Pronouncement of Judgment: FCRA Amendment Upheld

On April 8th 2022, Justices A.M. Khanwilkar, Dinesh Maheshwari, and C.T. Ravikumar  upheld the constitutional validity of the Foriegn Contributions (Regulation) Amendment Act, 2020 (FCRA). The Act places restrictions on Indian NGOs’ ability to raise and use foreign donations. The Bench reserved Judgment in this case in November 2021. 

NGOs Argued That 2020 Amendment Places Unreasonable Restrictions on Their Financial Capabilities

Over two days of final hearings, Senior Advocate Gopal Sankaranarayanan, argued that Sections 7, 8(1)(b), 11(2), 12, and 17 of the FCRA place arbitrary restrictions on NGOs. Mr. Sankaranarayanan was appearing on behalf of the NGO Care and Share’s founder, Noel Harper.

Mr. Sankaranarayanan argued that Section 7 of the FCRA, which bars recipient NGOs from transferring foreign funds to other entities, stops smaller NGOs from benefiting from the gains of bigger, internationally-renowned NGOs. Further he proposed that Section 8(1)(b), which states that NGOs may only use 20% of foreign funds received for administrative expenses, has no rational basis. 

Section 11(2) of the FCRA further empowers the Union government to freeze an NGO’s foreign funds while they are pending enquiry for misusing foreign funds. Mr. Sankaranarayanan argued that this  restricts NGOs even before it has been proved that they defaulted. 

Sections 12 and 17 of the FCRA require NGOs, irrespective of where they are located in India, to both register and receive foreign funds from the State Bank of India’s main branch in New Delhi. Mr. Sankaranarayanan argued that this is an arbitrary requirement, inconveniencing NGOs located outside of New Delhi. 

Finally, Mr. Sankaranarayanan argued that Section 12(a), which requires an NGO’s primary contact person to submit their Aadhaar card to receive an FCRA licence, violated the Right to Privacy. 

Court Agrees With Union’s Argument That Restrictions Necessary to Protect National Security

While defending the Act, Solicitor General Tushar Mehta, appearing for the Union government, stated that the restrictions were necessary to ensure that foreign donations were not misused to threaten national security. 

Upholding key provisions of the Amendment, the Bench agreed with Mr. Mehta’s argument. It noted that transparency about foreign funds was required to protect sovereignty and national security. It upheld all the challenged provisions, barring Section 12(a). 

The Bench partially read down Section 12(a), noting that a passport would suffice for identification—sharing Aadhaar information was deemed unnecessary.

The Court is expected to publish its Judgment soon.