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Section 3(1)(c): Prohibition to accept foreign contribution:

Pre-amended Section:

No foreign contribution shall be accepted by any Judge, government servant, or employee of any corporation or any other body controlled or owned by the government.

Post-amended Section:

No foreign contribution shall be accepted by any public servant, Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government.

Brief comments: In the earlier section there was no mention of the public servant. “Public Servant” means a public servant as defined under section 21 of the Indian Penal Code. During the recent past Government raised objections about how individuals like Additional Solicitor General of Government can receive funds under FCRA since section 3 prohibits Government Servants from receipt of funds under FCRA. In the supreme court, it was argued that advocates are not government servants as defined under section 21 of the Indian Penal Code, being public servants thus does not come under section 3 of FCRA. To plug this loophole Public Servants as defined under section 21 of the Indian Penal Code will be covered under section 3 of the amended FCRA which will prohibit not only government servants but also public servants from receipt of funds under FCRA.

The Foreign Contribution (Regulation) Amendment Act, 2020 - A Section Wise Analysis

Section 7. Prohibition to transfer foreign contribution to another person:

Pre-amended Section:

No person who:

  1. Is registered and granted a certificate or has obtained prior permission under this Act; and
  2. receives any foreign contribution, shall transfer such foreign contribution to any other person unless such other person is also registered and had been granted the certificate or obtained the prior permission under this Act:

Provided that such person may transfer, with the prior approval of the Central Government a part of such foreign contribution to any other person who has not been granted a certificate or obtained permission under this Act in accordance with the rules made by the Central Government.

Post-amended Section:

No Person who:

  1. is registered and granted a certificate or has obtained prior permission under this Act; and
  2. receives any foreign contribution.

Shall transfer such foreign contribution to any other person.

 

Brief comments:

The existing Section 7 of FCRA allows the transfer of foreign contribution to other registered persons registered under FCRA or having obtained prior permission as defined under FCRA. Funds can be transferred to such persons also who are not registered under FCRA but have prior permission as defined under the provisions of FCRA.

After the amendment, the Government has put a complete prohibition on the transfer of funds to another person irrespective of the fact that the other person is registered under FCRA or has prior permission or not. This amendment has put a full stop on the indirect transfer of funds and all the FCRA registered persons will be required to receive funds under FCRA directly from the funding agencies.

Section 8: (1)(b): Restriction to utilize foreign contribution for administrative purposes:

Every person who is registered and granted a certificate or given prior permission under this Act and receive any foreign contribution:

Pre-amended clause (1)(b):

Shall not defray as far as possible such sum, not exceeding fifty percent of such contribution, received in a financial year, to meet administrative expenses:

Provided that administrative expenses exceeding fifty percent of such contribution may be defrayed with prior approval of the Central Government.

Post-amended clause (1)(b):

Shall not defray as far as possible such sum, not exceeding twenty percent of such contribution, received in a financial year, to meet administrative expenses:

Provided that administrative expenses exceeding twenty percent of such contribution may be defrayed with prior approval of the Central Government.

Brief comments:

The idea of the Government is to ensure better utilization of funds for the cause than transferring funds from one registered person to another and in the process lose a sizeable part in the meeting of administrative expenses. The logic behind bringing down the administrative cost can be attributed due to savings in the cost by imposing prohibition on the transfer of funds from one registered person to another person.

Section 11: (1) & (2): Registration of certain persons with Central Government.

11. Registration of certain persons with Central Government.

(1) Save as otherwise provided in this Act, no person having a definite cultural, economic, educational, religious, or social program shall accept foreign contribution unless such person obtains a certificate of registration from the Central Government: Provided that any association registered with the Central Government under section 6 or granted prior permission under that section of the Foreign Contribution (Regulation) Act, 1976 (49 of 1976), as it stood immediately before the commencement of this Act, shall be deemed to have been registered or granted prior permission, as the case may be, under this Act and such registration shall be valid for a period of five years from the date on which this section comes into force.

(2) Every person referred to in sub-section (1) may, if it is not registered with the Central Government under that sub-section, accept any foreign contribution only after obtaining the prior permission of the Central Government and such prior permission shall be valid for the specific purpose for which it is obtained and from the specific source:

Pre-amended:

Provided that if the person referred to in sub-section (1) and (2) has been found guilty of a violation of any of the provisions of this Act or the Foreign Contribution (Regulation) Act, 1976 (49 of 1976), the unutilized or unreceived amount of foreign contribution shall not be utilized or received, as the case may be, without the prior approval of the Central Government.

Post-amended:

Provided that the Central Government, on the basis of any information or report, and after holding a summary inquiry, has reason to believe that a person who has been granted prior permission has contravened any of the provisions of this Act, it may, pending any further inquiry, direct that such person shall not utilize the unutilized 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:

Provided further that if the person referred to in sub-section (1) or in this sub-section has been found guilty".

 

Brief comments:

The Government seems to be serious in preventing illegal receipts and utilization of funds when the authorities have prima-facia evidence against the recipient is already contravening the provisions of FCRA. The government had the power to restrict a registered person from the utilization of funds or unreceived funds pending inquiry, but the same powers were missing in the case of those persons who had prior permission under FCRA. Post amendment registered persons and persons with prior permission under FCRA will be treated at par.

Section 12: Grant of Certificate of Registration:

Grant of Certificate of registration: one more subsection has been added to section 12 after subsection (1). The new subsection is (1A) and will be inserted after subsection 12(1):

"(1A) Every person who makes an application under sub-section (1) shall be required to open ‘‘FCRA Account’’ in the manner specified in section 17 and mention details of such account in his application"

Section 12 (A): After section 12 of the principal Act, the following section shall be inserted, namely: -

"12A. Notwithstanding anything contained in this Act, the Central Government may require that any person who seeks prior permission or prior approval under section 11, or makes an application for grant of a certificate under section 12, or, as the case may be, for renewal of the certificate under section 16, shall provide an identification document, the Aadhaar number of all its office bearers or Directors or other key functionaries, by whatever name called, issued under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, or a copy of the Passport or Overseas Citizen of India Card, in case of a foreigner.".

