Madras High Court.
Madras High Court: NGOs Not to Be Viewed with Suspicion Solely for Receiving Foreign Aid: Chennai, India – In a significant ruling for non-governmental organizations (NGOs) operating with international funding, the Madras High Court has asserted that such entities should not be regarded with suspicion simply because they receive foreign contributions, unless there is concrete evidence of misuse. Justice Anand Venkatesh, presiding over the case, emphasized the need for authorities to maintain an open mind when dealing with NGOs, cautioning against automatic suspicion in the absence of serious violations.
The High Court‘s pronouncement underscores a critical perspective on the operations of charitable and social organizations. Justice Venkatesh stated, “Just because some institutions run with the aid of foreign contribution, it is not necessary to look at the institutions like that of the petitioners with suspicion unless there are materials to show that such foreign contribution is being misused and it is being used against public interest/national interest. This is more so where persons of Indian origin, settled in foreign countries, earn money and want to give something back to their country by contributing funds.”
The ruling came in response to petitions filed by two institutions, Sharma Centre for Heritage Education and Ellen Sharma Memorial Trust. Both organizations challenged an order from the Union Government’s Foreign Contribution (Regulation) Act (FCRA) Wing, which had rejected their applications for renewal of registration under the Foreign Contribution (Regulation) Act, 2010.
The petitioner institutions, established in 1982, are dedicated to improving child education and welfare, having set up schools and health centers in and around Chennai. They informed the court that a substantial portion of their revenue, between 70-75%, originated from foreign donations, which were consistently channeled towards their charitable and social initiatives. The trusts highlighted their long history of compliance, having been registered under Section 12 of FRCA since March 25, 1983, with regular renewals, the last being in 2016. Their 2021 renewal application, despite addressing various queries, was ultimately rejected, prompting the current legal challenge.
The Union Government, in its defense, argued that the trusts had violated Section 7 of the FCRA by transferring funds between NGOs without obtaining prior permission. The Centre contended that the trusts failed to provide satisfactory answers to their queries, leading to the rejection of renewal under powers granted by Section 16(1) read with Section 12(4)(a)(vi) and (vii) of the Act. Furthermore, the government asserted that the right to receive foreign aid is not a fundamental or vested right, and each renewal application should be treated as a fresh request for permission.
Upon review, the High Court observed that the rejection communication itself lacked specific reasons, merely stating that the renewal was refused under Section 16(1) read with Section 12(4)(a)(vii) of the Act, without detailing the contravened provision. It was only in the government’s counter-affidavit that a violation of Section 7 was explicitly mentioned.
The court then delved into Section 7 of the Act, noting that prior to its 2020 amendment, it permitted the transfer of foreign contributions to other registered persons. However, the amendment introduced a requirement for prior permission from the competent authority even for such transfers. Justice Venkatesh opined that even if a violation was perceived, the authorities should have sought clarification from the petitioners and informed them about the amendment’s implications.
Crucially, the court found no material evidence to suggest that the foreign contributions received by the trusts were misused. The judge concluded that a mere procedural formality not being followed should not be grounds to reject a renewal application, especially when such a decision could lead to the closure of established institutions serving public interest.
Consequently, the Madras High Court allowed the appeal, setting aside the Union Government’s communication rejecting the renewal application. The court further directed the authorities to process the application and grant renewal to the trusts within a period of four weeks.
The case, titled M/s. Sharma Centre for Heritage Education and Another v. The Director, FRCA Wing (Case No: CMA.No.746 of 2022 & WP.No.4887 of 2022), saw Mr. S. Ramamurthy for Ms. E. Ann Priscilla Swarna Kumari & Ms. Saitanya Kesan, and Mr. Satish Parasaran, SC for Mr. Rahul Balaji representing the petitioners. Mrs. Mr. A. R. L. Sundaresan, AGG assisted by Mr. K. S. Jeyaganeshan, Senior Panel Counsel, appeared for the respondents.
