Opinion

All About Foreign Contribution Regulation (Amendment) Act, 2020 And Examining The Role Of NGOs

Pankaj Singh & Gautam Jha | Updated : December 29, 2021, 11:29 pm
Pankaj Singh & Gautam Jha
Updated : December 29, 2021, 11:29 pm

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There are NGOs, often funded from USA & the Scandinavian Countries, which are not fully appreciative of the development challenges that our country faces. But we are a democracy. We are not like China. You know for example, what’s happening in Kundakulum [In Southern India, where local NGO-led protest have stalled commissioning of two 1000-Megawatt nuclear reactors]. The atomic energy programme has got into difficulty, because these NGOs, mostly I think based in United States, don’t appreciate the need for country to increase the energy supply.” [The Then PM, Shri Manmohan Singh in an interview in February 2012.]

The Background To FCRA (Amendment) Act, 2020

The Foreign Contribution Regulation Act (FCRA) is a piece of legislation having a long and chequered history. It was first enacted in the year 1976, and the Statement & Object of Reasons of the original Act read as follows:

“An Act to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain persons or associations, with a view to ensuring that parliamentary institutions, political associations and academic and other voluntary organisations as well as individuals working in the important areas of national life may function in a manner consistent with the values of a sovereign democratic republic, and for matters connected therewith or incidental thereto.”


One of the original intents of the 1976 Act, brought in by the Indira Gandhi Government at the peak of emergency, was to stop political funding of its rivals, who were starved of funds within the country. The Act was enacted to insulate the sensitive areas of national life like- Journalism, judiciary and politics from extraneous influence from outside the country.

Unwarranted Criticism of the FCRA (Amendment) Act, 2020

Since 1976, much ink has been spilled on paper, and the original Act has undergone several Amendments, including the recent Amendments of 2020, FCRA (Amendment) Act, 2020. The aforesaid Amendment has met with criticism from several quarters on the premises that the foreign aid is not a new concept. Even the mighty US had been a beneficiary. Without appreciating the correct intention behind the Amendments, it was said that the Amendments are meant to crush dissent and concentrate powers in the hands of this Government. Surprisingly, even the United Nations criticised the new Amendments on the premise that access to resources, including foreign funding, is a fundamental part of the Right to Freedom of Association under International Law, standards, and principles, and more particularly part of forming an association. Therefore, any restriction on access to foreign funding must meet the stringent test for allowable restrictions for the right to association developed by the International Human Rights bodies. Given this narrow test, restricting access to foreign funding for associations based on notions such as “political nature”, “economic interest of the State” or “public interest” violates the right because these terms or definitions are overly broad, do not conform to a prescribed aim, and are not a proportionate response to the purported goal of the restriction. Such stipulations create an unacceptable risk that the law could be used to silence any association involved in advocating political, economic, social, environmental or cultural priorities which differ from those espoused by the government of the day.

The Formal Response of The Government Of India On The New Amendments

There is absolutely no justification in the allegations or understanding that these Amendments in any way prevent or impede the inflow of foreign contributions in India. Shri Nityanand Rai, Minister of State for Home Affairs, Govt. of India has stated in the Parliament, that; “FCRA is a national and internal security law with the main objective of ensuring that foreign money does not dominate India’s public life, politics, and social discourse. Internal security, cultural security, national security and protection of Democracy are the utmost priority and specialty of this Government. This amendment is also necessary for Atma Nirbhar India. This government wants NGOs to make their sincere contribution to meet the specific needs of society. They should bring transparency in the expenditure of foreign contributions and ensure that it is spent on the right objectives and the work for which foreign contributions is received. There is a provision of foreign contributions for social education, cultural, religious, and economic activities. These Amendments has not been brought to threaten any political opponents. The only aim behind the Amendment is to ensure that the funds are not misused to throttle Indian democracy and suppress Indian people”.

Justification And Necessity Of The New Amendments

It has to be appreciated that India is a vibrant and pluralistic democracy with a robust domestic grievance redressal mechanism, overseen by an independent judiciary and a Category ‘A’ National Human Rights Commission, compliant with the Paris Principles. Framing of Laws is power & prerogative of the sovereign, so long as the new law or amendments in existing law are made for achieving legitimate aims & objective and, inter alia, is in national interest and public order. It is a misconceived notion that the aforesaid Amendments are against NGOs. Had that been the case, a large majority of the NGOs and individuals in this sector would not have already complied with the new requirements of the FCRA (Amendment) Act, 2020.

