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Foreign Contribution (Regulation) Act, 2010: Important Aspects

The FCRA, also known as the Foreign Contribution (Regulation) Act of 2010, serves as a regulatory framework in India for monitoring the inflow and utilization of foreign contributions. Its main objectives are to promote transparency, accountability, and safeguard national interests by preventing the misuse of foreign funds. Under this Act, entities receiving foreign contributions must register or obtain prior permission, thereby promoting oversight and accountability.

According to Section 2(1)(h) of FCRA, 2010, the term 'foreign contribution' refers to any donation, delivery, or transfer received from a foreign source. This includes: (i) any article, except those given as personal gifts, with a market value in India that does not exceed a specified amount set by the Central Government; (ii) any type of currency, whether Indian or foreign; and (iii) any type of security, as defined in both the Securities Contracts (Regulation) Act, 1956 and the Foreign Exchange Management Act, 1999, including foreign securities.

Donation of funds by an Indian who got citizenship abroad counts as foreign contribution. This rule governs both PIO cardholders and Overseas Citizens of India. But it doesn't apply to Non-resident Indians who still keep Indian citizenship. Contributions from those with Indian passports are excepted from foreign contribution regulations.

As per the Gazette Notification S.O. 2446 (E) dated 27.10.2011, the Central Bureau of Investigation and the crime branches of the State Governments have been assigned the duty to investigate and prosecute persons responsible for violating FCRA, 2010 in their respective states.

Section 3(1) of The Foreign Contribution (Regulation) Act, 2010:

According to Section 3(1) of The Foreign Contribution (Regulation) Act, 2010, no foreign contribution can be accepted by any individual or entity listed below:

  1. A candidate running for election;
  2. A registered newspaper's correspondent, columnist, cartoonist, editor, owner, printer, or publisher;
  3. A public servant, judge, government employee, or employee of a corporation or any other body under government control or ownership;
  4. A member of any legislative body;
  5. A political party or any of its office-bearers;
  6. An organization of a political nature specified by the Central Government under sub-section (1) of section 5;
  7. The association or company that deals in broadcasting, production of audio or video news, or current affairs using electronic means as defined in clause (r) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), and any other medium;
  8. An owner, correspondent, columnist, editor, or cartoonist who works for the same organization or company mentioned in clause (g).

Explanation 1: In clause (c), 'public servant' refers to a public servant as defined in section 21 of the Indian Penal Code.

Explanation 2: In clause (c) and section 6, the term 'corporation' includes a corporation owned or controlled by the government and a Government company as defined in clause (45) of section 2 of the Companies Act, 2013.

Section 4 of Foreign Contribution (Regulation) Act, 2010:

According to section 4 of Foreign Contribution (Regulation) Act, 2010, section 3 shall not be applicable to the individuals listed in this section. These individuals may accept foreign contributions, subject to the regulations outlined in section 10. Such contributions may be accepted in the following circumstances:
  1. As payment for salary, wages, or other forms of compensation owed to the individual or a group of persons under their supervision, from a foreign source. This also includes payments made in the normal course of business carried out by the foreign source within India.
  2. As payment in the course of international trade or commerce, or as part of ordinary business conducted outside of India.
  3. As an agent of a foreign source, for transactions made with either the Central or State Government.
  4. If accepted in accordance with the regulations set by the Central Government, a gift or presentation may be given to an individual as a member of an Indian delegation.
  5. From the individual's relative.
  6. As a remittance received through official channels, post offices, or authorized foreign exchange agents under the Foreign Exchange Management Act, 1999, in the normal course of business.
  7. As a scholarship, stipend, or similar payment.

However, if any foreign contribution is received by an individual listed under section 3 for a purpose that is not specified in this section, it shall be considered a violation of the provisions of section 3.

Section 6 of The Foreign Contribution (Regulation) Act, 2010:

According to Section 6 of FCRA, 2010, it is prohibited for any member of a legislature, office bearer of a political party, judge, government servant, or employee of a government-owned or controlled corporation or body to accept foreign hospitality while visiting any country or territory outside of India, without prior permission from the Central Government.

