March 13, 2007

John Dayal memo on FCRA Bill

Dr. John Dayal

Member: National Integration Council

Government of India

National President: All India Catholic Union (Founded 1919)

Secretary General: All India Christian Council (Founded 1999)

President: United Christian Action, Delhi (Founded 1992)

MOST URGENT

505 Link, 18 IP Extension, Delhi 110092 India

Email: johndayal@vsnl.com

Phone: 91-11-22722262 Mobile 09811021072

Memorandum Submitted to the Standing Committee on Home Affairs
on Foreign Contribution (Regulation) Bill, 2006

To,

The Parliamentary Standing Committee on Home Affairs

C/o Shri Rohtas,

Under Secretary,

Rajya Sabha Secretariat,

Parliament House Annexe,

New Delhi-110001

Honorable members,

After a thorough analysis of the Foreign Contribution (Regulation) Bill, 2006 we have realized that there are certain provisions regarding acceptance and utilization of foreign contribution which may curb the democratic space of the civil society.

We would like to bring the following critical issues before you for your reconsideration.

1) Preamble to the Bill

Proposed bill:

The text of the preamble in the proposed Foreign Contribution Regulation Bill, 2006 reads:

“A Bill to consolidate the law to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto”.

Comments:

To understand as to how the proposed change in the new preamble would bring about a difference to the voluntary sector, it is important to give a reading to the preamble to existing FCRA, 1976.

It reads:

“An Act to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain persons or associations, with a view to ensuring that parliamentary institutions, political associations and academic and other voluntary organizations as well as individuals working in the important areas of national life may function in a manner consistent with the values of a sovereign democratic republic, and for matters connected therewith or incidental thereto”.

A plain reading of the preamble to the proposed FCR bill, 2005 gives the reader a negative view as it is couched in negative language which talks of “to prohibit” whereas the existing FCRA, 1976 talks of “to regulate”. The use of the negative expression-“to prohibit” has the potential to curb the democratic space of the dynamic voluntary sector which works proactively for the betterment of the poor and marginalized. Such prohibition is bound to hinder the working of the sector.

The important developmental role which the voluntary sector plays has not been reflected in the present Bill whereas in the existing bill the vital role of Voluntary organizations has been strongly acknowledged. Also, the bill talks about prohibiting “activities detrimental to national interest”. This seems to us to be a subjective expression and what indicators would suggest activities detrimental to national interest are not mentioned anywhere in the Bill.

After going through the text above it becomes quiet clear that there is a room for the government to exercise its subjectivity.

Proposal:

The words “and to prohibit acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto” be deleted.

Therefore the amended preamble would read as below:

“A Bill to consolidate the law to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies”

2) Procedure to notify an organization of a political nature.

Proposed bill:

Section 3 (1) (f) states that organizations of a political nature as may be specified by the

Central Government is prohibited from accepting foreign contribution.

Section 5(1) of the proposed FCR Bill, 2006 reads:

The Central Government may, having regard to the activities of the organization or the ideology propagated by the organization or the programme of the organization or the association of the organization with the activities of any political party, by an order published in the Official gazette , specify such organization as an organization of a political nature not being a political party, referred to in clause (f) of sub-section (1) of section 3.

Another provision related to the organizations of a political nature is contained in section 54 (2) (b) of the Bill.

Section 54 (2) (b) reads:

Notwithstanding such repeal,-

(b) any organization of a political nature, not being a political party, to whom the prior permission was granted under section 5 of the repealed Act, shall continue to be the organization of a political nature, not being a political party under clause (f) of sub-clause (1) section 3 of this Act, till such permission is withdrawn by the Central Government;

Comments:

India being a democratic republic, every one has the right to be part of the political process. Section 3(1) (f) where the organization of political nature is prohibited from accepting foreign contribution as specified by the Central government seems to be inconsistent with the rights guaranteed by the Constitution of India .

Proposal:

Section 3 (1) (f), 5(1) and 54 (2) (b) be deleted.

