Preamble

The Foreign Contribution (Regulation) Act, 1976 (hereinafter referred as ‘FCRA’) was passed by the Indian Parliament and received the assent of the President of India on 31st March, 1976. The preamble to the Act reads as follows :

An Act to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain persons and associations, with a view to ensuring that parliamentary institutions, political associations and academic and other voluntary organisations 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.

Genesis

The main purpose behind the enactment of FCRA was to curb the use of foreign funds and hospitality for nefarious and anti-national activities or purposes. The idea was to regulate the acceptance and use of foreign contribution so that the recipient institutions and individuals function in a manner consistent with the values of a sovereign democratic republic. The Ministry of Home Affairs, Government of India was assigned the responsibility of implementing FCRA. The protection of sovereignty, democracy and republican nature of the Indian Government forms the basis of FCRA.

The need for having such regulatory law was felt in the late sixties when foreign agencies including CIA were suspected of having links with various trade unions, student bodies, youth organisations, political organisations etc. The then Home Minister in 1969 raised this issue in both the Houses of Parliament and the need to regulate foreign funding was discussed. It was agreed that the government would not allow foreigners or foreign money to dictate or influence the functioning of the Government, Political Parties and Other Institutions of India.

Introduction of FCRA Bill - Finally the Foreign Contribution (Regulation) Bill, 1973 was introduced in Rajya Sabha on 24.12.1973. This bill was forwarded to the joint committee of the Parliament in 19.02.1974. The joint committee consisted of 20 members of Rajyasabha and 40 members of Loksabha with Shri Manubhai Saha as the Chairperson of the committee. The joint committee held 33 meetings at different places. The committee also invited views and opinions from various state governments, bar councils, political parties, trade unions, attorney general, universities etc. The committee presented its report to the Parliament on 6-1-1976. The Bill was passed in the parliament and it came into force vide Notification No. GSR 755(E) dated 5th August 1976.

Amendments in year 1985 - In 1985, the FCRA was amended to remove some inadequacies and practical difficulties in administration of the Act. For instance the fund received by the subsequent recipient were also brought within the purview of the Act. Provisions were also made for prior permission, audit and penal provisions for offence under the Act. The Foreign Contribution (Regulation) (Amendment) Ordinance 1984 was promulgated by the President of India on 20th October 1984 and the following amendments in the act were proposed :

i) The definition of “foreign contribution”, as contained in the Act, included only the donation, delivery or transfer made by any foreign source. It did not include donation or contribution received by an organisation from another organisation from out of foreign contribution received by the latter organisation. The definition was enlarged to include such contributions also for the purpose of tracing the utilisation of foreign contribution down the line.

ii) The definition of “political party”, as contained in the Act, did not include political parties in the State of Jammu and Kashmir and political parties which are not covered by the Election Symbols (Reservation and Allotment) Order, 1968, the Ordinance amended this definition to include such political parties also.

iii) Section 6(1) of FCRA provided that every association having a definite cultural, economic, educational, religious or social programmes, may receive foreign contributions. But it was required to send intimation regarding such receipt to the Central Government within such time and in such manner to be prescribed by the rules made under FCRA. It had been observed that a number of associations had not sent such intimation. In order to effectively monitor the receipt of foreign contribution, this sub-section was amended to provide that associations referred to therein should accept foreign contributions only after they were registered with the Central Government specifically for the purpose and should accept such contributions only through a specified branch of a bank. They would, however, be required to give, within such time and in such manner as may be prescribed, intimation to the Central Government as to the amount of foreign contribution received by them, the source from which and the manner in which such foreign contribution was received by them etc. Where any registered association does not accept foreign contribution through the specified branch of a specified bank or does not submit intimations etc., in time, the Central Government has been empowered to direct that such association shall not accept foreign contribution without the prior permission of the Central Government. A new sub-section (1-A) had also been included in this section to provide that an association not so registered with the Central Government shall obtain prior permission of the Central Government before accepting any foreign contribution and also give intimation to the Central Government as to the amount of contribution received by it.

iv) FCRA only enabled the Central Government to inspect the accounts of certain persons or associations. It did not provide for any power to audit the accounts of any organisation if it was considered necessary to do so. The Ordinance amended FCRA by inserting a new Section 15-A, to take specific power to audit the accounts of certain persons, organisations or associations, if the prescribed returns were not furnished in time by such persons, organisations or associations or the returns so furnished by them were not in accordance with law or their scrutiny gives room for suspicion that the provisions of the Act had been contravened.

v) A new Section 25-A had also been inserted in FCRA to provide that where any person is convicted of an offence relating to the acceptance or utilisation of foreign contribution for a second time, he shall be prohibited from accepting any foreign contribution for a period of three years from the date of the second conviction.

