In the absence of any challenge to the aforesaid order of DHC, the said order sets a significant
precedent and brings clarity in respect of applications under Section 13(2) of FCRA read with
Rule 14 of FCRR regarding permissibility of utilization of the unutilized foreign contribution
amount. Watch this space as we continue tracking developments in this sector.

The Government has been introducing a series of amendments and
changes to the Foreign Contribution (Regulation) Act, 2010 (“FCRA”) and
other legislations impacting non-governmental and charitable
organizations (“NGOs”), and very recently, the Government introduced,
amongst others, amendments to the Prevention of Money-laundering
(Maintenance of Records) Rules, 2005. We have discussed and analyzed
in detail some of the amendments in our earlier articles on our AZB
website which can be accessed on the AZB portal. We are, in this article,
analyzing another development in this space pursuant to a recent order
of the Hon’ble Delhi High Court (“DHC”), pertaining to the utilization of
foreign contributions/ grants by NGOs being suspended in terms of
Section 13(1) of FCRA, during the pendency of
investigations/proceedings regarding cancellation of registration of such
NGOs (“Suspended NGOs”).

Section 13(2)(b) of FCRA read with Rule 14(a) of the Foreign Contribution (Regulation) Rules, 2011 (“FCRR”) provides limited permission to
Suspended NGOs to utilize up to 25% (twenty five percent) of the
unutilized foreign contribution amount towards the declared aims and
objectives, after receiving prior approval of the Central Government in
this regard. The availability of these funds become critical for Suspended
NGOs, as the same provides limited scope for said Suspended NGOs to
continue to work towards their objectives during the suspension period
and avoid any abrupt halt to their activities and projects owing to the
suspension. Also, the aforesaid provision is critical to ensure that Recently, the DHC while hearing an application filed by Centre of Policy
Research (“CPR”) in the matter titled Centre for Policy Research Vs.
Union of India (W.P.(C) 11139/ 2023) (“Writ Petition”), examined and
interpreted the extent and nature of the unutilized foreign contribution
amount that should be considered for computing the amount permitted
to be utilized in terms of Section 13(2)(b) of FCRA read with Rule 14 of
FCRR.
AWrit Petition was filed by CPR to challenge the order of the
Government of India under Section 13(1) of FCRA for suspending its
registration certificate under FCRA owing to certain allegations regarding misutilization of foreign grants by CPR. During pendency of
the Writ Petition, CPR applied to the Government to permit it to utilize
25% (twenty five percent) of the unutilized foreign contribution amount
in terms of Section 13(2)(b) of FCRA read with Rule 14 of FCRR, and also
filed an application before DHC to direct the Government to grant such
permission.

In response to the aforesaid application of CPR, the Government
allowed CPR to utilize 25% (twenty five percent) of the unutilized
foreign contribution amount in its custody. The permission granted by
the Government only considered the amount lying in the current bank
accounts of CPR as the amount of unutilized foreign contribution and
did not consider the remaining unutilized amount in the form of fixed
deposits, government bonds etc., thereby limiting the amount that could
be utilized by CPR during suspension of its registration. The aforesaid
limited interpretation of the unutilized foreign contribution for the
purposes of granting permission in terms of Section 13(2)(b) of FCRA
read with Rule 14 of FCRR was challenged by CPR before DHC.
Agreeing with argument of CPR, that it shall be permitted to utilize 25% (twenty five percent) of the entire unutilized foreign contribution
amount in its custody to meet its expenditure and overcome severe cash
crunch being faced by it due to the suspension of its registration, DHC
held in the context of Section 13(2) of FCRA, inter alia, that “There is no
occasion to restrict the term “his custody” only to the current account”
and the amounts held in fixed deposits, government bonds etc. would
also constitute unutilized foreign contribution amount for the purposes
of any permission under Section 13(2) of FCRA.

In the absence of any challenge to the aforesaid order of DHC, the said
order sets a significant precedent and brings clarity in respect of
applications under Section 13(2) of FCRA read with Rule 14 of FCRR
regarding permissibility of utilization of the unutilized foreign
contribution amount. Watch this space as we continue tracking
developments in this sector.
Suspended NGOs, against whom cancellation proceedings are
eventually withdrawn, are not materially prejudiced due to the
suspension of their registration.