an initiative of FMSF & CPA

       
 

IMPORTANT CONCEPT & DEFINITION
IN FC(R)A

Meaning of ‘Association’

Section 2(1)(a) of FCRA defines the term association as :

“ Association” means an association of individuals, whether incorporated or not, having an office in India and includes a society, whether registered under the Societies Registration Act, 1860, or not, and any other organisation, by whatever name called;

All types are covered- The term ‘association’ covers individuals and all types of associations in the widest possible sense. The Act does not specify registration as a condition precedent for the purposes of this Act. It is not necessary for an association to be a registered one but there must be some documentary evidence to establish the existence and activities of the association. All types of conceivable associations of two or more individuals are covered under the definition of the Act. All charitable organisations, educational, social, cultural, religious, political etc. organisations, societies, trusts, companies etc. are covered under the Act. Organisations established for the promotion of science, research, literature, fine arts, libraries, museums, hospitals, trade unions come within the purview of this Act. It also includes co-operative societies, companies registered under the Partnership Act, 1932 and chit fund societies created under the Chit Fund Act, 1982 etc.

Association need not be charitable - Further it must be noted, it is not necessary that the objects of the association should be charitable in nature. The organisations as aforesaid are covered under the Act irrespective of whether they are charitable in nature or not.
Meaning of ‘Foreign Contribution’

The term ‘foreign contribution’ (hereinafter referred as ‘FC’) has been given a specified definition in FCRA.

The statutory definition-Section 2(1)(h) of FCRA defines ‘Foreign Contribution’ as follows

“ Foreign contribution” means the donation, delivery or transfer made by any foreign source,—

i. of any article, not being an article given to a person as a gift for his personal use, if the market value, in India, of such article, on the date of such gift, is not more than such sum as may be specified from time to time, by the Central Government by the rules made by it in this behalf;

ii. of any currency, whether Indian or foreign;

iii. of any security as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 and includes any foreign security as defined in clause (o) of section 2 of` the Foreign Exchange Management Act, 1999.

Explanation 1— A donation, delivery or transfer of any article, currency or foreign security referred to in this clause by any person who has received it from any foreign source, either directly or through one or more persons, shall also be deemed to be foreign contribution within the meaning of this clause.

Explanation 2— The interest accrued on the foreign contribution deposited in any bank referred to in sub-section (1) of section 17 or any other income derived from the foreign contribution or interest thereon shall also be deemed to be foreign contribution within the meaning of this clause.

Explanation 3— Any amount received, by any person from any foreign source in India, by way of fee ( including fees charged by an educational institution in India from foreign student) or towards cost in lieu of goods or services rendered by such person in the ordinary course of his business, trade or commerce whether within India or outside India or any contribution received from an agent of a foreign source towards such fee or cost shall be excluded from the definition of foreign contribution within the meaning of this clause;

Being a specific definition, no item other than those mentioned in the definition can be brought under ‘foreign contribution’.

The three broad divisions - As is evident from the definition, the scope of foreign contribution has been broadly divided into three parts i.e. (i) article or gift, (ii) currency both Indian or foreign and (iii) foreign security received from a foreign source.

Mode of receipt is wide - Again, the mode of receipt has been kept extensively wide so as to cover donation, delivery or transfer made by any foreign source. In this regard it is important to understand the implication of the explanation to this section which was inserted vide FCR (Amendment) Act 1985. The effect of this explanation has brought the subsequent receivers of foreign funds within the scope of foreign contribution. Thus, organisations have been debarred from making contribution to organisation not registered under the FCRA.

Contributions by Indian citizen - It may be noted that contribution made by a citizen of India living in another country, from his personal savings, through the normal banking channels, is not treated as Foreign Contribution. It is advisable to obtain the passport details of the concerned citizen of India before accepting such contributions.

Meaning of ‘Foreign Source’

Unlike the term ‘foreign contribution’ which has been defined specifically, the term ‘foreign source’ is given only an inclusive definition in FCRA.

