The Foreign Contribution (Regulation) Act, 2010 has come into effect from May 1, 2011. The Ministry of Home Affairs has issued the necessary Gazette Notification vide S.O. 999 (E) dated the 29th April, 2011 in this regard. The Ministry of Home Affairs has also issued a Gazette Notification vide G.S.R. 349 (E) dated the 29th April, 2011 notifying the Foreign Contribution (Regulation) Rules, 2011 made under section 48 of FCRA, 2010. The FCR Rules, 2011 have come into force simultaneously with FCRA, 2010.
Salient Features of the Act
Any association granted prior permission or registered with the Central Government under Section 6 or under the repealed FCRA, 1976, shall be deemed to have been granted prior permission or registered, as the case may be, under FCRA, 2010 and such registration shall be valid for a period of five years from the date on which the new Act has come into force. While the provisions of the repealed FCRA, 1976 have generally been retained, the FCRA, 2010 is an improvement over the repealed Act as more stringent provisions have been made in order to prevent misutilisation of the foreign contribution received by the associations. Any organisation of a political nature and any association or company engaged in the production and broadcast of audio or audio visual news or current affairs programme have been placed in the category prohibited to accept foreign contribution.
A new provision has been introduced to the effect that no person who receives foreign contribution as per provisions of this Act, shall transfer to other person unless that person is also authorized to receive foreign contribution as per rules made by the Central Government. Another new provision has been made to the effect that foreign contribution shall be utilized for the purpose for which it has been received and such contribution can be used for administrative expenses up to 50% of such contribution received in a financial year. However, administrative expenses exceeding fifty per cent of the contribution to be defrayed with the prior approval of the Central Government.
New provisions have been made for suspension as well as cancellation of registration granted for violation of the provisions of the Act. Such provisions did not exist in the repealed Act.
New provision has also been made for management of foreign contribution and assets created out of such contribution of persons whose certificates have been cancelled. Under the repealed Act, there was no time limit regarding the validity of registration certificate granted to the associations etc. for accepting foreign contribution. FCRA, 2010 provides that the certificate granted shall be valid for a period of five years and the prior permission shall be valid for the specific purpose or specific amount of foreign contribution for which permission was granted. Further, every person who has been granted a certificate shall renew it within six months before the expiry of the period of certificate. No funds other than foreign contribution shall be deposited in the FC account to be separately maintained by the associations etc. Every bank shall report to such authority, as may be prescribed, the amount of foreign remittance received, sources and manner and other particulars.
Provision has been made for inspection of accounts if the registered person or person to whom prior permission has been granted fails to furnish or the intimation given is not in accordance with law. A new provision has been introduced to the effect that the assets of any person who has become defunct shall be disposed of in such manner as may be, specified by the Central Government. A new provision has been introduced to the effect that any person, who knowingly gives false intimation and seeks prior permission or registration by means of fraud, false representation or concealment of material fact, shall, on conviction by Court, would be liable to imprisonment for a term which may extend to six months or fine or with both. Any person contravening the provisions of the Act shall be punishable with imprisonment for a term which may extend to five years or with fine or with both.
Salient Features of the Rules
Guidelines for declaration of an organisation to be of a political nature, not being a political party have been prescribed. Activities to be treated as speculative activities have been defined. Expenditure constituting ‘Administrative expenses’ has been clearly defined.
Modalities for submission of application for obtaining registration or prior permission to receive foreign contribution have been given in detail in the Rules and Forms for filing the applications. The applications for obtaining registration or prior permission shall have to be made electronically on-line, and shall have to be followed by forwarding the hard copy of the on-line application, duly signed, together with the required documents within thirty days of the submission of the on-line application, failing which the request of the person shall be deemed to have ceased.
Any person whose request has ceased shall be able to prefer a fresh on-line application only after six months from the date of cessation of the previous application.
No person would be permitted to prefer a second application for registration or prior permission within a period of six months after submitting an application either for the grant of prior permission for the same project or for registration. A new provision has been made for submission application fee. The fee for obtaining registration or prior permission would be Rs. 2000/- and Rs. 1000/- respectively. Applications made for registration or prior permission under the repealed FCRA, 1976 but not disposed of before the date of commencement of these rules shall be deemed to be an application for registration or prior permission, as the case may be, under the new Rules, subject to the condition that the applicant furnishes the prescribed fees for such registration or prior permission, as the case may be.
Every person who has been granted registration or prior permission shall maintain a separate set of accounts and records, exclusively, for the foreign contribution received and utilised. Every certificate of registration issued to a person shall be liable to be renewed after the expiry of five years from the date of its issue on proper application and application for its renewal shall have to be made in the prescribed form accompanied by a fee of Rs.500/- six months before the date of expiry of the certificate of registration. A person implementing an ongoing multi-year project shall apply for renewal twelve months before the date of expiry of the certificate of registration.
