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TMI Blog2022 (2) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... r orders as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case." 2. It is the case of the petitioner, being Commonwealth Human Rights Initiative (hereinafter, 'CHRI') that it is an independent, nonprofit, civil society organisation, headquartered in New Delhi, India since 1993, working to promote access to justice, access to information and timely fulfilment of the United Nations Sustainable Development Goals (SDGs) in India and in Commonwealth countries. The petitioner was registered under the Societies Registration Act, 1860 on July 21, 1993. 3. It is stated in the petition that several institutions of the Central and State Governments including Human Rights Commissions, Central and State Information Commissions, law enforcement agencies and legal aid authorities, recognise the petitioner as a resource partner in the domains of police and prison reform and transparency in governance. 4. On September 03, 1993, the petitioner was granted a Certificate of Registration No. 231650671 under the Foreign Contribution Regulation Act, 1976. Thereafter, on October 28, 2016, the petitioner's registration was renewed up to October 31, 2021, under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said form. The said information was submitted again as per the format given under point 3(a) of the FC-4 Form in Annexe-2 to the petitioner's response dated June 26, 2021. (b) "The Bank Account No. 60051011 0004721, Bank of India, New Delhi opened on 18.02.2016 has not been intimated online to the Ministry and there is flow of foreign contribution in this Bank account." "Further, one utilization account through which the Association has been utilizing foreign contribution has not been intimated in ARs for the FY 2016-17 and 2017-18." In this regard, it is stated that the response by the petitioner dated June 26, 2021, to the impugned order has duly clarified that: a. On February 22, 2012, the petitioner opened a new utilisation bank account with the name: "Commonwealth Human RightsFNF" with account number: 600510110003989 with the Bank of India, Green Park Branch, New Delhi, 110016. This action was taken in accordance with the requirement of the donor specified in the grant letter that an exclusive utilisation account be opened for the purpose of utilising funds under this grant. b. The above-mentioned bank account was closed on October 05, 2016, after the said proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner for the FYs 20112012 to 2016-2017. h. Further, the bank statement pertaining to the said utilisation account was attached to the Annual Return for every FY subsequent to the date of its opening until its closure on October 05, 2016, filed online in the FC-4 Form. It is stated that from the copy of the statement of the bank account, attached with the return for the AY 2016-2017, it may be seen that the account has been closed with NIL balance. It was further stated that the hard copy of the said return was also submitted by speed post on December 23, 2017, with a copy of the bank statement. i. The details of the above-mentioned account had been closed, the same was not reported in the Annual Return for 2017-2018 onwards. However, it appears that this closed account is incorrectly being reflected in the pre-populated format of the FC-4 Form by the respondent although the status of the account is closed. It is submitted that the said account was not utilised for any purpose since its closure on October 05, 2016. (c) "In addition the Association has refunded some foreign contribution back to the donor in the FY 2013-2014 and 2014-2015 in violation of Section 8(1)(a) of the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as damage its reputation, this particular safeguard of recording reasons for the necessity of suspension enshrines an important principle of natural justice, which has been violated. 10. That apart, they contended that the impugned order is ultra vires to Section 13(1) of the FCRA, 2010 as the reasons in the order of suspension are wholly alien to the scheme of suspension under Section 13(1) of the FCRA, 2010. Moreover, they stated that the impugned order has made a hotchpotch of the provision of suspension under Section 13(1) along with the provision for cancellation under Section 14 of the FCRA, 2010. 11. According to them, the Competent Authority without any inquiry and without giving any opportunity of being heard to the certificate holder, has concluded that certain provisions of FCRA, 2010 have been violated and on that basis proceeded to suspend the certificate under Section 13(1) of the FCRA, 2010. In this regard, they also contended that the impugned order has been passed in the exercise of a power not vested with the respondent under Section 13 of the FCRA, 2010. 