Brief comments:

Section 12 has new entries 12(1A) makes it mandatory for every person to open a bank account in a manner as per section 17 of FCRA designated as FCRA Account.

12A: The aim of the insertion of this section is to ensure the identification of office bearers, directors, or other key functionaries by whatever name called be it through Aadhaar Card for Indian citizens and Passport or Overseas Citizen of India Card in case of a foreigner.

Section 13: Suspension of certificate:

Pre-amended Section 13(1)

(1) Where the Central Government, for reasons to be recorded in writing, is satisfied that pending consideration of the question of canceling the certificate on any of the grounds mentioned in sub-section (1) of section 14, it is necessary so to do, it may, by order in writing, suspend the certificate for such period not exceeding one hundred and eighty days as may be specified in the order.

Post-amended Section 13(1):

(1) Where the Central Government, for reasons to be recorded in writing, is satisfied that pending consideration of the question of canceling the certificate on any of the grounds mentioned in sub-section (1) of section 14, it is necessary so to do, it may, by order in writing, suspend the certificate for a period of one hundred and eighty days, or such further period, not exceeding one hundred and eighty days, as may be specified “in the order.

Brief comments:

Amendment to section 13 of FCRA has given powers to the Government to suspend the registration certificate from the existing 180 days to 360 days during which foreign contribution received cannot be utilized or received.

Section 14A: After section 14 of the principal Act, the following section shall be inserted, namely: -

"14A. On a request being made in this behalf, the Central Government may permit any person to surrender the certificate granted under this Act, if, after making such inquiry as it deems fit, it is satisfied that such person has not contravened any of the provisions of this Act, and the management of foreign contribution and asset, if any, created out of such contribution has been vested in the authority as provided in sub-section (1) of section 15."

Brief comments:

A new sub-section has been added with an idea to allow a registered person to surrender the registration certificate voluntarily if after making such inquiry as it deems fit, it is satisfied that such person has not contravened any of the provisions of FCRA and the management of foreign contribution and asset, if any, created out of such contribution has been vested in the authority as provided in sub-section (1) of section 15.

Section 15: Management of foreign contribution of a person whose certificate has been canceled or surrendered:

Pre-amended section 15:

Management of foreign contributions of a person whose certificate has been canceled.

15(1): The foreign contribution and assets created out of the foreign contribution in the custody of every person whose certificate has been canceled under Section 14 shall vest in such authority as may be prescribed.

Post-amended section 15:

Management of foreign contributions of a person whose certificate has been canceled or surrendered.

15(1): The foreign contribution and assets created out of the foreign contribution in the custody of every person whose certificate has been canceled under Section 14 or surrendered under section 14A shall vest in such authority as may be prescribed.

Brief comments:

This section has been amended to include the cases where a certificate of registration is surrendered in line with section 14 and 14(A).

Section 16: Renewal of certificate:

Pre-amended section 16 (1):

Every person who has been granted a certificate under Section 12 shall have such certificate renewed within six months before the expiry of the period of the certificate.

Post-amended section 16 (1):

Every person who has been granted a certificate under Section 12 shall have such certificate renewed within six months before the expiry of the period of the certificate.

Provided that the Central Government may, before renewing the certificate, make such inquiry, as it deems fit, to satisfy itself that such person has fulfilled all conditions specified in sub-section (4) of section 12.".

Brief comments:

Presently every person is required to renew the certificate of registration within six months before the date of expiry of the certificate of registration issued under FCRA. After the amendment Government has acquired the power to make such inquiry, as it deems fit, to satisfy itself that such person has fulfilled all the conditions specified in sub-section (4) of section 12. This is the end of the era of the automatic renewal of registration of certificate under FCRA in the future.

Section 17: Foreign contribution through scheduled bank

Pre-amended section 17

(1) Every person who has been granted a certificate or given prior permission under section 12 shall receive foreign contribution in a single account only through such one of the branches of a bank as he may specify in his application for grant of certificate: Provided that such person may open one or more accounts in one or more banks for utilizing the foreign contribution received by him: Provided further that no funds other than foreign contribution shall be received or deposited in such account or accounts.

(2) Every bank or authorized 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.

Post-amended section 17:

17. (1) Every person who has been granted a 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 banks of his choice for the purpose of keeping or utilizing 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 utilizing 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 authorized person in foreign exchange, shall report to such authority as may be specified, —

  1. the prescribed amount of foreign remittance.
  2. the source and manner in which the foreign remittance was received; and
  3. other particulars,

in such form and manner as may be prescribed:

Brief comments:

By amending this section Government wants to control the inflow of funds received under FCRA at a single place i.e. New Delhi and through a single bank i.e. branch of State Bank of India, to be specified by the Government situated at New Delhi.

Presently FCRA Account for the receipt of funds can be opened at any branch of a scheduled bank anywhere in India.

Thus, in the future, all the inward remittances covered under FCRA can be deposited in the specified branch of State Bank of India, New Delhi. The recipient can open one or more FCRA accounts in scheduled banks or banks to transfer funds from the master bank account being maintained with State Bank of India, New Delhi for operational purposes. No funds other than FCR can be deposited in such bank accounts.

The State Bank of India and or all other Banks where funds have been deposited under FCRA are mandatorily required to report to such authority as may be specified:

  1. the prescribed amount of foreign remittance.
  2. the source and manner in which the foreign remittance was received; and
  3. other particulars,

in such form and manner as may be prescribed:

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