The preamble of the Foreign Contribution (regulation) Act 2010 states-
“An Act to consolidate the law to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.”
Which means the act came into force with the objective to regulate and prohibit the acceptance of contribution and hospitality made by the foreigners (i.e. contribution made by the person who is not a citizen of India and do not reside in India) to a citizen of India and entities or associations incorporated or formed in India.
The bill no. 123 of 2020 was presented in the parliament to amend the FCRA 2010 and was named as Foreign Contribution Amendment Bill 2020. The bill brought some majors changes in the existing act which was strongly opposed the members of opposition parties and the members of Civil Society.
The changes proposed to be made in the act through the bill are given below-
A). Section 3 prohibits specified individuals and associations from accepting foreign contribution.
- Amendment to section 3- Prohibition to accept foreign contribution-
Earlier no foreign contribution shall be accepted by- Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government.
Now no foreign contribution shall be accepted by- public servant, Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government.
The amendment was made to clause (c) of section 3 of the act and it further in the explanation stated that the term public servant has the same meaning as defined under section 21 of the Indian Penal Code.
B). Section 7 states that any person and association can obtain foreign contribution only if he/she has registered itself with the government and government has assented for the same and if there is no such registration done then by obtaining the certificate from the government.
- Amendment to section 7- Prohibition to transfer foreign contribution to other person
Earlier – there was a prohibition on transfer of foreign contribution to any person unless such other person is also registered with government or has been granted certificate by the government.
Now- there is complete prohibition on transfer of foreign contribution by one person to other. In simple words no person is allowed to transfer the foreign contribution received by him to any other person.
C). Section 8 imposes restrictions on usage of foreign exchange money for administrative expenses and the elements that constitute administrative expenses would be defined and given by the government.
- Amendment to section 8 the limit prescribed by the government for administrative purposes now has been changed brought down to 20%
Earlier- the limit of usage of funds for administrative work was 50% of the funds received
Now- the bill proposed to lower the limit to 20% for administrative usage.
Such limit on expenditure could be extended with the approval of government
D). Section 11 of the act gives the direction on how a person can obtain the foreign contribution by getting a certificate of registration by government or by obtaining the prior approval from the government,
- Amendment to section 11- where the person has obtained prior approval of the government and later found guilty of misuse of such funds the proviso of the section imposed restriction of usage of unutilised and unreceived foreign contribution.
Earlier- if the person has been found guilty of violation of the rules and provisions given under the act the unutilised or unreceived amount of foreign contribution shall not be utilised or received, as the case may be, without the prior approval of the Central Government.
Now on the basis of any information or report, and after holding a summary inquiry, if government has reason to believe that a person who has been granted prior permission has contravened any of the provisions of this Act, it may direct that such person shall not utilise the unutilised foreign contribution or receive the remaining portion of foreign contribution which has not been received or, as the case may be, any additional foreign contribution, without prior approval of the Central Government.
Earlier it was at the wish of the central government to grant the approval without any inquiry but now the central government has to conduct a summary inquiry and give its approval after the inquiry and if the person is found guilty then the restrictions on usage of unutilised amount would be imposed.
E). Section 12 “Grant of certificate of registration” of the act talks about the granting of certificate of registration by the government
Insertion in the section – the Bill has given an insertion to section 12 that after clause (1) the clause (1A) has to be inserted which states tht the person making the application must open a foreign exchange account as per the provisions given under section 17 of the act.
F). Further section 12A has been inserted in the act which states that- Notwithstanding anything contained in this act the person making application under section 11 or section 12 for the renewable of prior permission or grant of registration such person should give his identification document that is Aadhar no. of all its office bearers or directors or other key functionaries, by whatever name called. And in case the person is foreigner then the copy of his passport or overseas citizen card would be required.
This section has made it mandatory to give aadhar no. (copy of passport or overseas citizen card no., as the case may be) at the time of making new application or at the time of renewable of existing approval or registration.
G). Section 13- Suspension of certificate- the section empowers the government to suspend the certificate given under section12 if the government has reason to believe that the certificate is subject to cancellation on ground stated in section 14 of the act(i.e. for public interest, person misused the amount etc).