As statutory definition - As per Section 2(1)(j) of FCRA, ‘foreign source’ is defined as follows :

Foreign source” includes, —

i. The Government of any foreign country or territory and any agency of such Government;

ii. any international agency, not being the United Nations or any of its specialized agencies, the World Bank, International Monetary Fund or such other agency as the Central Government may, by notification, specify in this behalf;

iii. A foreign company;

iv. A corporation, not being a foreign company, incorporated in a foreign country or territory;

v. a multi-national corporation referred to in sub-clause (iv) of clause (g);

vi. a company within the meaning of the Companies Act, 2013, and more than one-half of the nominal value of its share capital is held, either singly or in the aggregate, by one or more of the following, namely:—

a) the Government of a foreign country or territory;
b) The citizens of a foreign country or territory;
c) Corporations incorporated in a foreign country or territory;
d) Trusts, societies or other associations of individuals (whether incorporated or not), formed or registered in a foreign country or territory;
e) Foreign company;

“ Provided that where the nominal value of share capital is within the limits specified for foreign investment under the Foreign Exchange Management Act, 1999, or the rules or regulations made thereunder, then, notwithstanding the nominal value of share capital of a company being more than one-half of such value at the time of making the contribution, such company shall not be a foreign source;”.(Inserted through Finance Act, 2016).

vii. A trade union in any foreign country or territory, whether or not registered in such foreign country or territory;

viii. A foreign trust or a foreign foundation, by whatever name called, or such trust or foundation mainly financed by a foreign country or territory;

ix. A society, club or other association of individuals formed or registered outside India;

x. A citizen of a foreign country;

As it is evident, the term “foreign source” has not been defined precisely or exhaustively. The act has given an inclusive definition of the term ‘foreign source’ and that includes the sources mentioned in clauses (i) to (x).

By virtue of the proviso inserted in clause vi, FCRA law will not apply even if the nominal value of share capital of a company held by foreigners exceeds 50 per cent at the time of making contributions provided the foreign investment is within the limit specified under the Foreign Exchange Management Act, 1999 or the rules or regulations made there under.

Therefore for all practical purposes, Indian Companies where more than 50 percent of shareholding is by a foreign source will be exempted from definition of “Foreign Source” as all Indian Companies have to comply with the limits set by FEMA for foreign investment.

The amended law shall be applicable with retrospective effect from 26th September, 2010. In other words, all donations/grant given by such companies since 26th September, 2010 in violation of FCRA will be condoned.

Agencies of foreign government –

Agencies of Foreign Government include their embassies and consulates in India. They are included within the purview of foreign source. Further, the Central Government has notified in the official gazette, the agencies of United Nations and other International Organisations which shall not be treated as ‘foreign source’ for the purposes of this Act. The list of the organisations which shall not be treated as foreign source is given at Annexure 4.

Determination of company as foreign company –

To determine whether a company is a foreign company or not, the provisions of Section 591 of the Companies Act, 1956 are relevant. Basically the provisions consider any company as foreign company, which has been incorporated outside India has a place of business within India. Provisions of Section 591 are reproduced as under:

“ (1) Sections 592 to 602, both inclusive, shall apply to all foreign companies, that is to say, companies falling under the following two classes, namely -

a) companies incorporated outside India which, after the commencement of this Act, establish a place of business within India; and
b) companies incorporated outside India which have, before the commencement of this Act, established a place of business within India and continue to have an established place of business within India at the commencement of this Act.

(2) Not withstanding anything contained in sub-section (1), where not less than fifty per cent, of the paid-up share capital (whether equity or preference or partly equity and partly preference) of a company incorporated outside India and having an established place of business in India, is held by one or more citizens of India or by one or more bodies corporate incorporated in India, or by one or more citizens of India and one or more bodies corporate incorporate in India, whether singly or in the aggregate, such company shall comply with such of the provisions of this Act as may be prescribed with regard to the business carried on by it in India, as if it were a company incorporated in India.”

Subsidiaries are also included –

The subsidiary of foreign company even if it is an Indian company is also considered as foreign source under FCRA. Again to determine whether a company is a subsidiary of a foreign company or not, the provisions of Section 4 of Companies Act 1956 are relevant which are reproduced as under:

“ Meaning of “subsidiary company”

For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if,-

a) that other controls the composition of its Board of directors ; or

b) that other –
i. where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company ;
ii. where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital ; or

c) the first-mentioned company is a subsidiary of any company which is that other’s subsidiary.

