News Excerpt
The Supreme Court recently held that the central government cannot brand an organisation political and deprive it of its right to receive foreign funds for using legitimate forms of dissent to aid a public cause.

•    A petition was filed by the Indian Social Action Forum (INSAF) challenging certain provisions of the Foreign Contribution Regulation Act (FCRA), 2010 and the Foreign Contribution (Regulation) Rules of 2011.
•    The Central Government is conferred with power under these Laws to brand organisations ‘political’ and shut down their access to foreign funds.

Foreign Contribution Regulation Act FCRA, 2010
The Foreign Contribution (Regulation) Act 2010 replaces the Foreign Contribution (Regulation) Act, 1976 (FCRA). The act seeks to regulate the acceptance and utilization of all foreign funds through donations, gifts or grants. It falls under the purview of Home Ministry and not the Reserve Bank of India (RBI).

Salient features of FCRA 2010
    The 1976 Act lists a number of organizations and individuals that are prohibited from accepting foreign contribution.  The Bill adds organizations of a “political nature” and electronic media organizations to the list. The Bill also allows the central government to add any person or organization to this list.
    The Bill requires all persons with a “definite cultural, economic, educational, religious or social programme” to register under FCRA to accept foreign contribution.  The central government may deny, suspend or cancel certification under certain conditions.
    Organizations must renew FCRA certification every five years.
    The act introduces a cap of 50% of foreign funds for administrative expenses. The government will define what constitutes administrative expenses.
    Banks must report to the government the amount of foreign remittance, the source and manner in which the foreign remittance was received and any other particulars.
    The act allows the central government to conduct separate audits for FCRA certified organizations and grants it the power of search and seizure.

Various provisions under question in Supreme Court
    Section 5(1) of the FCRA: This provision allowed the Centre a free hand to decide whether a seemingly non-political organisation was actually political in nature.
    Section 5(4) of the FCRA: The provision did not exactly identify the authority before which an organisation could represent its grievance. But the apex court dismissed this contention.
    Various clauses of Rule 3 of the 2011 Rules: This provision identified the various types of ‘political’ activities for which/organisations whose foreign funding could be stopped by the government.

Observations made by the Supreme Court
    An organisation supporting public causes by resorting to legitimate means of dissent like ''bandh'' and ''hartal'' cannot be deprived of its legitimate right of receiving foreign funds.
    An organisation, which supports the cause of a group of citizens agitating for their rights without a political goal or objective, cannot be penalised by being declared as an organisation of a political nature.
    But foreign funding could be stopped if an organisation took recourse to these forms of protest to score a political goal.
    The apex court said that an organisation having avowed political objectives in its memorandum of association or bye laws is an organisation of a political nature.
    It struck a similar balance in the cases of organisations of farmers, workers, students, youth based on caste, community, religion, language, etc.
    It said their foreign funding could continue as long as these organisations worked for the “social and political welfare of society” and not to further “political interests”.

The apex court judgement is a welcomed check on the misuse of the FCRA, 2010. However, there should be further clarity for terms used in the statute like ‘political objectives’, ‘political activities’, ‘political interests’ and ‘political action’.

Who are debarred from receiving Foreign Contribution?
    Candidate contesting an election
    Cartoonist, editor, publishers of registered newspaper
    Judge, Government servants or employee of any corporation
    Member of any legislature, Political parties
    Organization of political nature

Political parties exempted from scrutiny on foreign fund under FCRA
Finance Bill 2018 passed by the Parliament exempted political parties from scrutiny of foreign funding received after 1976.