1990 (9) TMI 270 - HC - Companies Law

Certain associations & persons receiving Foreign Contribution to give intimation to Central Government, Power of Central Government to prohibit receipt of Foreign Contribution, etc., in certain cases

Issues Involved:
1. Non-existence of objective material for "satisfaction" under section 10(b) of the Foreign Contribution (Regulation) Act, 1976.
2. Breach of principles of natural justice due to lack of show-cause notice and reasons in the impugned order.
3. Compliance with section 6 of the Act regarding intimation of foreign contributions.
4. Legality and justification of the impugned order under section 10(b) of the Act.

Issue-wise Detailed Analysis:

1. Non-existence of Objective Material for "Satisfaction" under Section 10(b):
The appellant challenged the impugned order on the grounds that it lacked objective material to substantiate the "satisfaction" required under section 10(b) of the Foreign Contribution (Regulation) Act, 1976. The court observed that the order merely stated that the Central Government was "satisfied" that the acceptance of foreign contributions by the appellant was likely to affect public interest prejudicially. However, the order did not disclose any material or evidence that led to this satisfaction. The court emphasized that the existence of objective material is a pre-condition for proper satisfaction and that the order must furnish cogent reasons for non-acceptance of the appellant's explanation.

2. Breach of Principles of Natural Justice:
The appellant argued that the impugned order breached the principles of natural justice as no show-cause notice was given before passing the order, and no reasons were stated in the order. The court concurred, noting that the principles of natural justice require that affected parties be given a show-cause notice and an opportunity to explain themselves before any adverse order is passed. The court highlighted that even if the statute does not explicitly require natural justice, the court can read such requirements into the statute if the provisions are likely to have civil consequences. The court found that the impugned order failed to meet these requirements, making it legally untenable.

3. Compliance with Section 6 of the Act:
The appellant had received a show-cause notice under section 6 of the Act for alleged violations, including failure to furnish required intimations and audited accounts. In response, the appellant clarified that the contributions were received in Indian currency from the Ford Foundation office in India, which had already obtained prior permission from the Government of India. The appellant also submitted all required returns along with their reply. The court noted that section 6 is a self-contained code that provides for registration and intimation requirements for associations receiving foreign contributions. The court observed that the Central Government had initiated action under section 6 but later abandoned it without justification and resorted to the more severe action under section 10(b).

4. Legality and Justification of the Impugned Order under Section 10(b):
The court examined the legality and justification of the impugned order passed under section 10(b) of the Act. The court found that the order did not meet the statutory requirements as it lacked objective material, did not provide reasons, and was issued without giving the appellant a chance to respond. The court also noted that section 10(b) provides drastic powers to the Central Government, which must be exercised with caution and based on solid evidence. The court concluded that the impugned order was illegal and unjustified, as it failed to comply with the requirements of fair play and natural justice.

Conclusion:
The court quashed and set aside the impugned order, allowing the appeal with costs. The court emphasized the importance of objective material, adherence to natural justice, and proper statutory compliance in the exercise of powers under the Foreign Contribution (Regulation) Act, 1976.

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