Illustration: Company B is subsidiary of Company A, and Company C is a subsidiary of Company B. Company C is a subsidiary of Company A, by virtue of clause(c) above. If Company D is a subsidiary of Company C, Company D will be a subsidiary of Company B and consequently also of Company A, by virtue of clause (c) above, and so on.”

Meaning of ‘multinational corporation’ –

Multinational corporation has also been defined under FCRA by virtue of Explanation in Section 2(1)(k). A corporation could be considered as multinational if it has a subsidiary or a branch in two or more countries or carries on business in two or more countries. The provisions under FCRA are reproduced are as under :
“ Explanation: For the purposes of this Act, a corporation incorporated in a foreign country or territory shall be deemed to be a multinational corporation if such corporation—

a) has a subsidiary or a branch or a place of business in two or more countries or territories ; or

b) carries on business, or otherwise operates, in two or more countries of territories. Over and above all, it may be noted that, the Central Government may permit foreign institutions by notification in the official gazette and consequently they will not be considered as foreign source. Such institutions can give contributions into India without violating the provisions of the FCRA”.

Eligible / Ineligible recipients

According to the provision of Section 3(1) of FCRA, 2010, foreign contribution cannot be accepted by certain specified persons. The list of the same is mentioned below:

a) a candidate for election;
b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;
c) Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government;
d) member of any Legislature;
e) political party or office-bearer thereof;
f) organisation of a political nature ;
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 or any other mode of mass communication;
h) Correspondent or columnist, cartoonist, editor, owner of the association or company.
The organisation which can receive Foreign Contribution should have a definite cultural, economic, educational, religious or social programme. Further it has to obtain the prior permission of the Central Government or get itself, registered with the Central Government, to receive foreign contribution

Organisation of a Political Nature

The Central Government may specify any organisation as organisation of political nature on one or more of the following grounds:-

i. organisation having avowed political objectives in its Memorandum of Association or bylaws;

ii. any Trade Union whose objectives include activities for promoting political goals;

iii. any voluntary action group with objectives of a political nature or which participates in political activities;

iv. front or mass organisations like Students Unions, Workers’ Unions, Youth Forums and Women’s wing of a political party;

v. organisation of farmers, workers, students, youth based on caste, community, religion, language or otherwise, which is not directly aligned to any political party, but whose objectives, as stated in the Memorandum of Association, or activities gathered through other material evidence, include steps towards advancement of political interests of such groups;

vi. any organisation, by whatever name called, which habitually engages itself in or employs common methods of political action like ‘bandh’ or ‘hartal’, ‘rasta roko’, ‘rail roko’ or ‘jail bharo’ in support of public causes.

(2) (a) No person, resident in India, and no citizen of India resident outside India, shall accept any foreign contribution, or acquire or agree to acquire any currency from a foreign source, on behalf of any political party, or any person referred to in sub-section (1), or both.

(b) No person, resident in India, shall deliver any currency, whether Indian or foreign, which has been accepted from any foreign source, to any person if he knows or has reasonable cause to believe that such other person intends, or is likely, to deliver such currency to any political party or any person referred to in sub-section (1), or both.

(c) No citizen of India resident outside India shall deliver any currency, whether Indian or foreign, which has been accepted from any foreign source, to—

i. any political party or any person referred to in sub-section (1), or both; or

ii. any other person, if he knows or has reasonable cause to believe that such other person intends, or is likely, to deliver such currency to a political party or to any person referred to in sub-section (1), or both.

Meaning of ‘Legislature’

As per section 2(1)(k) of FCRA ‘legislature’ is defined as follows :

“ Legislature” means —

A. either House of Parliament;
B. the Legislative Assembly of a State, or in the case of a State having a Legislative Council, either House of the Legislature of that State;
C. Legislative Assembly of a Union territory constituted under the Government of Union Territories Act, 1963;
D. Legislative Assembly for the National Capital Territory of Delhi referred to in the Government of National Capital Territory of Delhi Act, 1991;
E. Municipality as defined in clause (e) of article 243P of the Constitution;
F. District Councils and Regional Councils in the States of Assam, Meghalaya, Tripura and Mizoram as provided in the Sixth Schedule to the Constitution;
G. Panchayat as defined in clause (d) of article 243 of the Constitution; or
H. any other elective body as may be notified by the Central Government;

Controlling Office

The implementation of FCRA is looked into in a centralized manner by the Ministry of Home Affairs, though, as and when required, interaction with State Intelligence Bureau is made by the Ministry of Home Affairs. The address of the concerned authority is “The Secretary to the Government of India, Ministry of Home Affairs FCRA Wing, NDCC-II Building JAI SINGH ROAD, Opposite Parliament Street, Near Jantar Mantar New Delhi-110001”.

