SPENDING OF FOREIGN CONTRIBUTION LYING IN THE CUSTODY OF THE PERSON AFTER THE SUSPENSION OF HIS CERTIFICATE OF REGISTRATION

[Mr. M. GOVINDARAJAN]

Registration

Section 12 of Foreign Contribution Regulation Act, 2010 (‘Act’ for short) provides the procedure for registration under this Act to receive foreign contribution.  For this purpose the applicant is to open a FCRA Account in New Delhi SBI branch.  The applicant is to submit FC - 3A along with a fee of Rs.5,000/-.  If the application is in order the Central Government shall issue certificate of registration.

Suspension of registration

Section 13 of the Act provides that if the Central Government is satisfied that pending consideration for cancellation of the certificate of registration, it may suspend the certificate in writing for a period of not exceeding 180 days specified in the order.  On cancellation of the certificate of registration the applicant is prohibited in receiving any foreign contribution.  The applicant may be allowed to use the foreign contribution in his custody at the time of suspension of certificate, as detailed below-

• Up to 25%, for the declared aims and objects for which the foreign contribution was received.
• The remaining 75% of the unutilized foreign contribution shall be utilized only after revocation of suspension of the certificate of registration.

In CENTRE FOR POLICY RESEARCH VERSUS UNION OF INDIA - 2023 (10) TMI 891 - DELHI HIGH COURT , the petitioner has been granted certificate of registration under the Act.  It has been complained that the petitioner has not used the amount received from foreign countries for the specified approved purpose and spent the same for undesirable purposes which amounts to violation of the provisions of the Act and the Rules.

The Central Government suspended the certificate of registration of the petitioner.  The petitioner filed the present writ petition for allowing the petitioner to spend 25% of the foreign contribution lying in his custody.  Certain clarifications had been sought by the Central Government regarding the application made by the petitioner for utilizing the unspent amount and this Court while considering the interim application on 29.08.2023 observed that it is expected that the application given by the petitioner for utilization of the unspent amount will be decided by the Central Government on or before 05.09.2023.  Vide order dated 12.09.2023 the Central Government passed an order directing the petitioner to utilize 25% of the foreign contribution lying in the custody of the petitioner, amounting to Rs.1.79 crores.  The order further directed the petitioner to maintain accounts of expenses and furnish a copy of the same to the Ministry on monthly basis.

The petitioner contended before the High Court that the petitioner was suffering from severe financial crunch and unable to pay the salaries of its employees.  There are 113 employees of the Petitioner and the salaries and other expenses which are payable till September, 2023, is Rs.6,60,83,370/-.  The petitioner made a prayer to the High Court that the petitioner may be allowed to spend 25% of foreign contribution including that which is lying in fixed deposits, government bonds etc.  The Central Government contended that 25 % of the amount lying the current account are only allowed to spend.

The High Court analyzed Section 13 and 14 of the Act.  The High Court observed that  Section 13(2) of the Act permits utilization of foreign contribution which is in custody of the person whose certificate has been suspended. There is no occasion to restrict the term “his custody” only to the current account. The amounts which are held in fixed deposits or in government bonds etc. are also unutilized foreign contributions which can be made available to the person whose account has been suspended pending the inquiry under Section 14 of the Act.

The High Court held that since  there is nothing in the said Section which restricts that only the amounts lying in the current account can be permitted to be utilized, the petitioner is allowed  to utilize the 25% of the total foreign contribution funds held it in fixed deposits, government bonds etc. pending consideration of the cancellation of registration under Section 14 of the Act.  The High Court further directed that the outward disbursement of the amounts shall only be for the purpose of carrying out the day-to-day activities and for no other expenses.    A complete statement of the Petitioner’s FCRA account and the amounts deposited in fixed deposits and government bonds etc. along with expenses incurred from the date of suspension shall be submitted to the Respondent periodically.