Delhi HC dismisses CHRI's challenge to suspension of its FCRA licence

THE Delhi High Court, on Monday, rejected the petition filed by the Commonwealth Human Rights Initiative [CHRI], an independent, nonprofit civil society organisation, challenging the suspension of its license by the Union Ministry of Home Affairs [MHA] under the Foreign Contribution Regulation Act [FCRA].

Justice V. Kameswar Rao held that the satisfaction of the Union Government based on the material facts/reasons available with it, cannot be substituted by the Court unless such reasons are perverse.

“The scope of judicial review is very limited and should be exercised only when it is a case of mala fide arbitrariness, or an ulterior motive”, Justice Rao held.

Section 13 of the FCRA allows the union government to suspend an organisation’s certificate for a maximum of 180 days by order in writing. During the suspension period, the organisation may not receive foreign contributions or utilise the contributions already in its custody unless specifically authorised by the government.

The Court ruled that under Section 13(1) of the FCRA, no inquiry was required to be conducted before suspending the license.

The MHA accused the CHRI of the following violations –

  • The activities/projects for which foreign contribution had been received and utilised have not been given in the prescribed Point 3(a) in FC-4 Form in AR for the FYs 2018- 2019.
  • The bank account No.[account number redacted], Bank of India, New Delhi opened on February 18, 2016, had not been intimated online to the Ministry, and there is a flow of foreign contributions in this bank account.
  • One utilisation account through which the Association has been utilizing foreign contribution has not been intimated in ARs for the FYs 2016-2017 and 2017-2018.
  • In addition, the association had refunded some foreign contributions back to the donor in FYs 2013-2014 and to 2014-2015, in violation of Section 8(1)(a) of the FCRA.

CHRI informed the High Court that it had clarified to the MHA the details of project-wise foreign contribution received and utilised during the Financial Year 2018-2019, along with the opening and closing balance of foreign contribution that has been furnished online in the receipts account, payments account, income account and the expenditure account for the year ended March 2018-2019. These documents, CHRI said, were annexed to the Annual Report (AR) uploaded online in FC-4 Form.

Further, all the information required to be submitted under point 3(a) of the FC-4 Form had already been disclosed in the documents annexed to the said form, CHRI said.

The union government has also initiated the process of cancellation of the FCRA licence of CHRI as per Section 14 of the FCRA.

Appearing for the petitioner, senior advocates Arvind Datar and C.U. Singh argued that the section 13 of the FCRA requires recording of reasons as to why the competent authority was satisfied that the drastic and optional action of suspension was necessary pending consideration of the question of cancellation of the certificate under section 14 of the FCRA. They submitted that the order suspending the license had not recorded any reasons explaining the necessity of suspension of the licence.

The argument did not find favour with the Court, which opined that there was nothing in the provision to show that these violations cannot be construed as reasons which weighed with the union government to suspend the certificate.

“Surely, if the violation makes a strong prima facie case against the certificate holder, if proved, would lead to cancellation of certificate under Section 14(2), then the Central Government will be justified in suspending the certificate. In other words, suspension order can be passed by the Central Government considering the gravity of violations, the nature of evidence available and effect on public interest. These aspects can be deduced from the material available on record including the annual returns filed / the replies to the questionnaires. So, it follows that the violations of FCRA, 2010 can be reasons to suspend the certificate. In that sense, the reasons and grounds are inter-related. This conclusion of mine shall negate the submission of Mr Datar and Mr Singh that the order of suspension is wholly alien/ultra vires to the scheme of suspension under section 13(1) of the FCRA, 2010”, the Court held.

The Court also rejected another argument made by Datar and Singh that the audit/inspection as required under Sections 20 and 23 of the FCRA, was authorised on July 29, 2021, and thus the question of cancellation could be said to have been pending consideration only after that date and could not cure the illegality of the suspension order passed on June 7, 2021. The Court called the argument unmerited because no inquiry is contemplated under section 13(1) of the FCRA before suspending the certificate of registration.

It clarified that the audit/inspection authorised on July 29, 2021, is an inquiry contemplated under section 14(1) of the FCRA which precedes the issuance of show cause notice under section 14(2) for cancellation of the registration.

Besides, the Court said it was the case of the MHA that inquiry into the infirmities in the account had started in the year 2017, that is, before June 07, 2021.

Pursuant to the finding in audit/inspection, and after seeking the response of the CHRI, the MHA had extended the suspension, for a further period of 180 days, on December 1, 2021, which, the Court said, would justify the suspension, more particularly when show cause notice under section 14(2) of the FCRA had also been issued.

The petitioner sought to argue that a conjoint reading of sections 13, 14, 20, and 23 of the FCRA does not contemplate, but in fact, offers protection against suspension orders at the first hint of the slightest violation by any organisation without proper inquiry. The High Court, however, rejected the argument stating that if reasons to suspend under section 13 exist pending consideration of the question of cancelling the certificate, the decision to hold audit/inspection under sections 20 and 23 is justified, which is in furtherance to an inquiry under section 14(1) , even if it is the first violation.

Click here to read the Delhi High Court’s judgment.

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