The Indian Parliament, representing the will of the people, has enacted the Foreign Contribution (Regulation) Act thereby laying down a clear legislative policy of regulating foreign contributions for certain activities in the country. As a matter of principle, there exists no right to receive any foreign contribution outside the framework designed by the Parliament and implemented by the executive. The existing regime in place, which enables receiving of foreign contribution, envisages certain regulations and procedural preconditions and compliances for accepting foreign contributions. No part of any purported Right to receive foreign contributions can be said to be a part of the Fundamental Rights granted to citizens. There is no question of Fundamental Rights being violated through controls of acceptance of foreign contribution by certain type of organisations as the said organisations or individuals are always open to operate with locally secured funds and achieve their objectives.

During implementation of the FCRA Act, 2010, a need was felt to streamline some of its provisions to achieve the desired objective of the Act to improve the compliance mechanism, enhance transparency and accountability in the receipt and utilisation of foreign contribution through effective monitoring and facilitate genuine non-Governmental organisations or associations who are working for the welfare of the society so, that maximum donated resources reach the intended population.

FCRA (Amendment) Act, 2020 does not bar any person who meets the criteria laid in the Act and complies with the mandate of the same to seek FCRA registration or prior permission. It only restricts transfer of Foreign Contribution to other persons/NGOs once the foreign contribution is received in India by any “person” as defined in the Act. The entity/NGO has to utilize it for the purposes for which it has been given a certificate of registration or prior permission by Government and there is no discrimination against any NGO in receipt of foreign contribution from any foreign donors.

There are some foreign powers and foreign state and non-state actors which continue to aid/support activities that amount to interference in the internal polity of the country with ulterior designs. The restrictions in the Act aim to prevent and counter such acts of ulterior motives. Therefore, for effective monitoring and for ensuring the accountability of the recipient association, the transfer of foreign contribution has been prohibited. It is expected that NGOs would grow on the strength of their own genuine work undertaken for fulfilling specific needs of society. The challenge to the Constitutional validity of the FCRA (Amendment) Act 2020 has been heard by the Hon’ble Supreme Court Of India and the judgment has been reserved in the matter. Without commenting on the merits of the cases heard by the Hon’ble Supreme Court or second guessing the judgment that Apex Court will pass, it can at least be said the stand of the Government that transfer of funds/goods by one NGO to another must be for the purpose of utilisation only, and not with an objective to sub-delegate the work, keeping its commission or margin in the process.

It is being made clear that religious organizations without any discrimination continue to receive foreign contributions as before. However, the Government is also keeping in mind that if the funds are received for a particular religious community, then it should be ensured that the money is used in the interest of that community only.

Lurking Concerns That Remain

At times, it has been observed that the foreign contributions are used for proselytization. The poor and backward are lured for proselytization for monetary consideration. Classified Information had revealed that foreign aided NGOs are stalling development. The major issues with NGOs include lack of accountability, stalling the development projects, threat to internal security etc.  And these are not bald allegations, but have been recognised at the highest level of intelligence and security establishment in the Country. Without expanding much, suffice it to say the Statement Of Objects & Reasons of the Amending Act itself is testimony to the facts that there are large scale violations taking place:

“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. Many of them were also found wanting in ensuring basic statutory compliances such as submission of annual returns and maintenance of proper accounts…..Therefore, there is a need to streamline the provisions of the said Act by strengthening the compliance mechanism, enhancing transparency and accountability in the receipt and utilisation of foreign contribution worth thousands of crores of rupees every year and facilitating genuine non-Governmental organisations or associations who are working for the welfare of the society.”

It is pertinent to understand, if the Civil Society Organisations are working with a legitimate aim for the purpose for which it was created or these Civil Society Organisations ecosystem has been created to attack and throttle the legitimacy of the State. In our considered opinion these Civil Society Organisations have diverted their interest in the present Geo-Political regime. We must understand that these Civil Society Organisations do not represent the popular will, hence they cannot interfere with the national interest and legitimate aim of the State and the laws made by the State.

More so, these Civil Society Organisation functioning in India who appears to be a torch bearer in India, assuming to represent the popular will mistakenly, are in fact, accountable to the external forces like George Soros and they are actively engaged in advancing International and Foreign Agenda in India, instead of voicing for local agendas. Further, these Civil Society Organisations functioning in India are partisan political actors hiding behind the cloaks and shield of non-partisan civil actors. These Civil Society Organisations in most of the cases are actively engaged in drawing negative campaign and act as anti-establishment, far away from their actual role in the society.

There are several instances where funds received from the foreign sources were utilised to throttle the security of India. Recently a Petition was filed in the Honourable Supreme Court of India by one NGO Citizens for Green Doon to oppose the development of Char- Dham Highway Project on environmental grounds. In the view of events, which have taken place in the recent past on the Indo-China border the infrastructure development on the Char-Dham Highway is strategic in nature for the purpose of safeguarding the sovereignty of India. The Petition filed by the Citizens for Green Doon clearly undermines and underscores the sovereignty of India.

