1. Challenge to the constitutional validity of amendments to the Foreign Contribution (Regulation) Act, 2010, specifically Sections 7, 12(1A), 12A, and 17(1) via the 2020 Amendment Act. (Para 1 , 2 , 3 , 4 )
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2022 Supreme(SC) 340
SUPREME COURT OF INDIA
A.M. KHANWILKAR, DINESH MAHESHWARI, C.T. RAVIKUMAR, JJ.
Noel Harper and Others – Petitioners
Versus
Union of India and Another – Respondents
Writ Petition (Civil) Nos. 566, 634, 751 of 2021
Decided On : 08-04-2022
Important Points
The Supreme Court upheld the constitutional validity of the 2020 FCRA amendments, ruling that prohibiting the transfer of foreign contributions and mandating a centralized bank account are reasonable restrictions to ensure transparency and protect national sovereignty, security, and public order, and are not manifestly arbitrary.
Subject
Constitutional Law - Fundamental Rights
Act Referred
BANKING REGULATIONS ACT: S.36(1)(a)
COMPANIES ACT: S.2(45), S.25
CONSTITUTION OF INDIA: Art.14, Art.19, Art.19(1)(c), Art.19(1)(g), Art.19(4), Art.19(6), Art.21, Art.32
FINANCE ACT: S.220, S.236
FOREIGN CONTRIBUTION REGULATION ACT: S.11, S.12, S.13, S.15, S.16, S.17, S.2, S.48, S.5, S.7, S.8
FOREIGN CONTRIBUTION REGULATION RULES: R.3(i), R.3(v), R.3(vi)
INDIAN PENAL CODE: S.21
INFORMATION AND TECHNOLOGY ACT: S.2(1)(r)
SECURITIES CONTRACTS REGULATION ACT: S.2
UNLAWFUL ACTIVITIES PREVENTION ACT: S.7
COMPANIES ACT: S.2(45), S.25
CONSTITUTION OF INDIA: Art.14, Art.19, Art.19(1)(c), Art.19(1)(g), Art.19(4), Art.19(6), Art.21, Art.32
FINANCE ACT: S.220, S.236
FOREIGN CONTRIBUTION REGULATION ACT: S.11, S.12, S.13, S.15, S.16, S.17, S.2, S.48, S.5, S.7, S.8
FOREIGN CONTRIBUTION REGULATION RULES: R.3(i), R.3(v), R.3(vi)
INDIAN PENAL CODE: S.21
INFORMATION AND TECHNOLOGY ACT: S.2(1)(r)
SECURITIES CONTRACTS REGULATION ACT: S.2
UNLAWFUL ACTIVITIES PREVENTION ACT: S.7
Headnote
(A) Constitution of India - Articles 14, 19, and 21 - Foreign Contribution (Regulation) Act, 2010 - Amendments via the 2020 Act - Legal validity challenged on grounds of arbitrariness and infringement of fundamental rights. (Paras 1-3, 11-12, 22, 57, 87)
(B) Fundamental Rights - Right to receive foreign contributions - Not absolute; can be subject to regulation and law. (Paras 21-22, 79-80)
Facts of the case:
Petitioners, comprising trusts engaged in social work, challenged amendments to the Foreign Contribution Act which imposed stricter controls on receiving and utilizing foreign contributions, mandating that contributions be received only through a specified account at a central bank branch in New Delhi. The petitioners alleged violation of Articles 14, 19, and 21. (Paras 1-3)
Findings of Court:
The amendments are legal, aimed at enhancing transparency and accountability, curbing misuse of funds, and ensuring that NGOs utilize the contributions for defined purposes only. The requirement to open FCRA accounts at designated banks was justified to streamline monitoring and oversight. The court found no infringement of fundamental rights. (Paras 87)
Issues: Whether the amended provisions of the Foreign Contribution Act violate fundamental rights under Articles 14, 19, and 21 of the Constitution and if they impose unreasonable restrictions on NGOs. (Paras 4-5, 21-22)
Ratio Decidendi: The Supreme Court upheld the amendments, affirming that regulatory frameworks for accepting foreign contributions do not infringe upon constitutional rights, and that the amendments serve significant state interests in maintaining sovereignty and integrity. (Paras 60-64)
Result: Writ petitions dismissed; amendments upheld as constitutional. (Paras 88)