Some noteworthy statistics

In 1968 the foreign funding into India was only Rs. 24 crores and it has risen considerably over the years and in 2004-2005 the total contribution received was Rs. 6,256.68 crores. The total number of organizations registered as on 31st March, 2005 was 30,321 and subsequently during 2004-2005 another 369 organizations were granted prior permission. The following data provide some insight about the foreign funding into India and the functioning of the FCRA :

i) 30,321 associations stood registered under the Foreign Contribution (Regulation) Act, 1976 as on 31st March 2005. During the year 369 associations were granted prior permission.

ii) 8,673 associations were reverted to prior permission category to receive foreign contribution during November, 2005; this was on account of their failure to furnish mandatory annual FC-3 returns.

iii) 18,540 associations filed returns for 2004-2005.

iv) The receipt of foreign contribution during 2004-2005 amounted to Rs. 6, 256.68 crores.

v) Among the districts in different States, Chennai (Rs 560.40 crores) reported the highest receipt of foreign contribution, followed by Banglore (Rs. 376.97 crores) and Mumbai (Rs. 321.82).

vi) Among the States and Union Territories, Tamil Nadu reported the largest receipt (Rs. 1,190.64 crores), followed by Delhi (Rs. 1,075.23 crores) and Andhra Pradesh (Rs.913.17crores).

vii) The United States of America (Rs. 1,926.95 crores) heads the list of donor countries, followed by the Germany (Rs.930.92 crores), and UK (Rs.764.13 crores).

viii) The leading donor agency was Foundation Vicent E Ferrer, Spain (Rs.183.31 crores), followed by World Vision International, USA (Rs.123.25crores), and Gospel for Asia, USA (Rs.110.12 crores).

ix) The largest recipient of foreign contribution was World Vision of India, Tamil Nadu (Rs. 133.57 crores), followed by Rural Development Trust, Andhra Pradesh (Rs.118.75 crores) and Sri Sathya Sai Central Trust, Andhra Pradesh (Rs. 77.57 crores).

x) Among the purposes, the largest amount was received for Establishment expenses (Rs.948.20 crores) followed by relief/rehabilitation of victims of natural calamities (Rs. 655.65 crores), and Rural Development (Rs. 582.48 crores).

Applicability of the Act

The provisions of the FCRA extends to the whole of India including the State of Jammu and Kashmir for which normally separate laws are made according to article 370 of the Constitution of India.

The Act applies to all citizens of India residing in India and also citizens of India who may be outside India. It would also apply to associates, branches or subsidiaries outside India of body corporate or companies incorporated or registered in India. The Act commenced with effect from 5th August 1976 as per the notifications issued by the Central Government vide GSR 755 (E), dated 5th August 1976.

Overall Summary

To sum up the discussions :

(i) FCRA was enacted in 1976. The main purpose was to curb the use of foreign funds and hospitality for nefarious and anti-national purposes.

(ii) FCRA is an internal security legislation and is not regulated by RBI. It is regulated by the Ministry of Home Affairs, Government of India.

(iii) In 1985, FCRA was amended and certain important changes were made:

(a) Funds received by subsequent recipient were brought under the purview of the act.
(b) Definition of political parties was enlarged.
(c) Section 6(1) was amended to ensure that foreign funds were received only after registration, and only through designated bank accounts.
(d) Section 15A was inserted to empower Central Government to inspect and audit books of accounts of organisations.
(e) Section 25A was inserted to ensure that acceptance of foreign funds was prohibited for 3 years after second conviction.

(iv) The inflow of foreign contribution through FCRA has increased from Rs. 24 crores in 1968 to Rs. 4535.23 crores in 2001.

(v) The provisions of FCRA extends to the whole of India including the State of Jammu and Kashmir.