Hemkunt Foundation was active in providing assistance in the aftermath of the covid pandemic. Hemkunt Foundation neither had the FCRA license to receive foreign funds, nor has it obtained any prior permission to receive foreign funds that are being donated for covid assistance in India. They cannot be allowed to continue to receive funds, which are outside the ambit of FCRA, as then it becomes difficult to monitor the usage of those funds.

Persecution Relief , a US registered organisation and managed by one Shibu Thomas — whose identity isn’t clear whether he is a US citizen or Indian — issued in its Annual Report 2019 in which statements have been made alleging fake persecution of Christians in India citing incidents where churches were burnt, hundreds of house churches were closed, false cases were lodged against priests, nuns, pastors, believers etc. The entire allegations in Annual Report 2019 of the Persecution Relief were false, baseless and contrary to the rights guaranteed to every citizen of India by the Constitution of India. The State can introduce religious reforms, protect minorities and formulate policies on religious matters. Due to this, Incalculable and Irreparable harm has been done to the prestige and image of India on International platforms, forums and Organizations through the malicious attempt of the Persecution Relief that is out to destroy native culture, religious sentiments and tolerance. India has constantly strived to build an ‘alliance of civilisations’ not set up a clash. India has always condemned anti-Semitism, Islamophobia and anti-Christian acts in international forums such as United Nations. There is an attempt to spread communal disharmony in India and disintegrate India. It is a direct attack on India’s sovereignty and Integrity by promoting hate amongst the community and society. India has already witnessed conspiracy of promotion of Anti India Propaganda by various International Organisations in recent times that led to mayhem during the Republic Day in the India’s National Capital in New Delhi on January 26.

Human Rights Law Network Of Colin Gonsalves, received funds from United Nations Agency for the Protection of the Refugees and Asylum Seekers in India, but have used the funds for assisting the Asylum Seekers and Refugees in making Indian Identification documents such as Aadhar Card, voter card etc. The NGO has also worked as a pull factor for the asylum seekers where they managed to enter the territory of India by crossing International Border from the neighbouring countries with the assistance provided by the NGO.

Khalsa Aid International, which is an implementing and operational partner of United Nations Agency, played an proactive role in instigating and propagating farm law protests in India was summoned by the National Intelligence Agency (NIA) for their exact role in the entire protest and funding the protest itself.

Hiding behind the cloak of the freedom of speech and expressions guaranteed by Article 19 of the Constitution of India, there are NGOs’, which are actively involved in spreading hatred and communal divide in India. The freedom of speech and expression is not absolute, and advocacy of national, racial or religious hatred that constitutes incitement to discrimination, hostility or violence shall be prohibited by law.

Loopholes That Are Required To Be Plugged

Having said above, there are loopholes still remaining in the FCRA (Amendment) Act, which must be plugged in or tightened.

The NGOs are involved in circumventing the FCRA Rules on the pretext of Humanitarian Aid etc. For Examples some NGOs are spending more than 20% of the foreign contribution for their administrative expenses despite the FCRA Amendment Act 2020 prescribing to fix the ceiling limit of administrative expenses to 20% of the total foreign funds utilized in a particular year. Hence, it is evident that NGOs are spending more on administrative expenses than Operational expenses.

There is a serious problem of pocket funding. A foreign donor enters into a consultancy or advocacy agreement with an individual who is an Indian national by a method of payment. The individual recipient then delegates the consultancy or advocacy to the NGO. The NGO receives funds from an Indian donor whose bank account is located in India in Indian rupees, instead of foreign Currency. By doing so the foreign donor bypasses the Foreign Inward Remittance Route, reporting etc and the Indian NGO receives funds. There is a reasonable possibility to receive such funds from “Enemy Countries”.

Concluding Remarks

The problem of foreign funding to NGOs, that are engaged in activities that are not in national interest, has been recognised and voiced by PM Narendra Modi and  home minister Amit Shah. That hardly requires any underlining. NGOs play an important role in the upliftment of the weaker sections of the society and their overall development. Being non-profit organizations, operations of NGOs are entirely reliant on donations, both domestic and foreign. Since foreign aid is often paramount for the expansion or sometimes even for the survival of an NGO, it is important for an NGO to have a clear understanding of legal compliances prior to availing and using such funding. The FCRA and the use of foreign money in India have been heavily scrutinized in the past. So much so, that the FCRA (Amendment) Act has been asked to be scrapped off by many stakeholders. Evidently, the major sectors like rural development, education of the poor, health, etc. are being ignored when it comes to foreign funding. Therefore, in order to have a well-functioning system all funds received by an NGO must be used only for the purpose for which they were received. Such funds must not be used in speculative activities identified under the Act.

(Pankaj Singh is Former Expert On Mission to the UNHCR and Advocate Supreme Court Of India & Gautam Jha is Advocate On Record, Supreme Court Of India)

(The authors appeared for the petitioner in one of the Writ Petitions in the batch of matters on the FCRA issue in the Supreme Court Of India).


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