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Live Updates SC hearing a challenge to the amendments to the FCRA [LIVE UPDATES]

Supreme Court FCRA Amendments live updates

Oct 28, 2021

ASG: SBI account opening as a basic umbrella account is only one requirement and after that any number of accounts can be opened. Funding in this country is regulated my Lord

SC: Financing another NGO which is also a registered one cannot be done under the new regime which could have been done earlier.

ASG: We have to see the broader objective as to what is the need for NGO like this.. in a large country like this govt often encourages NGOs to come forward and thus foreign funding had to be regulated

SC: Regulation could happen under old regime also. But your amendment says no transfer can be to third party and it has to be for self utilisation only.  

SC: So the ones registered who cannot get foreign funds due to their scale cannot recieve the funds from a  larger one. Reasonableness of this provisions has to be tested on this. Today this objective is diminished.

ASG: Suppose two NGOs have similar objective. One in Delhi and one in Imphal. Suppose in Imphal they could not get funds, the donor of the Delhi NGO can send the fund by domestic route and that is not restricted.

ASG: If public interest is dominant objective then utilisation cost has to be borne out

SC: The funding agency which is the foreign one would want to deal with only one NGO so that it creates smaller NGOs all across India. This was permissible under old act but not under this

ASG: A donor cannot determine the legal mechanism of donee country. If I am a genuine donor I would not create such issues.

SC: a donor could want to have engagement with only one NGO to bifurcate it's funds and if not done so then I will stop funding, that is the net result.

ASG: The dynamics of institutions have been changed.

SC: disputes are looked at from the ground level. How will the donor look at it.

ASG: After doing a daan the donor has no interest in it and donee will take care of it. We just don't want intermediaries.

SC: You are discouraging NGO activities meanwhile. The result is this.

ASG: the transfer of one organisation to another will lead to a perverted situation. Money is passed to another NGO over whom they have no control. Only ideological or work similarity is not good for regulation purposes

ASG: People of this country have donated largely and liberally. It is no more an era where average income of people was low. This dynamics have to be taken note of. Now domestic contribution is also large.

Matter adjourned to November 9, 2021

Oct 28, 2021

ASG: My Lord will not agree with any law leading to absurdity.

SC: The object of NGO is to also fund the subsidiary NGOs , that is prohibited?

ASG: Yes it is prohibited now and can only be used for their own utilisation

SC: But one of the activity could be to finance the other smaller NGOs

ASG: it will be subject to public policy and it will not be permitted.

Justice Dinesh Maheshwari: transfer is a very very wide term

Justice Khanwilkar: so if NGO is registered and complying with all laws, Then under old regime he could transfer to registered NGO's.. but now it is prohibited by the new act and thus the activity is affected

ASG: Two fold scenario emerges here My Lord. There is no restriction of money recieved through domestic route to finance other NGOs. If at all a particular NGO is interested in reaching out to NGO is Imphal then nothing prevents it if own objective permits it.

 

Oct 28, 2021

ASG: Earlier also exception was bas d on due classification and classification was only duly for registered ones

SC: Now there is complete prohibition?

ASG: What is prohibited here is the diversion of funds.

ASG: Please see the pre amended provision. Restriction was there for non registered persons..

SC: But thereafter there is no Prohibition.. they could use the money they want

ASG: this is the diversion aspect

ASG: In the earlier regime the same conditions would have applied to transferree entity also

SC: Dont react now but the keep the question in mind

ASG: As for amended section 7, it only restricts transfer of Foreign Contribution to other 
persons/NGOs once the foreign contribution is received in India by a particular NGO/person.

ASG: The petitioners or any entity/NGO has to utilise it for the purposes for 
which it has been given a certificate of registration or prior permission by 
Government and hence such a ban on transfer is not discriminatory.

ASG: If NGO Recieves funding and it sends a contractor to build a house or buiding then it is utilisation but the contra part of the same would be to transfer for the purposes of divergence.

