New Delhi: Mere permanent registration under Foreign Contribution (Regulation) Act (FCRA), 2010 does not give an organisation right to have funds from an overseas donor credited to a bank account in India, without prior clearance from the Ministry of Home Affairs (MHA), held the Karnataka High Court in an order passed earlier this month.
The court was hearing a petition filed by Bengaluru-based Manasa Centre For Development And Social Action, against the Development Credit Bank for allegedly not honouring a cheque issued by Manasa for fund transfer to a third entity on the ground of insufficient balance in the account.
According to the court order, a copy of which is with ThePrint, Manasa claimed that when it pointed out the presence of enough funds in its account, Development Credit Bank responded that since the funds were received from Denmark-based DanChurchAid, it can’t be transferred without approval from the MHA.
This prompted Manasa, to move court with a writ petition challenging the actions of the bank.
Delivering its verdict in the case, a bench of the Bengaluru HC headed by Justice K.S. Hemalekha said, “Mere possession of the permanent registration under the FCRA, 2010 does not permit the petitioner to get the amounts credited to the designated savings bank account, which is always subject to the clearance of the Ministry of Affairs”.
The bench in its order also highlighted that the objective of the Foreign Contribution (Regulation) Act was 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 or foreign hospitality for any activities detrimental to the national interest and matters connected therewith or incidental thereto”.
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‘Dependent on MHA clearance’
According to the court order, the petitioner had a savings account in the Development Credit Bank.
In 2013, the Reserve Bank of India (RBI), based on an MHA directive, had communicated to that any fund flow to India from ‘DanChurchAid’ was to be informed to the ministry before clearance, observed the court.
According to the order, Manasa had received two remittances — of Rs 5,23,549.34 and Rs. 23,89,343.62 — from ‘DanChurchAid’ in their Development Credit Bank. When the bank sought MHA clearance to credit the amount in the petitioner’s account, the MHA told the bank to not credit the money till further information from the ministry.
The MHA letter, which the bank presented in court, and which was further included by the court in its order, stated, “I am to refer to your letter dated 2nd May 2013 on the subject mentioned above and to state that the inward remittance received from ‘DanChurchAid’ in favour of Manasa Centre for Development and Social Action, Bangalore may not be credited into their account till further instruction from this Ministry,” the ministry of Home Affairs stated in a letter to the Development Credit Bank Limited.
According to the petitioner, however, it had completely utilised the funds received from DanChurchAid by December 2012 and since then it had not received any funds from that organisation. The petitioner further claimed that the funds in the account at the time were received from a different entity and freezing that was prima facie arbitrary.
After considering arguments from both sides, the court held that mere registration under FCRA did not automatically make the petitioner eligible for crediting the funds currently present in the savings account of the petitioner at Development Credit Bank.
The court emphasised that the Government of India can give instructions to banking institutions to not receive foreign funding from organizations that are in the ‘Prior Reference/Permission Category’ based on inputs from security and investigating agencies.
Therefore, these funds cannot be transferred to any third party without prior clearance from the MHA.
(Edited by Poulomi Banerjee)
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