12. It was further contended that the first three allegations in the impugned order of non-intimation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hared with the petitioner vide letter dated October 07, 2021, for comments. The petitioner's response dated November 10, 2021, was duly examined by the respondent. Only after such consideration of the petitioner's reply to audit observations, the respondent discovered each of the grounds under Section 14(1) stated in the Show Cause Notice, and thereafter the said notice was served on the petitioner. 16. The Show Cause Notice dated December 07, 2021, read with Section 20 and Section 23 of the FCRA, 2010 shows that an inquiry as required under Section 14 of the FCRA, 2010 was authorised by the respondent only on July 29, 2021, and the question of cancellation can be said to have been pending consideration only after that date for the purpose of Section 13(1). These subsequent events however do not state the material illegality of the June 07, 2021 suspension order as extended on December 01, 2021, with retrospective application. It is submitted that the impugned Order is liable to be quashed as the same was passed without the existence of the necessary jurisdictional facts prescribed under Section 13(1) of the FCRA, 2010 17. As an after-thought, in its final arguments, the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper inquiry. 19. These safeguards exist because the suspension of FCRA registration has drastic consequences for an organisation, threatening its very existence. Freezing of FCRA accounts causes disruption of operations, reputational loss, and threatens employees' livelihood for an unduly long period of 360 days. Impugned suspension is liable to be quashed for failing to adhere to the said safeguards and for issuance without jurisdictional fact under Section 13. 20. It is their contention that the respondent in its counter affidavit has failed to rebut the petitioner's response to each allegation. Allegations contained in the impugned suspension order dated June 07, 2021, are not retained in the Show Cause Notice dated December 07, 2021, served under Section 14(2) of the Act. In any case, the said allegations were hyper-technical in nature and only of form and not substance. The allegations do not warrant suspension as they violate the doctrine of proportionality. 21. It is stated that the impugned suspension order is liable to be set aside on grounds of violation of the doctrine of proportionality as laid down in the case of Modern Dental College and Research Centre and Others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration of the petitioner was granted vide letter dated September 03, 1993, and was subsequently renewed on October 28, 2016, and was valid up to October 31, 2021. It is submitted that the grant of FCRA registration to NGOs / Associations under Section 12 of the FCRA, 2010 and its subsequent renewal / continuation under Section 16 of the FCRA, 2010 is subject to fulfillment of terms and conditions as envisaged under the FCRA, 2010. In the present matter, the petitioner's association has come under adverse notice of the respondent through the inputs of the security agency. It is stated by the respondent that the security agency inputs in a sealed cover are submitted before this Court at the time of the preliminary hearing on June 26, 2021, which suggests that the petitioner's association is involved in such other activities, that are grave in nature and carry potentially serious violation of the provisions of the FCRA, 2010 and rules made thereunder. 26. On examination of Annual Returns and other records of the petitioner's association available with respondent / MHA, following multiple violations of the provisions given under FCRA, 2010 and FCRR, 2011 were observed: a. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 14(2) of the FCRA, 2010, before the proceedings leading to the cancellation of registration certificate and if things would turn in that direction, that opportunity of being heard would be duly provided to the petitioner. 30. It is stated that the Central Government had reasonable grounds to issue suspension order and those grounds are mentioned in the said order. Moreover, the respondent stated that the suspension order is not a punitive measure, nor is it stigmatic and it is only interim in nature which may or may not lead to cancellation of the certificate of registration of the petitioner. It is submitted that the FC-4 Form of Annual Return is a statutory document and NGO / Association is obligated to provide / furnish the information sought on each point in the FC-4 Form. Further, the receipt, payment account, income statement, expenditure statement, and balance sheet are supportive documents to the Annual Return in which the information is provided in the FC-4 Form. Therefore, non-furnishing of complete information in the statutory FC-4 Form (Annual Return) constitutes a violation of Section 18 of the Act read with Rule 17 of the FCRR, 2011. 