Earlier- the period of suspension was 180 days
Now- the time limit for the suspension has been extended to further but maximum of 180days(in simple words 180+extension of maximum 180 days)
The section empowered the government to suspend the certificate of those whose certificate is subject to cancellation due to conditions of section 14. Further the section also states that the central government can suspend the certificate for 180 days and if has reason to believe that more extension to such period is required then further extend the limit but subject to maximum 180 days.
H). The section 14A has been inserted by the central government in form of insertion after section 14 which states that if any person makes an application to surrender his certificate, the government may allow such surrender only after conducting an inquiry to check for any mismanagement of funds and contravention of the provisions given under the act. On satisfaction of government that there is compliance of the provisions and no mismanagement then the government allow the person to surrender the certificate and it further state that the management of asset of person who surrendered his certificate which are created out of the foreign contribution shall be sun in accordance of section 15 of the act.
I). Section 15 of the act Management of foreign contribution of person whose certificate has been cancelled. Person whose certificate has been cancelled due to incompliance becomes ineligible to use the assets created out of the foreign contribution
Amendment to section 15 after insertion of section 14A the cancellation and surrender of certificate would result in same outcomes and thus the amendment was required here
Earlier there were provisions for management of contribution asset of person whose certificate has been cancelled due to incompliance
Now the word surrender has been added after the word cancellation to fulfil the demand of section 14A of the act.
J). Section 16 Renewal of certificate the section tells that the certificate shall be renewed within 6 months before the date of expiration.
Amendment to section 16 the section instructs the person renewing the certificate regarding the procedure and date of renewal.
The proviso has been added after clause 1 of section 16 that government would renew the certificate after conducting an inquiry that conditions given under the section 12(4) have been complied.
K). Section 17 Foreign contribution through scheduled bank has been substituted by a new section 17
Old section- the section stated that contribution shall be received through one account and that account be maintained by any scheduled bank with further condition that no other deposit is made to that account than foreign contribution.
New section-“ (1) Every person who has been granted certificate or prior permission under
section 12 shall receive foreign contribution only in an account designated as “FCRA
Account” by the bank, which shall be opened by him for the purpose of remittances of
foreign contribution in such branch of the State Bank of India at New Delhi, as the
Central Government may, by notification, specify in this behalf:
Provided that such person may also open another FCRA Account in any of the
scheduled bank of his choice for the purpose of keeping or utilising the foreign
contribution which has been received from his FCRA Account in the specified branch
of State Bank of India at New Delhi:
Provided further that such person may also open one or more accounts in one or
more scheduled banks of his choice to which he may transfer for utilising any foreign
contribution received by him in his FCRA account in the specified branch of the State
Bank of India at New Delhi or kept by him in another FCRA Account in a scheduled
bank of his choice:
Provided also that no funds other than foreign contribution shall be received or
deposited in any such account.
(2) The specified branch of the State Bank of India at New Delhi or the branch of the
scheduled bank where the person referred to in sub-section (1) has opened his foreign
contribution account or the authorised person in foreign exchange, shall report to such
authority as may be specified,—
(a) the prescribed amount of foreign remittance;
(b) the source and manner in which the foreign remittance was received; and
(c) other particulars,
in such form and manner as may be prescribed.”
In simple words, The person who has been granted certificate shall open a FCRA account in the branch of state bank of India which would be specified by the central government and from such specified branch the person can transfer the fund to any other FCRA account opened by him in any scheduled bank of his choice to carry out his objectives and purpose.
It also states that no amount other than foreign contribution be deposited in the FCRA account.
Further the specified branch of state bank of India must give intimations and details of contribution received time to time.
The bill has been passed in both the houses of parliament and is sent to president of India (Mr. Ram Nath Kovind) for his assent.
The bill has made various and major changes in the act and is opposed by various individuals and association of individuals. Some of the objection made are given below-
- Lowering the administrative expenditure limit would create hindrance in doing activities to fulfil the objectives for which the contribution is procured.
- The summary inquiry could lead to biasness
- The prohibition of public servants from accepting FC would create problems because there are individuals who fall under the category and also obtain FC.
The bill will become an act and be applicable to whole India from the date on which it gets assent of the president of India or any other day specified.