Exemptions under FCRA: Amidst the state of perplexity

The 2020 amendment to the Foreign Contribution Regulation Authority (FCRA), has caused a legal quandary regarding its application, which has never been addressed by the ministry of home affairs. A subsequent right to information (RTI) application ran into a dismal response. 

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THE Foreign Contribution Regulation Act, 2010 (FCRA) is a crucial piece of legislation that regulates the acceptance and utilisation of foreign contributions by individuals and organisations operating within India.

In January 2020, the Union government, in the interest of the general public, exempted some organisations from the operation of the FCRA vide a publication in the official gazette on January 30, 2020 (exemption notification).

The publication exempts such organisations that are constituted or established by or under a Central Act or a state Act or by any administrative or executive Order of the Union government or any state government and wholly owned by the respective government and have to compulsorily get their accounts audited by the Comptroller and Auditor General of India (CAG) or any of the agencies of the CAG from the provisions of FCRA. 

Political parties have not been covered by this exemption notification.

When a legal person is exempted from a particular rule, duty or obligation it means that they are not bound or affected by its operations. 

Also read: Plea in SC to quash MHA's refusal to renew FCRA licenses of NGOs, and its restrictions on their accepting foreign funds

Responding to a right to information (RTI) application, the FCRA wing of the ministry of home affairs (MHA) has clarified that it does not maintain a list of organisations and establishments exempted from the operation of the provisions of FCRA under the exemption notification. 

The ministry also does not have any procedure, application or format for such organisations or establishments for receiving foreign contributions and foreign hospitality, the FCRA wing has further clarified. 

On December 31, 2021, the MHA cancelled 5,933 registrations of non-governmental organisations under the FCRA as they were either rejected or failed to apply for renewal before the due date. 

This list included Indian Institute of Technology (IIT) Delhi, Jamia Millia Islamia and Jawaharlal Nehru University, despite them being educational institutions established by statutes, therefore, squarely covered under the exemption notification. 

Their licences were restored upon submission of documents and annual returns, which is a mandatory requirement for renewal of licences. 

The abovementioned incidents add fuel to the persistent state of confusion regarding the applicability of FCRA in light of the exemption notification. 

In September, 2020, an amendment was made to the FCRA to enhance enforcement and increase transparency and integrity in the acceptance and utilisation of foreign contributions. 

Also read: Why the inordinate delay in SC's hearing of FCRA and electoral bonds cases is of concern

The amendment focused on forbidding any foreign grants from going to organisations that employ 'public servants'.

The amendment also reduced the maximum amount of overhead expenditures that can be paid for using funding under the FCRA from 50 percent to 20 percent and put a restriction on the mode of acceptance of foreign funds. 

Section 17(1) of the FCRA now requires organisations receiving foreign funds to maintain a separate FCRA account. 

Since there have been no changes or clarifications with respect to the exemption notification, it remains unclear whether the amended provisions are applicable to all organisations set up by or under a Central or state Act, or through an administrative or executive Order of the Union or state government, which are wholly owned by the government and have their accounts audited by the CAG.

The ministry's lack of guidance on this point only serves to deepen the uncertainty surrounding the obligations of such prestigious institutions under the FCRA. As a result, the administrative bodies of these establishments are following non-mandatory requirements under the FCRA just to be on the 'better side' of the law. 

The absence of specific guidelines leaves room for interpretation and differing opinions among legal experts. 

Some argue that even though these institutions are established by statutes, they still need to adhere to FCRA requirements, while others contend that since they fall under the category of institutions formed by a statute, they should be exempt from maintaining an FCRA account. 

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

The ambiguity surrounding the issue highlights the need for clarity and consistent interpretation regarding exemptions under FCRA regulations. It becomes imperative for authorities to provide explicit guidance so that educational institutions can navigate through these challenging waters without fear or confusion.

As we await for the government to clarify the matter, one thing is certain: ensuring transparency in financial transactions while upholding academic excellence will always remain a top priority for such reputed establishments.

In conclusion, the FCRA plays a crucial role in ensuring transparency and accountability when it comes to accepting foreign donations in India. 

While certain exemptions exist under this Act, the recent scrutiny faced by institutions such as IIT Delhi and Jamia Millia Islamia highlights some unresolved questions surrounding compliance requirements. 

It remains essential for organisations receiving foreign funding to understand their obligations under FCRA and take necessary steps towards compliance to avoid any legal implications or ramifications.