DELAY IN OPENING OF ‘FCRA’ ACCOUNT WITH STATE BANK OF INDIA

[Mr. M. GOVINDARAJAN]

HELPING HANDS JAIPUR SOCIETY VERSUS UNION OF INDIA & ANR. - 2023 (5) TMI 610 - DELHI HIGH COURT

Foreign contribution

Section 17 of the Foreign Contribution Regulation Act, 2010 (‘FCRA’ for short) provides that 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.   Such person may open one or more accounts in one or more banks for utilizing the foreign contribution received by him.  No funds other than foreign contribution shall be received or deposited in such account or accounts.

Opening of FCRA Account

The said section 17 was substituted vide ‘The Foreign Contribution Regulation (Amendment) Act, 2020, dated 28.09.2020.  The newly substituted Section 17(1) provides that 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.   Section 17(2) provides that such person may also open another ‘FCRA Account’ in any of the scheduled bank 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.  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.   No funds other than foreign contribution shall be received or deposited in any such account.

Section 17(2) of the Act provides that the specified branch of the State Bank of India at New Delhi or the branch of the scheduled bank where the person has opened his foreign contribution account or the authorized person in foreign exchange, shall report to such authority as may be specified,-

•  the prescribed amount of foreign remittance;
• the source and manner in which the foreign remittance was received; and
• other particulars,

in such form and manner as may be prescribed.

Pursuant to the said amendment of the FCRA, the notification was issued by the Government on 07.10.2020 specifying that the State Bank of India, New Delhi Main Branch, 11, Sansad Marg, would be the branch for opening of FCRA account as per amended Section 17 of the FCRA. Correspondingly, on November 10, 2020, the FCRA Rules were also amended vide Foreign Contribution (Regulation) (Amendment) Rules, 2020 such that the Form FC-4 (Annual Returns) reflected the amended Section 17. The said FCRA account was to be opened at the latest by March 31, 2021 which was extended till 30th June, 2021 by way of a notification dated 18th May, 2021.

Filing of Form FC - 4

Rule 17 of Foreign Contribution (Regulation) Rules, 2011 provides that every person who receives foreign contribution under FCRA, shall submit a signed or digitally signed report in electronic form in Form FC-4 with scanned copies of income and expenditure statement, receipt and payment account and balance sheet for every financial year beginning on the 1^st day of April within nine months of the closure of the financial year, duly certified by a Chartered Accountant.   The annual return in Form FC-4 shall reflect the foreign contribution received in the exclusive bank account and include the details in respect of the funds transferred to other bank accounts for utilization.  Every such return in Form FC-4 shall also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank.   A ‘NIL’ report shall be furnished even if no foreign contribution is received during a financial year.

Non opening of FCRA Account

Sl. No. 7 of FC - 4 form requires FCRA account says that receipt of foreign contribution ‘as on 31st March of the year ending’ has to be provided and the bank account has to be in the SBI, Sansad Marg branch.

In WNS CARES FOUNDATION & ANR. VERSUS UNION OF INDIA - 2023 (1) TMI 944 - DELHI HIGH COURT, The petitioners’ case is that in March, 2021, while submitting the returns for the FY 2019-20, they were confronted with an issue, inasmuch as the said Form FC-4 required a FCRA account as on 31st March of the end of financial year. The amendments having been introduced only in September, 2020, details of such a bank account could not have been sought in a retrospective manner as per the petitioner. It is the petitioner’s case that the form could not be submitted on the respondent’s online portal without the petitioners first identifying the designated FCRA Account with SBI, Main Branch, New Delhi.  It is further submitted that the respondent’s online portal has clearly been designed in a manner such that it is impossible for the Petitioner No.1 to submit the Form FC-4 online for a period prior to September 29, 2020, i.e., for a period before the which the amendment pursuant to the Foreign Contribution Regulation (Amendment) Act, 2020 would apply. Thus, the Petitioner No.1 could not file the returns for the year 2019-20 and 2020-21.

