Organisations with no active politics cannot be denied access to foreign contributions. Legitimate means of dissent like bandh, hartal etc. no ground to ban from receiving foreign contribution
ABCAUS Case Law Citation:
ABCAUS 3287 (2020) (03) SC
Important case law relied upon by the parties:
A. Abbas v. Union of India (1970) 2 SCC 780
Tata Engineering and Locomotive Co. Ltd. v. State of Bihar (1964) 6 SCR 885
Shree Sidhbali Steels Ltd. vs. State of Uttar Pradesh (2011) 3 SCC 193
Association for Democratic Reforms v. Union of India 2014) 209 DLT609
In the instant case, the Appellant organisation had filed a Writ Petition in the High Court for a declaration that Sections 5(1) and 5(4) of the Foreign Contribution (Regulation) Act, 2010 (the Act/FCRA) and Rules 3(i), 3(v) and 3(vi) of the Foreign Contribution (Regulation) Rules, 2011(the Rules), are violative of Articles 14, 19(1)(a), 19(1)(c) and 21 of the Constitution of India.
The High Court dismissed the Writ Petition which prompted the appellant to approach the Hon’ble Supreme Court.
The Appellant submitted that Section 5 (1) of the Act confers unguided and uncanalised power on the Central Government to specify an organisation as an organisation of a political nature not being a political party. It was submitted that Rule 3(i), 3(v) and 3(vi) which contain the guidelines and grounds, suffer from the vice of vagueness and required to be declared as unconstitutional. The vagueness in the said provisions leads to arbitrary exercise of power in violation of Article 14 of the Constitution.
It was submitted that an organisation, the activity of which is to educate and promote civil, political, social, economic and cultural rights cannot be prevented from having access to funding, whether domestic or foreign.
It was contended that curtailing the right of the appellant-organisation to have access to foreign funds would result in the violation of the fundamental rights guaranteed under Articles 19(1)(a) and 19(1)(c) of the Constitution
The Hon’ble Supreme Court observed that the title of the 2010 Act itself indicates that it is made to consolidate the law to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution nor foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.
The Hon’ble Supreme Court noted that while section 3 of the Act prohibits acceptance of foreign contribution by specified category of persons, section 5 stipulates that the Central Government shall specify an organisation as an organisation of a political nature not being a political party having regard to the activities of the organisation or the ideology propagated by the organisation or association of the organisation with the activities of any political party.
It was observed that the Central Government had framed the Foreign Contribution (Regulation) Rules, 2011 of which Rule 3 lists out the grounds based on which the Central Government may specify any organisation as organisation of political nature.
The Hon’ble Supreme Court observed that a plain reading of Section 3 of the Act shows that foreign contributions should not be accepted by a candidate in an election or by a political party or office bearer thereof and member of any legislature apart from Judges and Government servants and those belonging to the press, print and electronic media. Further, Section 3(1)(f) of the Act provides that an organisation of a political nature is also barred from receiving foreign contributions. Such an organisation of a political nature may be specified under Section 5(1) by the Central Government. However, under the 2010 Act, an organisation of a political nature is barred from accepting foreign contributions.
The Hon’ble Supreme Court observed that according to Rule 3(i) an organisation having avowed political objectives in its memorandum of association or bye laws is an organisation of a political nature. As the intention of the legislature is to prohibit foreign funds in active politics, an Association with avowed political objectives (i.e. to play a role in active politics or party politics) cannot be permitted access to foreign funds. There is no ambiguity in the provision and hence, cannot be termed as vague. Therefore, the Hon’ble Supreme Court held that there was no substance in the contention of the Appellant that Rule 3(i) is ultra vires the Act.
The Hon’ble Supreme Court expressed agreement that the words ‘political interests’ used in Rule 3(v) are vague and are susceptible to misuse. However, possible abuse of power could not be a ground to declare a provision unconstitutional.
The Hon’ble Supreme Court stated that where the provisions of a statute are vague and ambiguous and it is possible to gather the intention of the legislature from the object of the statute, the context in which the provisions occur and purpose for which it is made, the doctrine of “reading down” can be applied. To save Rule 3(v) from being declared as unconstitutional, the Court can apply the doctrine of “reading down”.
The Hon’ble Supreme Court stated that those voluntary organisations which have absolutely no connection with either party politics or active politics cannot be denied access to foreign contributions. Therefore, such of those organisations which are working for the social and economic welfare of the society cannot be brought within the purview of the Act or the Rules by enlarging the scope of the term ‘political interests’.
The Hon’ble Supreme Court opined that the expression ‘political interests’ in Rule 3 (v) has to be construed to be in connection with active politics or party politics.
The Hon’ble Supreme Court pointed out that , according to the guideline prescribed in Rule 3(vi), any organisation which habitually engages itself in or employs common methods of political action like ‘bandh’ or ‘hartal’, ‘rasta roko’, ‘rail roko’ or ‘jail bharo’ in support of public causes can also be declared as an organisation of political nature. Support to public causes by resorting to legitimate means of dissent like bandh, hartal etc. cannot deprive an organisation of its legitimate right of receiving foreign contribution. It is clear from the provision itself that bandh, hartal, rasta roko etc., are treated as common methods of political action. Any organisation which supports the cause of a group of citizens agitating for their rights without a political goal or objective cannot be penalized by being declared as an organisation of apolitical nature.
The Hon’ble Supreme Court held that it is only those organisations which have connection with active politics or take part in party politics, that are covered by Rule 3(vi). Organisations not involved in active politics or party politics do not fall within the purview of Rule 3(vi).
The Hon’ble Supreme Court clarified that organisations used for channeling foreign funds by political parties cannot escape the rigour of the Act provided there is concrete material.
Download Full Judgment Click Here >>
- CBDT notifies ITRs Forms for AY 2020-21. Download Notification
- Expenditure for earning interest income allowed u/s 57(ii) as nexus of loan & FDR not doubted
- Extension of opportunity to NGOs to apply for FCRA registration on filing of ARs
- Resumption of Limited Insolvency Exam in areas/locations where such activities permitted
- CA/Auditor’s report on utilisation of CSR funds if CSR activity done through third party-ICAI advisory