Annexure - 4

The list of Organisation not considered as Foreign Source

THE UNITED NATIONS SYSTEM

I. Secretariat
1. Office of Internal Oversight Services, New York.
2. Office of Legal Affairs, New York.
3. Department of Political Affairs, New York.
4. Department for Disarmament Affairs, New York.
5. Department of Peacekeeping Operations, New York.
6. Office for the Coordination of Humanitarian Affairs, New York.
7. Department of Economic and Social Affairs, New York.
8. Department for General Assembly Affairs and Conference Services, New York.
9. Department of Public Information, New York.
10. Department of Management, New York.
11. United Nations Office at Geneva.
12. United Nations Office at Vienna.
13. United Nations Office at Nairobi.

II. Bodies of the United Nations
14. International Research and Training Institute for the Advancement of Women (INSTRAW), Santo Domingo, Dominican Republic.
15. Joint United Nations Programme on HIV/AIDS (UNAIDS), Geneva.
16. Office of the UN High Commissioner for Human Rights (OHCHR), Geneva.
17. Office of the UN High Commissioner for Refugees (UNHCR), Geneva.
18. United Nations Capital Development Fund (UNCDF), New York.
19. United Nations Conference on Trade and Development (UNCTAD), Geneva.
20. United Nations Development Fund for Women (UNIFEM), New York.
21. United Nations Institute for Disarmament Research (UNIDIR), Geneva.
22. United Nations Institute for Training and Research (UNITAR), Geneva.
23. United Nations Interregional Crime and Justice Research Institute (UNICRI), Rome.
24. United Nations Office for Project Services (UNOPS), New York.
25. United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), Gaza and Amman.
26. United Nations Research Institute for Social Development (UNRISD), Geneva.
27. United Nations University (UNU), Tokyo.
28. United Nations Volunteers (UNV), Bonn.

III. Funds and Programs
29. United Nations Children’s Fund (UNICEF), New York.
30. United Nations Development Programme (UNDP), New York.
31. United Nations Environment Programme (UNEP), Nairobi.
32. United Nations International Drug Control Programme (UNDCP), Vienna.
33. United Nations Population Fund (UNFPA), New York.
34. World Food Programme (WFP), Rome.

IV. Regional Commissions
35. Economic Commission for Africa (ECA), Addis Ababa, Ethiopia.
36. Economic Commission for Asia and the Pacific (ESCAP), Bangkok, Thailand.
37. Economic Commission for Europe (ECE), Geneva.
38. Economic Commission for Latin America and the Caribbean (ECLAC), Santiago, Chile.
39. Economic Commission for Western Asia (ESCWA), Beirut, Lebanon.

V. Law of Sea Treaty Bodies
40. International Seabed Authority, Kingston.
41. International Tribunal for the Law of the Sea, Hamburg.
42. Commission on the Limits of the Continental Shelf, United Nations Divisions for Ocean Affairs and the Law of the Sea, New York.

VI. Environmental Bodies
43. Secretariat of the United Nations Framework Convention on Climate Change (UNFCCC), Bonn.
44. Intergovernmental Panel on Climate Change (IPCC), Geneva.
45. Ozone Secretariat to the Vienna Convention for the Protection of the Ozone Layer and the Montreal Protocol on Substance that Deplete the Ozone Layer, Nairobi.
46. Secretariat of the Convention on Biological Diversity (CBD), Montreal.
47. Secretariat of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), Geneva.
48. UNEP/CMS Secretariat of the Convention on the Conservation of Migratory Species of Wild Animals (CMS or Bonn Convention), Bonn.
49. Secretariat of the Basel Convention on the Control of Trans-boundary Movements of Hazardous Wastes and their Disposal, Geneva.
50. Secretariat of the United Nations Convention to Combat Desertification in Countries Experiencing Serious Drought /or Desertification, especially in Africa (CCD), Bonn.
51. Global Environment Facility, Washington D.C.
52. Bureau (Secretariat) of the Convention on Wetlands (Ramsar), Gland, Switzerland.