(B) Fundamental Rights - Right to receive foreign contributions - Not absolute; can be subject to regulation and law. (Paras 21-22, 79-80)
Facts of the case:
Petitioners, comprising trusts engaged in social work, challenged amendments to the Foreign Contribution Act which imposed stricter controls on receiving and utilizing foreign contributions, mandating that contributions be received only through a specified account at a central bank branch in New Delhi. The petitioners alleged violation of Articles 14, 19, and 21. (Paras 1-3)
Findings of Court:
The amendments are legal, aimed at enhancing transparency and accountability, curbing misuse of funds, and ensuring that NGOs utilize the contributions for defined purposes only. The requirement to open FCRA accounts at designated banks was justified to streamline monitoring and oversight. The court found no infringement of fundamental rights. (Paras 87)
Issues: Whether the amended provisions of the Foreign Contribution Act violate fundamental rights under Articles 14, 19, and 21 of the Constitution and if they impose unreasonable restrictions on NGOs. (Paras 4-5, 21-22)
Ratio Decidendi: The Supreme Court upheld the amendments, affirming that regulatory frameworks for accepting foreign contributions do not infringe upon constitutional rights, and that the amendments serve significant state interests in maintaining sovereignty and integrity. (Paras 60-64)
Result: Writ petitions dismissed; amendments upheld as constitutional. (Paras 88)
Legal Category Hierarchy
- constitutional law
- administrative law
- regulatory law
Advocates appeared:
For the Petitioner(s):Gopal Sankaranarayanan, Ashishek Jabaraj, Srishti Agnihotri, Nupur Raut, Ishita Chowdhury, Sanjana Grace Thomas, Gautam Jha, Piyush Chhabra, Bripendra Singh, Praveen Swarup, Advocates
For the Respondent(s):Tushar Mehta, Ld. Kanu Aggrawal, M.K. Maroria, Sanjay Kapur, Swarupama Chaturvedi, Sanmaya Kapoor, Himanshi Goel, Advocates
For the Petitioner(s):Gopal Sankaranarayanan, Ashishek Jabaraj, Srishti Agnihotri, Nupur Raut, Ishita Chowdhury, Sanjana Grace Thomas, Gautam Jha, Piyush Chhabra, Bripendra Singh, Praveen Swarup, Advocates
For the Respondent(s):Tushar Mehta, Ld. Kanu Aggrawal, M.K. Maroria, Sanjay Kapur, Swarupama Chaturvedi, Sanmaya Kapoor, Himanshi Goel, Advocates
Table of Contents
2. Petitioners allege manifest arbitrariness and violation of Articles 14, 19, and 21; Respondents argue legislative wisdom to protect national sovereignty and prevent fund misappropriation. (Para 2 , 3 , 5 , 8 )
3. The court noted the necessity of strict regulation to prevent fund routing and protect national sovereignty, finding the amendments rational and proportionate to the legislative objective. (Para 21 , 22 , 23 , 24 , 25 , 26 , 29 , 30 , 44 , 45 , 46 , 51 , 54 , 55 , 63 , 69 , 70 , 72 , 75 , 77 , 83 )
4. Regulation of foreign contributions is a matter of state policy to protect sovereignty; reasonable restrictions for monitoring and accountability do not violate fundamental rights. (Para 21 , 30 , 58 , 64 , 80 )
5. Amendments to Sections 7, 12(1A), 12A, and 17 are held intra vires; Section 12A is read down to permit Indian Passports for identification. (Para 87 , 88 )
6. Is the complete prohibition on transferring foreign contributions to other registered persons under Section 7 of the FCRA constitutional?
Yes. The court held it is a reasonable restriction to prevent the creation of layered money trails and excessive administrative expenditures, ensuring the recipient utilizes funds itself for permitted purposes. (Para 43 , 44 , 50 , 51 , 64 , 65 )
7. Does mandating the opening of a primary FCRA account at a specific SBI branch in New Delhi violate fundamental rights?
