then we have to test provisions in this case, not on basis of affidavit." the Bench said.

Referring to the Supreme Court's landmark judgement on the Aadhar issue, Mr Sankaranarayanan submitted that the judgement made it clear that the Aadhar identity can be insisted upon only for purposes of benefits etc that you are seeking under the act; or benefits being sought and it can't be made incumbent. 

The Bench stated that in that case, the petitioner's Argument was very specific, they said such deprivation can only take place by primary legislation and not subordinate legislation. However now, the petitioners are taking a step ahead and saying it cannot be by primary legislation either.

"I'm saying substance is the same. Substance was that even if its by law, its disproportionate. Thats why finding is given that our considered opinion is it doesn't need test of proportionality." Sr Adv Sankaranarayanan said.

Concluding his arguments, he stated that these petitioner and other similar organisations have been doing excellent work across the country and they are harmless as they have never been found to be violating any legislation till now.

The matter will be next heard on November 9.

Read the report about Centre's counter-affidavit here : FCRA Amendments Aim To Prevent Foreign Powers Interfering With Internal Polity, Diversion Of Funds By NGO : Centre Tells Supreme Court

Details Of Petitions: The writ petitions, Noel Harper and others v. Union of India and Jeevan Jyothi Charitable Trust and others v. Union of India have challenged the amendments saying that they have imposed harsh and excessive restrictions on the NGOs in utilizing foreign funds.


Case Title: Noel Harper and Ors v. Union of India, Vinay Vinayak Joshi v. Union of India and Jeevan Jyothi Charitable Trust and others v. Union of India

Click Here To Read/ Download Order



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