3) Prohibition to accept foreign contribution by correspondent, columnist and news

organization

Proposed Bill:

Section 3 (1) (b), (g) and (h) of the proposed Bill reads:

Section 3 (1) No foreign contribution shall be accepted by any-

(b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;

(g) association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode, or any other electronic form as defined in clause (g) of sub section (1) of section 2 of the Information Technology Act, 2000 ( 21 of 2000) or any other mode of mass communication ;

(h) ) correspondent, columnist, cartoonist, editor, owner, of the association or company referred to in clause (g).

Comments:

The provision fails to take into consideration the vital role played by civil society organizations in disseminating information with the use of radio as a mode. Important information regarding issues like literacy, sanitation, AIDS and other important areas is spread to the masses with the help of audio broadcast.

Also the provision has the potential to seriously affect and impede religious broadcasting work activity, which is a constitutional right to practice, profess and propagate one’s religion, and has no relation to the stated aims and objects of the Bill.

Proposal:

Section 3 (b), (g) and (h) may be deleted.

4) Speculative Business

Proposed Bill:

Section 8(1) of the Foreign Contribution Regulation Bill, 2006 states:

Every person, who is registered and granted a certificate or given prior permission under this Act and receives any foreign contribution,-

a) Shall utilize such contribution for the purpose for which the contribution has been received:

Provided that any foreign contribution or any other income arising out of it shall not be utilized for speculative business;

Comments:

It is important to note that the words “speculative business” are not defined anywhere in the Bill.

More importantly, the NPO are governed by the provisions of the Income Tax Act, 1961. The Income Tax Act prescribes that the funds of the non-profit organization can be invested in the mode specified under section11 (5) of the Income Tax Act, 1961.The mode of investment also includes the government owned mutual funds. Whether the government owned mutual funds is speculative business or not is an open question.

Further, as there is no synchronization between Income Tax Act, 1961 and Foreign Contribution Regulation Bill, 2006 about the mode of investment; it has the potential to create enormous difficulties for the NGOs to comply with both the laws having different requirements.

Proposal:

Section 8 (1) of the Foreign Contribution (Regulation) Bill, 2006 are read as:

Every person, who is registered and granted a certificate or given prior permission under this Act and receives any foreign contribution,-

a) Shall utilize such contribution for the purpose for which the contribution has been received and invest in mode specified under section 11(5) of the Income Tax Act, 1961.

5) Administrative Expenses

Proposed Bill:

Section 8(1) (b) and 8 (2) of the proposed FCR Bill, 2006 states:

Every person, who is registered and granted a certificate or given prior permission under this Act and receives any foreign contribution,-

b) Shall not defray as far as possible such sum, not exceeding fifty per cent of such contribution, received in a financial year, to meet the administrative expenses:

Provided that the administrative expenses exceeding fifty per cent of such contribution may be defrayed with the prior approval of the Central Government.

(2) The Central Government may prescribe the elements which shall be included in the administrative expenses and the manner in which the administrative expenses referred to in sub-section (I) shall be calculated.

Comments:

In the proposed bill, the term “administrative expenses” is not defined.

Further, some expenses which are programme related, like the salary of a doctor for running a dispensary should be treated as programme costs and not administrative costs. In the absence of a clear basis for determining administrative costs, the same will be open for subjective interpretation and would result in litigation.

Proposal:

Section 8(1)(b) and 8(2) be deleted

6) Grant and Renewal of certificate of Registration and Deemed Registration

Proposed Bill:

The relevant sections from the proposed bill, 2006 are 12(3), 12 (5) and 16.

Last para of section 12(3) reads:

“The Central Government may register such person and grant him a certificate or give him prior permission, as the case may be, subject to such terms and conditions as may be prescribed.”

Section 12 (5) reads:

“The certificate granted under sub-section (3) shall be valid for a period of five years and the prior permission shall be valid for the specific purpose or specific amount of foreign contribution proposed to be received, as the case may be”.

Section 16 reads:

(1)Every person who has been granted a certificate under section 12 shall have such certificate renewed within six months before the expiry of the period of the certificate.

(2)The application for renewal of the certificate shall be made to the Central Government in such form and manner and accompanied by such fees as may be prescribed.