In case no application for renewal of registration is received or such application is not accompanied by the requisite fee, the validity of the certificate of registration of such person shall be deemed to have ceased from the date of completion of the period of five years from the date of the grant of registration. If the validity of the certificate of registration of a person has ceased in accordance with the provisions of these rules, a fresh request for the grant of a certificate of registration may be made by the person to the Central Government as per the provisions of the Rules.
In case a person who has been granted a certificate of registration or prior permission receives foreign contribution in excess of one crore rupees, or equivalent thereto, in a financial year, he/it shall place the summary data on receipts and utilisation of the foreign contribution pertaining to the year of receipt as well as for one year thereafter in the public domain. Besides, the Central Government shall also display or upload the summary data of such persons on its website for information of the general public.
In case the certificate of registration is suspended under the relevant provisions the Act, up to twenty-five per cent of the unutilised amount may be spent, with the prior approval of the Central Government, for the declared aims and objects for which the foreign contribution was received. The remaining seventy-five per cent of the unutilised foreign contribution shall be utilised only after revocation of suspension of the certificate of registration.
The amount of foreign contribution lying unutilised in the exclusive foreign contribution bank account of a person whose certificate of registration has been cancelled shall vest with the banking authority concerned till the Central Government issues further directions in the matter. If a person whose certificate of registration has been cancelled transfers/has transferred the foreign contribution to any other person, the provisions of sub-rule (1) of this rule shall apply to the person to whom the fund has been transferred. Every bank shall send a report to the Central Government within thirty days of any transaction in respect of receipt of foreign contribution by any person who is required to obtain a certificate of registration or prior permission under the Act, but who was not granted such certificate or prior permission as on the date of receipt of such remittance. The report shall contain the details regarding name and address of the donor, name and address of the recipient, account number, name of the Bank and Branch, amount of foreign contribution (in foreign currency as well as Indian Rupees), date of receipt, manner of receipt of foreign contribution (cash/cheque/electronic transfer etc.).
The bank shall also send a report containing the above details to the Central Government within thirty days from the date of such last transaction in respect of receipt of any foreign contribution in excess of one crore rupees or equivalent thereto in a single transaction or in transactions within a duration of thirty days, by any person, whether registered or not under the Act. Every person who receives foreign contribution under the Act shall submit a report, duly certified by a chartered accountant, in the prescribed Form, accompanied by an income and expenditure statement, receipt and payment account, and balance sheet for every financial year beginning on the 1st day of April within nine months of the closure of the financial year, to the Secretary to the Government of India, Ministry of Home Affairs, New Delhi. The annual return in the prescribed Form shall reflect the foreign contribution received in the exclusive bank account and include the details in respect of the funds transferred to other bank accounts for utilisation. If the foreign contribution relates to articles or foreign securities, the intimation shall be submitted in the prescribed Forms. Every such return in shall also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank. The accounting statements referred to above shall be preserved by the person for a period of six years. A ‘NIL’ report shall be furnished even if no foreign contribution is received during a financial year.
Foreign contribution received by a candidate for election, referred to in section 21, shall be furnished in the prescribed Form within forty-five days from the date on which he is duly nominated as a candidate for election.
An application for revision of an order passed by the competent authority under the Act shall be made to the Secretary, Ministry of Home Affairs, Government of India, New Delhi on a plain paper. It shall be accompanied by a fee of Rs.1000/- An application for the compounding of an offence may be made to the Secretary, Ministry of Home Affairs, on a plain paper and shall be accompanied by a fee of Rs.1000/-. The Central Bureau of Investigation or any other Government investigating agency that conducts any investigation under the Act shall furnish reports to the Central Government, on a quarterly basis, indicating the status of each case that was entrusted to it, including information regarding the case number, date of registration, date of filing charge sheet, court before which it has been filed, progress of trial, date of judgment and the conclusion of each case.
Any information or intimation about political or speculative activities of a person shall be furnished to the Secretary to the Government of India in the Ministry of Home Affairs, New Delhi. Such information or intimation shall be sent by registered post. Any person intending to transfer the foreign contribution may make an application to the Central Government in the prescribed Form. The Central Government may permit the transfer in respect of a person who has been granted the certificate of registration or prior permission under, in case the recipient person has not been proceeded against under any provision of the Act. Any transfer of foreign contribution shall be reflected in the prescribed returns by the transferor and the recipient.