The petitioners obtained an FCRA account with the SBI, Sansad Marg branch on 06.08.2021.   In view of the language of the Form FC-4, which states as on 31st March, the petitioner cannot fill in the details of the said account and does not wish to be alleged of misleading the authorities.  Therefore the petitioners filed the present writ petition before High Court.  The High Court observed that the language used in the said form is that the receipt of foreign contribution ‘as on 31st March of the year ending’ has to be provided and the bank account has to be in the SBI, Sansad Marg branch. Since the Petitioner No.1 opened its account in August, 2021 and in any case, as on 31st March, 2020, the Foreign Contribution Regulation (Amendment) Act, 2020, had not come into effect, there appears to be some justification in the Petitioners’ case.

The High Court permitted the petitioner to fill up the details of its FCRA account in serial no.7 of the Form FC – 4 and submit the same.  The High Court also directed that no coercive steps shall be taken against the Petitioners for having opened the FCRA account belatedly and no penalty shall be imposed upon the Petitioners if the returns for FY 2019-2020 and FY 2020-21 are filed within a period of one month.

In SHREE SWAMINARAYAN MANDIR, KUTCH NAV NIRMAN ABHIYAN, SHRI SWAMINARAYAN DWISHATABDI MEDICAL AND CHARITABLE TRUST VERSUS UNION OF INDIA - 2023 (4) TMI 974 - DELHI HIGH COURT the petitioners opened SBI accounts with the SBI, Sansad Marg Branch were opened by them on the following dates:

• Shri. Shree Swaminarayan Mandir - 16.03.2021;
• Kutch Nav Nirman Abhiyan - 23.03.2021;
• Shri Swaminarayan Dwishatabdi Medical and Charitable Trust - 25.03.2021

The above said petitioners could not able to file Form FC - 4 for the year 2019 - 2020.

In view of the reasoning given in the said order in WNS Cares Foundation (Supra), the petitioners also having already opened their bank accounts with SBI Sansad Marg Branch, the petitioners are permitted to upload their annual returns for the year 2019-2020 by specifying the SBI account number of the account which was subsequently opened by them.  If the said annual returns are uploaded within one month from today, no penalty shall be charged qua the Petitioners.

In HELPING HANDS JAIPUR SOCIETY VERSUS UNION OF INDIA & ANR. - 2023 (5) TMI 610 - DELHI HIGH COURT, the petitioner registered under Section 11 and 12 Foreign Contribution Regulation Act, 2010 on 15.05.2011.  The petitioner also renewed the registration on 15.10.2016 under Section 16 of the Act.  The petitioner, while uploading FCRA Annual Return under Form FC-4 for the financial year 2019-2020, faced some issues due to the fact that the bank account details were being sought as of 31.03.2020. The Petitioner opened the designated FCRA bank account with the SBI only on 04.10.2021. 

The petitioner filed a writ petition before High Court.  Vide order dated 17.01.2022, the petitioner was asked to file an affidavit giving the steps that were taken by it for opening of the bank account.  The petitioner filed the same.  The High Court observed that the present case would be covered by the order dated 16th January, 2023 passed by the Delhi High Court in  WNS Cares Foundation & another (supra).  On 03.03.2023, the Court was informed that the penalty amount was deposited by the Petitioner to the tune of Rs. 5,18,062/- on 28.10.2022.   The FCRA annual return under Form FC-4 for the F.Y 2019-2020 has also now been uploaded after paying the penalty.

The High Court observed that the FCRA account in the SBI was opened by the Petitioner only on 04.10.2021, which was much beyond the deadline fixed initially i.e. 31.03.2021, and even after the expiry of the extended period till 30.06.2021 vide notification dated 18.05.2021.  The High Court held that Keeping in mind that the petitioner has now opened the said FCRA bank account in SBI Sansad Marg Branch, Parliament Street, New Delhi, and has deposited the penalty and also uploaded the annual return for the F.Y 2019-2020, the relief sought for in this petition has become infructuous.   The delay has not been convincingly explained by the petitioner. 

The High Court held that it is made clear that FCRA FC-4 annual return for the F.Y 2019-2020 which has been uploaded, shall be taken as valid without any payment of further penalties by the petitioner.