(3) The Central Government shall renew the certificate subject to such terms and conditions as it may deem fit and grant a certificate for renewal for a period of five years:

Provided that the Central Government may refuse to renew the certificate in case where a person has violated any of the provisions of this act or rules made thereunder.

Comments:

With regard to the grant of certificate of registration section 11(2) of the existing FCRA, 1976 states:

If an application referred to in sub-section (1) is not disposed of within ninety days from the date of receipt of such application, the permission prayed for in such application shall, on the expiry of the said period of ninety days, be deemed to have been granted by the Central Government:

PROVIDED that, where in relation to an application, the Central Government has informed the applicant the special difficulties by reason of which his application cannot be disposed of within the said period of ninety days, such application shall not, until the expiry of a further period of thirty days, be deemed to have been granted by the Central Government.

The existing FCRA, 1976 specifies a time frame for the Central Government to dispose of the application for grant of prior permission.

In absence of a provision relating to the time frame within which the application should be disposed of, a number of applications can remain pending and the organizations are left to the discretion of the implementers to take their own time in granting prior permission.

Secondly, renewal of registration every five years would add a lot of administrative burden on both the Central Government and voluntary organizations.

Proposal:

Section 12 (3) and 16 be deleted.

Section 12 (5) be reframed as below:

The Central Government may grant or reject the application for registration or prior permission within 90 days from the date of receipt of such application .If, the application is not disposed of within 90 days from the date of receipt of such application, the application shall be deemed to have been granted by Central Government.

7) Grant of Certificate of Registration

Proposed Bill:

Section 12 (3) (a) (ii), (iii) and (v) of the FCR Bill, 2006 states:

If on receipt of an application for grant of certificate or giving of prior permission and after making such inquiry as the Central Government deems fit, it is satisfied that-

(ii) has not indulged in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another;

(iii) has not created communal tension or disharmony in any specified district or any other part of the country;

(v) is not engaged or likely or engage to propagate sedition or advocate violent methods to achieve its ends;

The Central Government may register such person and grant him a certificate or give him prior permission, as the case may be, subject to such terms and conditions as may be prescribed.

Comments:

Words like “inducement”, “communal tension and disharmony”, “propagate sedition or advocate violent methods” have not been defined anywhere in the bill. They are subjective and have the potential to be used selectively. For e.g. it can be used against a group or community which is genuinely doing good work by providing facilities like medical aid, providing food, shelter, clothing, education without any intention for conversion through inducement.

Proposal:

Section 12 (3) (a) (ii), (iii) and (v) be deleted.

8) Grant of Certificate of Registration

Proposed Bill:

Section 12 (3) (b) of the FCR Bill, 2006 states:

If on receipt of an application for grant of certificate or giving of prior permission and after making such inquiry as the Central Government deems fit, it is satisfied that-

(b) The person making the application for registration under sub-section (1) has undertaken meaningful activity in its chosen field for the benefit of the people for which the foreign contribution is proposed to be utilized;

the Central Government may register such person and grant him a certificate or give him prior permission, as the case may be, subject to such terms and conditions as may be prescribed”.

Comments:

The term “meaningful activity” has not been defined in the Bill. Meaningful Activity is a very broad expression and has the potential for subjective interpretation.

Also it is not apparent what measure will satisfy the government that the organization has undertaken meaningful activity in the bill.

Proposal:

Clause 12(3) (b) be deleted

9) Grant of certificate of registration only in cases where there is no conviction or prosecution for any offence pending against the individual. [Section 12 (3) (d) & 12 (3) (e)]

Proposed Bill:

Section 12 (3) (d) & 12 (3) (e)] of the FCR Bill, 2006 states:

If on receipt of an application for grant of certificate or giving of prior permission and after making such inquiry as the Central Government deems fit, it is satisfied that-

(d) in case the person being an individual, such individual has neither been convicted under any law for the time being in force nor any prosecution for any offence pending against him

(e) in case the person being other than an individual, any of its directors or office bearers has neither been convicted under any law for the time being in force nor any prosecution for any offence pending against him.

the Central Government may register such person and grant him a certificate or give him prior permission, as the case may be, subject to such terms and conditions as may be prescribed”.