However, in case of sudden illness requiring immediate medical aid during the visit, such permission is not necessary. In the event that foreign hospitality is received, the person must inform the Central Government within one month of receiving it, providing details of the hospitality and its source.

Section 10 of The Foreign Contribution (Regulation) Act, 2010:

In Section 10 of The Foreign Contribution (Regulation) Act, 2010, it is stated that the Central Government has the power to prohibit the payment of any currency that has been received in violation of the Act. After conducting an appropriate inquiry, the Central Government may issue a written order to a person who is found to have custody or control of any article, currency, or security (Indian or foreign) that has been accepted in contravention of the Act.

This order will restrict the person from making any payments, deliveries, transfers, or any other form of dealing with the said article, currency or security, except in accordance with the written orders of the Central Government. A copy of this order must be served to the person in the prescribed manner.

In such cases, the provisions of sub-sections (2), (3), (4) and (5) of section 7 of the Unlawful Activities (Prevention) Act, 1967 (37 of 1967) will be applicable to the said article, currency or security. The references to moneys, securities or credits in the aforementioned sub-sections will be construed as references to the article, currency or security in question.

According to Section 11 of the FCRA, 2010, it is prohibited for any individual to receive foreign contribution without obtaining a certificate of registration or prior permission from the Central Government, except as provided in the Act. This means that accepting foreign contribution without registration or permission is a punishable offence under the Act.

Despite the provisions of the Code of Criminal Procedure, 1973, Section 41 of the FCRA, 2010 allows for the compounding of offences under this Act (whether committed by an individual, association, officer, or employee) by designated officers or authorities, as specified by the Central Government through a notification in the official gazette. This provision does not apply to offences punishable with imprisonment only. Furthermore, any offence committed by an individual, association, officer, or employee within three years of a similar offence being compounded under this section is not eligible for compounding.

The penalty for violating any provision of the FCRA 2010, stated in Section 35, is severe. It states that anyone who either accepts or aids in the acceptance of any foreign contribution, currency or security from a foreign source, in defiance of the Act or any related regulations, will face imprisonment for up to five years, or a fine, or both.

Section 39 of The Foreign Contribution (Regulation) Act, 2010:

According to Section 39 of the FCRA, 2010, companies may be held liable for offences committed under this Act or any related rules or orders. In such cases, both the company and the person in charge of the business at the time of the offence shall be considered guilty and subject to appropriate punishment.

However, if the person can prove that they had no knowledge of the offence or had taken all necessary precautions to prevent it, they shall not be held liable. Additionally, even if the company is found to be at fault, if any director, manager, secretary or officer of the company is found to have consented to or been negligent in the commission of the offence, they too shall be considered guilty and face consequences accordingly.

Section 40 of The Foreign Contribution (Regulation) Act, 2010:

This section talks about the Prohibition on Prosecution of Offences under the Act and says that no court shall initiate proceedings for any crime committed under this legislation, unless prior approval is obtained from the Central Government or any designated official authorised by the government for this purpose.

Despite its intended purpose, the FCRA has faced criticism on various fronts. Critics argue that its provisions are overly restrictive and can hinder the legitimate activities of non-governmental organizations (NGOs) and civil society groups. The Act's broad definitions and discretionary powers granted to government authorities have raised concerns about arbitrary enforcement and harassment of organizations critical of the government.

Moreover, the Act's stringent reporting requirements and compliance burdens have been deemed cumbersome, particularly for smaller NGOs and grassroots organizations. This could potentially hinder their ability to access much-needed foreign funding for developmental and humanitarian projects.

Overall, while the FCRA aims to regulate foreign contributions and prevent their misuse, it should ensure accountability and transparency without unduly stifling the legitimate activities of civil society organizations and NGOs working towards the betterment of society, critics argue.

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