In case the foreign contribution is proposed to be transferred to a person who has not been granted a certificate of registration or prior permission by the Central Government, the person concerned may apply for permission to the Central Government to transfer a part of the foreign contribution, not exceeding ten per cent, of the total value of the foreign contribution received. The application shall be countersigned by the District Magistrate having jurisdiction in the place where the transferred funds are sought to be utilised. The District Magistrate concerned shall take an appropriate decision in the matter within sixty days of the receipt of such request from the person. The donor shall not transfer any foreign contribution until the Central Government has approved the transfer.
The Foreign Contribution (Regulation) Act, 2010 (42 of 2010) dated the 26th September, 2010 was notified in The Gazette of India – Extraordinary – Part II – Section I dated the 27th September, 2010. However, the Act was to come into force on such date as the Central Government may, by notification in the Official Gazette appoint. Consequently, the earlier Act, viz., the Foreign Contribution (Regulation) Act, 1976 has also been repealed.
BY MANDAKNI DEVESHAR SURIE IN THE INDIAN EXPRESS
The NGO landscape in India is getting pretty crowded. According to the findings of a recent government survey there are an estimated 3.3 million registered NGOs working in the country — one for every 400 Indians. Not only has the number of NGOs in India risen dramatically but so has their influence. In some of India’s flagship development efforts — the National Rural Employment Guarantee Act, the National Rural Health Mission, the Right to Education or even the draft Right to Food Act — NGOs have been at the forefront both in formulating these laws and policies and in implementing them. NGOs have helped voice the concerns of some of India’s most vulnerable groups and focus the attention of the government on critical social and development issues. They have also spearheaded efforts to expose corruption and maladmistration in government bringing in much needed transparency.
But despite the growing influence of NGOs in India today, we know very little about them: their structure, activities, sources of funding and, more importantly, how accountable they are to the people they represent. This is alarming given the crores of rupees in development aid that NGOs receive from the government and from donors every year. Ironically, though NGOs have been watchdogs of the government for many years, there has been little regulation or monitoring of their own activities. Leading many to ask a very fundamental question: who watches the watchers?
Interestingly, although India has probably the world’s highest NGO population, the debate on NGO accountability is still in its nascent stages. Across the world, NGOs have been experimenting with different ways of addressing the issue of accountability; Indian NGOs would do well by learning from these efforts. For example, NGOs in Kenya are legally required to comply with the Code of Conduct for NGOs developed by the National Council of NGOs, a self-regulatory body set up under the NGO Coordination Act in 1990. The code ensures that NGOs comply with basic ethical and governance standards. Similarly, in Uganda, the NGO Quality Assurance Mechanism (QuAM) certifies NGOs against a set of quality standards designed to ensure NGO credibility. In Chile, Chile Transparente has developed transparency standards for NGOs which require organisations to publish online information about their mission, vision, activities, staff, details of funding etc.
Indian NGOs are slowly beginning to experiment with similar self-assessment tools and certification schemes, but the real problem is that information disclosure by NGOs continues to be a rare and uncommon practice. This is ironic given that NGOs that were at the forefront of the RTI movement.
Interestingly, the RTI places a legal obligation on NGOs to be transparent and offers one important mechanism through which NGO accountability could be enforced. Under Section 2(h) (ii) of the RTI Act, NGOs that receive substantial funds, grants or loans from the government are considered public authorities and are required to disclose information as per the law. While the term “substantially financed” has not been defined clearly in the act, arguably NGOs accountable to the government for the funds they receive from it are automatically accountable to the public under the RTI. The Delhi High Court has expanded this interpretation to argue that NGOs that perform “public functions” or provide services similar to those provided by the government, are subject to the RTI Act. Thus for example, private bodies such as Sanskriti School, New Delhi, the Indian Olympic Association and the Commonwealth Games Organising Committee have been brought under the purview of the RTI.
Over and above these legal provisions, the RTI Act also serves as a useful model for NGO disclosure. Section 4 of the RTI Act outlines 17 categories of basic information that public authorities have to disclosure proactively through websites, manuals and other means. This includes basic information about the organisation, its structure and activities, the rules and norms that guide its functioning, a staff directory and so on. NGOs can very easily, and at low cost, adapt the proactive disclosure provisions of the RTI Act and develop their own guidelines for information disclosure.
There is little doubt that NGOs are here to stay and with good reason. Many NGOs have been at the forefront of efforts to fundamentally reshape the development and accountability debate in India. Given this role that NGOs have begun to play, it is all the more critical that questions of NGO accountability be debated and resolved. In the absence of a clear guidelines or an official code of conduct, NGOs have a moral and ethical obligation to be transparent and answerable to the public for their activities. The RTI Act, the very tool that NGOs have used to hold government accountable, can help to initiate this process of setting norms and standards for NGO accountability.
The writer works at the Accountability Initiative, New Delhi