31. According to the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the certificate of registration of a defaulting organisation "pending consideration of the question of cancelling the certificate on any of the grounds mentioned in Section 14(1)" after recording reasons in writing. That the period for suspension cannot exceed 180 days at first instance or for a further period not exceeding 180 days. ii. It is submitted that during the period of suspension, the Central Government may permit receipt and / or utilisation of foreign contribution if considered appropriate. Further, under Rule 14 of the FCRR, 2011 up to 25% of the unutilised amount may be spent during suspension with prior approval of the Central Government, whereas the remaining 75% only after revocation of suspension. Vide order dated July 29, 2021, of this Court, the petitioner has been permitted to utilise 25% of the amount lying in its custody as foreign contribution. Section 14(1) of the FCRA, 2010 empowers the Central Government to, after making "such enquiry as it may deem fit", cancel the certificate of a defaulting organisation for the reasons prescribed. Moreover, Section 14(2) of the FCRA, 2010 mandates that no order for cancellation of the certificate under this section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the scheme of the Act only because "the Central Government had neither issued any notice of hearing / Show Cause Notice in terms of Section 14(2) nor had it initiated any inquiry in terms of the said Section". viii. The material and relevant facts of the instant case are distinguishable from the said judgment wherein the suspension order dated April 30, 2013, was passed by the Central Government and it had neither issued any notice of hearing / Show Cause Notice in terms of Section 14(2) of the FCRA, 2010 nor had it initiated any inquiry in terms of same. The Central Government wrote to the petitioner seeking certain information for the first time vide letter dated May 02, 2013, which is after the petitioner was suspended. Further, no reasons were recorded in the order of suspension as to why the registration of the organisation was suspended in that case. However, in the instant case, the inquiry was underway when the order of suspension was passed, which itself records as many as five contraventions that were found in the accounts of the petitioner. 34. Having heard the learned counsel for the parties and perused the record, to answer the issues which arise for consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned suspension order inter alia reads as under: "******** ******** ******** Whereas, scrutiny of Annual Returns (ARs) of the Association reveals multiple violations of provisions of the FCRA, 2010 and Rules made there under. For example, details of activities/projects for which foreign contribution has been received and utilized has not been given at the prescribed point 3(a) in FC-4 form in AR for the FY 2018-19. The Bank Account No.600510110004721, Bank of India, New Delhi opened on 18.02.2016 has not been intimated online to the Ministry and there is flow of foreign contribution in this Bank account. Further, one utilization account through which the Association has been utilizing foreign contribution has not been intimated in ARs for the FY 2016-17 and 2017-18. Such acts of omission and commission by the Association amount to violation of provisions of Sections 17(1), 18 and 19 of the Act read with rule 9(1)(e) and 17 of the Foreign Contribution (Regulation) Rules, 2011. In addition, the Association has refunded some foreign contribution back to the donor in the FY 2013-14 and 2014-15 in violation of Section 8(1)(a) of the FCRA, 2010. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed by the Central Government. 38. The only caveat is that the power of suspension should not be exercised in an arbitrary manner and without any reasonable ground or as a vindictive misuse of power. It is precisely to obviate arbitrariness, that Section 13(1) of the FCRA, 2010 contemplates recording of reasons in writing, which shows the satisfaction of the Central Government that pending consideration of the question of cancellation of the certificate, it is necessary to suspend the certificate. 39. The reasons to be recorded is on the basis of the material available on record, which can include the material filed by the certificate holder as per the provisions of the Act / Rules and Order which prima facie reveal case against the certificate holder, that grounds as stated in Section 14(1) of the FCRA, 2010 exist, requiring the suspension of the certificate. 