No. It is a one-time exercise for real-time monitoring of inflows. Logistical inconveniences do not render the law manifestly arbitrary or unconstitutional. (Para 70 , 73 , 76 , 77 , 80 )
8. Is the mandatory requirement of Aadhaar for registration under Section 12A valid, and are there alternatives?
The provision is valid for identification and accountability. However, the court read it down to allow Indian nationals to provide their Indian Passport as a valid identification document. (Para 83 , 84 , 87 )
9. Is there a fundamental right to receive foreign contributions under the Constitution of India?
No. There is no absolute or vested right to receive foreign donations; such receipts are subject to a regulatory framework to protect national sovereignty and public order. (Para 21 , 53 , 74 )
JUDGMENT :
A.M. KHANWILKAR, J.
1. These petitions under Article 32 of the Constitution of India primarily assail the constitutional validity of the amendments to the provisions of the Foreign Contribution (Regulation) Act, 20101 [for short “the 2010 Act” or “the Principal Act” as the case may be] vide the Foreign Contribution (Regulation) Amendment Act, 20202 [for short “the 2020 Act” or “the Amendment Act” as the case may be] which has come into effect on 29.9.2020, in particular, Sections 7 , 12(1A), 12A and 17(1), being manifestly arbitrary, unreasonable and impinging upon the fundamental rights guaranteed to the petitioners under Articles 14, 19 and 21 of the Constitution.
2. Re: Writ Petition (Civil) No. 566 of 2021
(a) Petitioner No. 1 in this petition along with Carol Faison founded a trust in the name of “The Care and Share Charitable Trust” in Vijayawada, India (bearing Registration No. 242/1997), in the year 1997. It is the case of the petitioners that the Trust is also registered with the Income Tax authorities and Ministry of Home Affairs, Government of India including under the Foreign Contribution (Regulation) Act, 19763 [for short “the 1976 Act”] for receipt of foreign funds (FCRA No. 010260151 dated 8.12.1998 and renewed on 10.8.2016 under the 2010 Act). Petitioner No. 1 is serving as one of the trustees of the said Trust and petitioner No. 2 (Nigel Mills) is a social worker and one of the trustees of the stated Trust. The Trust is engaged in the social upliftment activity such as helping children below the poverty line in Vijayawada (Andhra Pradesh, India), street children, children of sex workers, physically challenged kids, shelter orphans, abandoned babies and assisting juveniles detained in the observation home (local reformatory). The Trust has built and is running nine schools in different slums. It has rescued over 1000 street children, 165 infants, HIV positive and AIDS orphans of Vijayawada. The Trust also engages in daily milk program for 500 kindergarten children since year 2000. The Trust has been awarded National Award for Child Welfare by the Government of India, Ministry of Women and Child Development in the year 2007, for its exceptional work and contribution in the field of child welfare.
(b) The petitioner Nos. 3 and 4 are also trustees of National Worker Welfare Trust (NWWT), which is registered under the Indian Trusts Act, 18824 [for short “the 1882 Act”] in Secunderabad, Telangana on 17.5.2016. Even this trust is registered with Ministry of Home Affairs, Government of India under the 2010 Act for receipt of foreign funds ( FCRA Registration No. 010230883). It is engaged in rehabilitation of migrant workers, with International Labour Organisation (ILO) and addresses the concerns of women workers from the marginalised communities and prospective migrant workers (interstate and oversees), families of migrants, communities, leaders of communities, returnees, women organisations, trade unions, local panchayats, Mandal, district and State department connected with labour and administration and governance related to these workers. Both these trusts, it is urged, are dependent upon foreign contributions to meet their day-to-day expenses. However, with the amendments effected in year 2020 to the provisions of the 2010 Act, a new dispensation has been set forth, which in their opinion, is manifestly arbitrary. For, it entails in cancellation of certificate5 [The expression “certificate” as defined in Section 2 (1)(e) of the 2010 Act as amended, reads thus: “2. Definitions - (1) In this Act, unless the context otherwise requires: (a) to (e) xxx xxx xxx (e) “certificate” means certificate of registration granted under sub-section (3) of section 12.”] of the trust permitting receipt of foreign contributions for being utilised towards the activities of the concerned trust. Similarly, the operational “ FCRA account” will be barred from receiving foreign contribution. The petitioner-Trusts and similarly pl