Comments:

As per the principle of natural justice, a person cannot be held guilty until proven. However, according to this clause, even if there is a prosecution pending against the person, he is prohibited from receiving foreign funds.

Also this clause would restrict a number of organizations from receiving FCRA registration since there can be false cases and accusations pending against social activists working in the field taking up rights issues on behalf of the marginalized communities.

Proposal:

Clause 12(3) (d) and (e) be amended to delete the words “nor any prosecution for any offence pending against him”

10) Management of Foreign Contribution of persons whose certificate has been cancelled

Proposed Bill:

Section 14 (1) of the proposed FCR bill states:

The Central Government may, if it is satisfied after making such inquiry as it may

deem fit, by an order, cancel the certificate if —

(a) the holder of the certificate has made a statement in, or in relation to, the application for the grant of registration or renewal thereof, which is incorrect or false; or

(b) the holder of the certificate has violated any of the terms and conditions of the certificate or renewal thereof; or

(d) the holder of certificate has violated any of the provisions of this Act or rules or order made thereunder.

Section 15 of the proposed bill reads:

The foreign contribution and assets created out of the foreign contribution in the custody of every person whose certificate has been cancelled under section 14 shall vest

in such authority as may be prescribed.

(2) The authority referred to in sub-section (1) may, if it considers necessary and in public interest, manage the activities of the person referred to in that sub-section for such period and in such manner, as the Central Government may direct and such authority may utilise the foreign contribution or dispose of the assets created of it in case adequate funds are not available for running such activity.

(3) The authority referred to in sub-section (1) shall return the foreign contribution and the assets vested upon it under that sub-section to the person referred to in the said sub-section if such person is subsequently registered under this Act.

Comments:

1) Only the foreign contribution which has been accessed in violation of any of the prescribed clauses should vest in the prescribed authority otherwise the clause is very harsh.

2) The sale of assets by the prescribed authority must not be permitted as it is open to misuse.

Proposal:

Section 14 (b), (c) and section 15 be deleted.

Section 14 may be reframed as follows:

The Central Government may, if it is satisfied after making such inquiry as it may

deem fit, by an order, cancel the certificate if —

(a) the holder of the certificate has made a statement in, or in relation to, the application for the grant of registration thereof, which is incorrect or false; or

(d) the holder of certificate has violated any of the provisions of this Act or rules or order made thereunder.

11) Appeal:

Proposed Bill:

Section 31 of the proposed FCR Bill reads:

Any person aggrieved by any order made under section 29 may prefer an appeal-

Comments:

The provision of appeal ought to apply to each and every discretion exercised by the government, particularly under section 6, 9,10,12,13, 14, 15 and 16 of the Bill to the District Judge.

The relevant sections are stated below:

Section 6: Restriction on acceptance on Foreign Hospitality

Section 9: Power of Central Government to prohibit receipt of Foreign contribution etc in certain cases.

Section 10: Power to prohibit payment of currency received in contravention of the Act.

Section 12: Grant of certificate of registration

Section 13: Suspension of Certificate

Section14: Cancellation of Certificate

Section15: Management of Foreign Contribution of persons whose certificate has been cancelled.

Proposal:

In all the above cases where the discretion can be exercised by the government, provision for appeal should be included.

12)Power of the Central Government to exempt:

Proposed Bill:

Section 50 of the proposed FCR Bill states:

If the Central Government is of opinion that it is necessary or expedient in the interests of the general public so to do, it may, by order and subject to such conditions as may be specified in the order, exempt any person or association or organization (not being a political party), or any individual (not being a candidate for election) from the operation of all or any of the provisions of this Act and may, as often as may be necessary, revoke or modify such order.

Comments:

The provision gives powers to the Central Government as no proper guidelines are prescribed for such exemption.

Proposal:

Section 50 may be deleted.

We would be happy to depose before the standing committee to clarify further on these issues if given an opportunity.

Yours Sincerely

From- catholicunion@gmail.com