40. I must state, Section 13(1) of the FCRA, 2010 gives discretion to the Central Government to suspend the certificate only if it is satisfied that it is necessary to do so. It is not necessary that in all cases suspension is resorted to. 41. I must also state here, it is the case of the respondent as contended b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt and utilisation of foreign funds for the FYs 2011-2012 to 2015-2016 and regarding manner of receipt and utilisation of foreign funds by the petitioner for the FYs 2011-2012 to 2016-2017. In fact, the suspension order also records the nonintimation of utilisation of foreign contribution in annual returns for the year 2016-2017 and 2017-2018. It also refers to the fact that petitioner has refunded some contribution back to the donor in FYs 2013-2014 and 2014-2015, which according to the respondent is in violation of the FCRA, 2010. So, it is clear that the reasons depicted in the suspension order are relatable to the questionnaires. Therefore, it can be said that the questionnaires were part of the process of inquiry and the plea that the suspension was made without inquiry is unsustainable. But I must state, that Section 13(1) of the FCRA, 2010 does not contemplate any inquiry to be caused before suspension. 42. Having said that, I also find, the impugned order records the following violations of the FCRA, 2010: i. The activities / projects for which foreign contribution has been received and utilised have not been given in the prescribed Point 3(a) in FC-4 Form in AR for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spension is wholly alien / ultra vires to the scheme of suspension under Section 13(1) of the FCRA, 2010. 44. The plea of Mr. Datar and Mr. Singh, that given the drastic nature of the power of suspension to bring an organisation to a grinding halt can be answered by noting the safeguard stipulated in proviso to Section 13(2)(a), empowering the Central Government to permit receipt of foreign contribution by such person on such terms and conditions as it may specify. Section 13(2)(b) stipulate permission being granted for the utilisation of the foreign contribution in the custody, which is 25% of the unutilised amount as per the FCRR, 2011. 45. There is no dispute that in the month of August, 2021 the respondent carried audit and inspection of the petitioner in terms of Sections 20 and 23 of the FCRA, 2010, and based on the outcome of the audit, the suspension was extended for a further period of 180 days and also the Show Cause notice dated December 07, 2021, was issued. 46. The decision of the Central Government to carry out the audit / inspection under Sections 20 and 23 is an inquiry as contemplated under Section 14(1) of the FCRA, 2010 to ascertain whether there has been a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons to suspend under Section 13 of the FCRA, 2010 exist pending consideration of the question of cancelling the certificate, the decision to hold audit / inspection under Section 20 and 23 of the FCRA, 2010, is justified which is in furtherance to an inquiry under Section 14(1) of the FCRA, 2010, even if it is the first violation. But it is reiterated that for an action under Section 13(1) no inquiry is required to be conducted. Even otherwise, it is the case of the respondent that the inquiry into the infirmities in the account of the petitioner had started in the year 2017 itself, resulting in the impugned order. 50. Much reliance has been placed by Mr. Datar and Mr. Singh on the judgment of a Coordinate Bench of this Court in the case of Indian Social Action Forum (INSAF) (supra). The judgment has been relied upon to contend that this Court in the said case has held that by the time suspension order was passed, the Central Government had neither issued any notice of hearing / Show Cause notice in terms of sub-section (2) of Section 14 nor had it initiated an inquiry in terms of the said Section. Therefore, there was no occasion to suspend the certificate of the petitioner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in the case of Shayara Bano (Supra) relied upon by Mr. Datar and Mr. Singh is concerned, the same have no applicability in the facts of this case and in view of my conclusion above. 55. In view of my above discussion, I do not see any reason to interfere with the impugned order dated June 07, 2021. The writ petition is dismissed. No costs. C.M. No. 20091/2021 - Application under Section 151 of CPC, 1908 for Interim Directions along with Affidavit. C.M. No. 34987/2021 - Application under Section 151 of CPC, 1908 for Interim Directions along with Affidavit. C.M. No. 37037/2021 - Application under Section 151 CPC, 1908 for striking out paragraphs 4, 6, and 10 from the respondent's counter affidavit dated 14.09.2021. C.M. No. 44671/2021 - Application under Section 151 CPC, 1908 for interim directions along with an affidavit. C.M. No. 46751/2021 - Application under Section 151 CPC, 1908 on behalf of respondent / UOI seeking modification of Order dated 25.10.2021 and further consequent direction. In view of the fact that I have decided the writ petition on the scope of Section 13 and 14 of the FCRA, 2010 and dismissed the petition, these applications also are liable to be dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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