 

Oct 28, 2021

SG: I am in some other court. Can you hear me some other day. There are 23,000 NGOs and 19,000 have been registered

SC: we will try to accomodate you

SG: can you please it have some other day. I would like to address the court

SC: Interim relief has been prayed for

SG: Interim relief means staying the statute

SC: We will hear you on 9th November

ASG resumes submissions: On the point of constitutionality we have placed all the relevant material. We have provided a comparative table here.

ASG: in the original section there was a provision of transfer so that there is no indiscriminate transfer even then. Now of one does not have a certificate of registration they cannot recieve or transfer foreign fund. What is prohibited is outsourcing of the corpus.

ASG: when foreign contribution comes it has to be regulated as it has several international and domestic ramifications.

 

Oct 28, 2021

ASG KM Natraj:  If an NGO spends 50 percent in administrative excercise then what parallel welfare is being looked at. Here transfer is only a sub specie. The main purpose of NGO is utilisation. When you recieve foreign fund you transfer as corpus to another NGO...

ASG: With this preface i ask why do we have to regulate the NGO. They are engaged in parallel govt welfare structure and then there has to be regulation and it has to be in sync with the govt of the day.

ASG: There is a need to regulate foreign constribution and has always been done as a matter of public policy.

ASG: these are not legislative provisions which have been brought into force by haste. These have been brought into force 10 years after primary law. This is based on ground situation. Observation by banking institutions and parliamentarians would not be of much consequence here

ASG: It would not be in doubt that there is no vested right in continuing a law in a particular form especially the one which provides a regulatory mechanism. It is not a delegated legislation but an amendment by the parliament.

ASG: This is the background to judge the constitutional challenge.

 

Oct 28, 2021

SC: it says the rights can be taken away by primary legislation but not subordinate legislation. You are going a step further and saying that not even primary legislation can do so

GS: it says the minute it violates right to privacy then whether it's law rule it does not matter

GS: These organizations have done excellent work all across India and they have never been found to default on any legal provisions existing till before FCRA came into force from 1970 Onwards. This is extreme and very harsh

Senior Adv Gopal Sankaranarayanan concludes

Counsel in connected plea of Vinay Joshi vs UOI (petitioner) starts arguments

SC: you are supporting the act
Let the ASG argue.

GS: I forgot to mention Section 8 of the act. I missed it

SC: This is also amended

GS: 8(1)(B) is amended. If I get a lakh then now max I can spend 20% on adminstrative expenses and earlier it was 50%

 

Oct 28, 2021

SC: We are testing the validity of the law by parliament. Can an affidavit make difference here ?

GS: If they dont explain we have to go by the act

SC: Can an affidavit explain the wisdom of the parliament ?? We have to judge the statute as it is whether on basis of doctrine of necessity.. affidavit will not discredit the law made by parliament

GS: The Puttuswamy judgment I would like to cite now. In the Aadhaar case...

SC: We don't have it

GS: My overzealous friend have made a separate compilation for it

SC: This is heavier than the original one

Sr Adv Gopal Sankaranarayanan reads the 2019 Aadhaar judgment

 

Oct 28, 2021

SC: These practical issues cannot be used to strike down the provisions of FCRA

GS: All that I am saying is that they have to explain the reasonableness of these provisions

SC: Perhaps the intention of the legislation is to regulate the receiving of foreign funding

GS: Now it is said about 26,000 institutions are registered under the old act and hundreds of FCRA accounts were opened. Many of them dont have online support. This we have brought out in the rejoinder

GS: Banks are going to Centre and giving details in 48 hours then where is the question of saying that we are suppressing data? Balance which is sought to be achieved has been disturbed here.

Sr Adv Gopal Sankaranarayanan again relies on the Pegasus judgment.

Says " National security cannot be the bugbear that the judiciary shies away from, by virtue of its mere mentioning"

Sr Adv Gopal Sankaranarayanan again cites Pegasus judgment and says there have been no "specific denial" by the centre in FCRA case.

 

Oct 28, 2021

GS: now it's an complete and outright ban. No person who is registered can transfer such foreign contribution. As soon as such Prohibition comes into force it becomes an absolute prohibition. Now goods and services are stuck with me even if other person is registered

GS: Centre is now bound to follow the act. So any miss and a registered entity and I will be prosecuted under the act. If this is not manifestly arbitrary then what is ? I think the draftsman made some mistake and they did not want to say this

GS: RBI responded saying "Voluminous data on foreign remittances will put an
extra burden on the financial institutions, which –do–
will increase cost on the banks. It will also divert
the focus on monitoring of suspicious transactions."

