22 January 2007
The Foreign Contribution (Regulations) Bill, 2006
Comments
Cl. 1(b) & 2(1)(t) – The Act shall also apply to foreign “subsidiaries” & “associates” of any society or organisation registered in India. Cl.2(1)(t) links their definition to that in the Companies Act, 1956.
The Companies Act does not contain a definition for “associates”.
The definition for “subsidiaries” is in the context of actual or de facto control of one company by another. It will be very difficult to determine if a foreign organisation, that is not a company, is a subsidiary of an Indian organisation, that too is not a company. It is possible that more than 50% of the board of a foreign organisation is common with that of an Indian organisation. That would not automatically make the former a subsidiary of the latter.
Cl. 2(1)(j)(ii) – The International Committee of the Red Cross should also be excluded, as are UN organisations.
Cl. 8 – The Act shall require special government approval should over 50% of donations received be applied to administerative expenses. The government will define what those are and how they shall be measured.
This will prove very cumbersome for an organisation such as CIF where the nature of expenses could all, in theory, be called administerative – salaries, rent, electricity, telephone, travel. It is not clear why such a requirement has been inserted in the Bill. Ideally it should be deleted. In case there is genuine reason to retain it, the government dispensation should be given at the time of approving the organisation and should be valid for the five year period envisaged for the latter approval.
Cl. 22 – The Bill does not state what shall happen to the proceeds realised from the disposal of the assets of an organisation that has ceased its activities and that had approval under the Act. Also, the clause covers all assets of such an organisation and not those acquired out of foreign contributions. The Act cannot extend its powers to assets acquired out of legitimate Indian funds.
Cl. 24 & 42 – The powers under this clause should also include action necessary after an inspection carried out under the provisions of cl. 20.
Cl. 25 – This clause empowers search & seizure of articles, currency, etc. The Foreign Exchange Management Act, 1999 already has such provisions. It will be impossible to tell if a contravention, if one is suspected, is of the FCMA or the FCRA. The power to conduct search & seizure should vest in any one entity, not two.
Cl. 35 – The clause covers the prosecution of an abettor of an offence. It is important that the word “knowingly” should be inserted in the decsription of the abettor so that an innocent party is not liable to being prosecuted. For example, if CIF were to fund a partner organisation that has a valid registration under the Act and that organisation were to misuse the funds without the knowledge and approval of CIF, the trustees of CIF cannot be open for prosecution under the Act.
Cl. 36 – The clause provides for a fine of upto five times the value of currency, etc. siezed or Rs. 1,000, whichever is more. This indicated situations in which the authorities can prosecute for an offence of less even than Rs. 200! This would be both, intolerable and also a waste of time. In fact, the Act should exclude petty offences. This clause indicated the very opposite.
Administration of the Act – Currently the Act is administered from the ministry in Delhi only. There are more than 1.5 million NGO’s in India. It is important that for the conveniencde of the NGO’s the administeration is decentralised to every state capital. NGO’s operate on shoe-string budgets and it is not possible for then to deal with a bureaucracy based in Delhi alone. Furthetr, this gives an unfair advantage to delhi based NGO’s.
Note: These comments are by Mr Nawshir Mirza, Member Finance Commmittee and member of Governing board of CHILDLINE India Foundation.
From-
Mr Nawshir Mirza
Nishit Kumar
Head Awareness and Advocacy,
CHILDLINE Indi Foundation,
Mumbai
Phone:91 22 2388 1098
Fax: 91 22 2381 1098