CHRI explains why cancellation of its FCRA registration is dubious

EARLIER today, the Commonwealth Human Rights Initiative [CHRI] issued a detailed statement on the cancellation on April 19 of its registration under the Foreign Contribution (Regulation) Act, 2010 by the Union Home Affairs Ministry [MHA]. The statement sheds light on the specious grounds availed by the MHA to cancel CHRI’s FCRA registration, as a result of which it won’t be able to accept or use funds from any foreign sources for its operations.

CHRI’s FCRA registration had been suspended by the MHA since July 7 last year.

The statement claims that CHRI fully cooperated with the MHA in all proceedings initiated by the latter against it, submitting detailed responses whenever called for to the allegations levelled against it. It further states that over 7,500 pages of records containing details of CHRI’s financial transactions were photocopied and submitted on the MHA’s demand within the stipulated deadlines. However, there is nothing in the cancellation order to indicate why CHRI’s explanations were found unsatisfactory or untenable.

According to the statement, the MHA’s cancellation order specifies the following four grounds for cancellation of CHRI’s FCRA registration:

  1. “[T]hat CHRI had credited/deposited a sum of Rs. 31,90,598/- in its bank account designated to receive foreign contribution even though it is not covered under the definition of ‘foreign contribution’.”
  2. “[T]hat CHRI has provided incomplete information in [Foreign Contribution]-4 Form in financial year … 2018-19 by not disclosing details of activities/projects for which foreign contributions had been received and utilised”
  3. “[T]hat CHRI has provided incorrect and conflicting information in [Foreign Contribution]-4 Form in [Annual Report] from 2013-14 to 2018-19 regarding opening and closing balances of [foreign contributions].”
  4. “[T]hat [CHRI] has utilised foreign contribution on activities beyond the scope of the Act for which the registration was granted thereby violating various provisions of the FCRA (specified in the last part of MHA’s cancellation order).”

The statement specifically addresses each of the four grounds.

In response to the first, CHRI avers that it explained twice to the MHA, with supporting evidence, that the sum in question “was received from foreign donor agencies situated in the United Kingdom and Sri Lanka for carrying out specific project activities in India in 2014 and 2018, respectively”. Even though these were out of consultancy project agreements, the contributions were indeed from foreign sources, which is why the CHRI, “out of abundant caution”, reported them as ‘foreign contributions’ to MHA.

CHRI disputes the second ground by claiming that it had thrice explained to the MHA that it had already submitted online the details of project-wise foreign contribution [FC] received and utilised during financial year [FY] 2018-19, and of “the opening and closing balance of funds as part of the Receipts and Payments Account and the Income and Expenditure Account for that FY”. Further, these documents were annexed with the Annual Report [AR] uploaded online in FC-4 form within the stipulated deadline. Copies of these documents were also shared by the CHRI with the MHA along with its responses sent to the MHA.

In response to the third reason, CHRI explains that it is based on some technical misunderstandings on the part of the MHA. It states that it gave the following explanation to the MHA on three separate occasions:

“[A]s is common practice of NGOs across India, CHRI has been consistently following an accrual-based accounting system, and not a cash-based accounting system. During the August 2021 audit of our books of accounts conducted by the MHA’s Audit Team, in order to arrive at the year wise Opening/Closing Balance, they have taken into consideration only the cash and bank accounts (reported under Col. 2.iv of FC-4) but not taken into consideration Fixed Deposits reported under the head: “Total investment in term deposit in FC-4”, for FYs 2014-15 and 2017-18.  This has resulted in the differences in the opening and closing balance as calculated by CHRI and MHA’s Audit Team”.

Further, CHRI clarifies that is not appropriate to compare the balances shown in FC-4 returns with the Receipts and Payment Accounts, since if “they are to be compared, it would be necessary to take into account other current liabilities and current assets such as amounts payable to sundry creditors, annual provisions for leave salary and gratuity payable to staff members as these are utilization of foreign funds although not paid during that Financial Year for which reporting was done through FC-4 format”.

Moreover, for FYs 2014-15 and 2017-18, MHA’s Audit Team has, according to CHRI, only considered the FC amount held in cash and bank accounts, and not considered the amount of Fixed Deposits reported under the head of “Total Investment in term deposits” in FC-4 while calculating the closing balances for those FYs.

The statement also notes that the presence of  “two typographical errors in the figures for FYs 2018-19 and 2019-2020 recorded at point #(vi) of the observations of the MHA’s Audit Team”.

CHRI dismisses the fourth reason by claiming its inability “to offer any explanation against such a vague and bald allegation” which, it claims, was never mentioned during any of the prior proceedings by the MHA against CHRI.

It also points out that the observations of the MHA’s Audit Team and a December 2021 show cause notice issued by it had both alleged that CHRI “utilised foreign contributions received for the benefit of foreign countries and foreign citizens from FYs 2013-14 to 2019-20.” However, this allegation is absent in the cancellation order.

In response to this allegation, on three previous occasions, CHRI had, the statement claims, explained to the MHA, along with supporting evidence, that “there is nothing in the FCRA that proscribes activities abroad by an FCRA registered association especially when such activities are in furtherance of the declared “purpose for which the contribution has been received” as well as the stated aims and objectives of the Association.” It reaffirmed that CHRI’s activities abroad are squarely in compliance with the FCRA’s provisions

Additionally, it clarifies that the total cost on activities undertaken by CHRI with benefit to foreign citizens, including CHRI’s staff time, as a percentage of the total utilisation of foreign contribution during the period from FYs 2013-14 to 2019-20, was only 7.37 per cent.

The statement concludes by stating that CHRI will seek all legal remedies to reverse the MHA’s cancellation order. It also reaffirms that “CHRI will continue to work for the practical realisation of people’s human rights, access to justice and access to information, as per its mandate”.

The Leaflet