GS: SBI now says local branch can be used to open account but any other facility like cheque book etc is taking too long

 

Oct 28, 2021

GS: now relying on the Pegasus judgment, if national security is applied then the clear restriction is on me. SC makes it very clear that centre cannot get a free pass everytime it is raised. They have to satisfy and not me.

GS: They have to show thay since double donation has come they have to show that those funds are being used for terror activities.

GS: The bank decision of limiting it to SBI Delhi has to be shown that it's in public interest. For 40 years this wasn't a problem but now under dispensation it has changed. We don't know why it has been done so.

GS: Reasonable restrictions under 19(6) can be imposed when public interest is served. Even if public interest is served it's to be through reasonable restriction. This is unjust and disproportionate

GS:  As a consequence of definition of foreign contribution, and also if the explanation is read then the entirety of the foreign contribution can be gauged.

GS: main provisions make it clear then article, securities and currencies are all under foreign contribution. Earlier it was that funding by larger organisations can be sent to the smaller ones who are doing the ground work like Bachpan Bachao Andolan etc.

 

Oct 28, 2021

SC: There is a different in approach when it's a law made by the parliament. It says I want foreign funds but it has to be gotten like this. Now tell us if the law falls foul of Article 14

GS: The amendments are manifestly arbitrary

SC: The funds coming in was double and that was a cause of concern

GS: that's why it's good

SC: It's only good when invested properly and not otherwise and that's why rules are important

GS: But asking a remote person in India asking them to open an account in Delhi is not working

SC: Now in the age of internet such access can be digitally

GS: Not everyone is technological savvy. I visit banks for transfer of funds.

SC: it depends on volume of transfer

SC: For us we are doing transactions with banks from our homes and we don't have to visit them (smiles)

 

Oct 28, 2021

Sr Adv Gopal Sankaranarayanan: 
This is how it was said that balance has to be acheived and there cannot be prohibition in recieving foreign funding by organisations not related to politics etc

Sr Adv Gopal Sankaranarayanan: we are looking at droughts, floods etc and we at bar have also got to send migrants to their homes. A lot of this money has come from foreign countries. Whenever it's foreign we look at it from coloured lenses.

SC: Nobody is opposed to foreign contribution and this act recognises it. The question is if the regulation under the act for receiving such fund is extreme or not.

Sr Adv Gopal Sankaranarayanan: most of the foreign fund is also from Indians who are based abroad..

 

Oct 28, 2021

Sr Adv Gopal Sankaranarayanan: please check section 35 of the act. There's an unlawful activities importing here. Now please look at the unamended rules of 2011.

Sr Adv Gopal Sankaranarayanan: Please see Rule 24 which is omitted by the amendment. It says any person intending to transfer the foreign constribution may make an application to Centre and centre will allow such transfer after checking the person is granted certificate of registration

Sr Adv Gopal Sankaranarayanan: pursuant to the new amendment they have omitted Rule 24 so now there is no procedure for transfer.

Sr Adv Gopal Sankaranarayanan: I would take you to an observation made in 2020 by you when certain rules of FCRA was challenged

Sr Adv Gopal Sankaranarayanan: "such organization who are working for social economic welfare cannot be brought under the act by widening the term of political interests."

SupremeCourt is hearing a challenge to the amendments to the FCRA and the rule mandating opening of an NGO's primary account in New Delhi SBI main branch

Right to life and liberty under Article 21 does not encompass the right to receive unregulated foreign contributions, the Central government had told the Supreme Court while defending amendments made in 2020 to the Foreign Contribution (Regulation) Act (FCRA)

The plea by Noel Harper of NGO Care And Share Charitable Trust challenged Sections 7, 12A, 12(1A) and 17 inserted in the FCRA by the Foreign Contribution (Regulation) Amendment Act, 2020 as ultra vires Articles 14, 19 and 21 of the Constitution of India

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