VII. SPECIALISED AGENCIES
53. International Labour Organisation (ILO), Geneva.
54. Food and Agriculture Organization (FAO), Rome.
55. United Nations Educational, Scientific and Cultural Organisation (UNESCO), Paris.
56. International Civil Aviation Organisation (ICAO), Montreal.
57. World Health Organisation, Geneva.
58. Universal Postal Union (UPO), Berne, Switzerland.
59. International Telecommunication Union (ITU), Geneva.
60. World Meteorological Organization (WMO), Geneva.
61. International Maritime Organization (IMO), London.
62. World Intellectual Property Organization (WIPO), Geneva.
63. International Fund for Agricultural Development (IFAD), Rome.
64. United Nations Industrial Development Organisation (UNIDO), Vienna.

VIII. The World Bank Group
65. International Bank for Reconstruction and Development (IBRD), Washington D.C.
66. International Development Association (IDA), Washington D.C.
67. International Monetary Fund (IMF) Washington D.C.
68. International Finance Corporation (IFC), Washington D.C.
69. Associated Organisations of World Bank Group:
A) International Centre for the settlement of Investment Disputes (ICSID), Washington D.C.
B) Multilateral Investment Guarantee Agency (MIGA), Washington D.C.
C) Consultative Group on International Agricultural Research (CGIAR), Washington D.C. (It has 16 Research centres)
i. International Plant Genetic Resource Institute (IPGRI), Rome.
ii. International Wheat and Maize Improvement Centre (CIMMYT), Mexico.
iii. International Centre for Living Aquatic Resource Management (ICLARM), Philippines.
International Irrigation Management Institute (IIMI), Colombo.
International Food Policy Research Institute (IFPRI) Washington D.C.
iv. International Centre of Research in Agro-forestry (ICRAF), Nairobi.
v. International Centre for Agricultural Research in Dry Areas (ICARDA), Syria.
vi. International Centre for Tropical Agriculture (CIAT), Columbia.
International livestock Research Institute (ILRI), Nairobi.
West Africa Development Association (WARDA), Abidjan.
xi. International Service Of National Agricultural Research (ISNAR), The Netherlands.
xii. International Crops Research Institute For the Semi-Arid Tropics (ICRISAT), Hyderabad.
xiii. International Rice Research Institute, Manila, Philippines.
xiv. International Potato Centre, Peru.
xv. Centre for International Forestry Research (CIFOR), Indonesia.
xvi. International Institute of Tropical Agriculture (IITA), Nigeria.

IX. Regional Development Banks
70. African development Bank (ADB), Abidjan.
71. Inter-American Development Bank (IDB), Washington D.C.
72. Asian Development Bank (ADB), Manila.
73. Caribbean Development Bank (CDB), St. Michael, Barbados.

X. Other Bodies Related to United Nations
74. International Atomic Energy Agency (IAEA), Vienna.
75. Organisation for the Prohibition of Chemical Weapons (OPCW), The Hague.
76. Provisional Technical Secretariat (PTS) for the Comprehensive Nuclear Test Ban Treaty Organization (CTBTO), Vienna.
77. International Consultative Group on Food Irradiation (ICGFI), Vienna.
78. International Narcotics Control Board (INCB), Vienna.
79. International Trade Centre UNCTAD/WTO (ITC), Geneva.
80. International Union for the Protection of New Varieties of Plants (UPOV), Geneva.
81. World Tourism Organisation (WTO/OMT), Madrid.
82. World Food Council (WFC).
83. United Nations Social Defence Research Institute (UNSDRI).
84. United Nations Statistical Office (UNSCO).

XI. Other International organisations
85. United Nations Outer Space Committee.
86. International Sugar Organisation, London.
87. Asian Productivity Organisation, Tokyo.
88. Asian and Pacific Development Administration, Kuala Lumpur.
89. Asian African Legal Consultative Committee, New Delhi.
90. Asia/Pacific Cultural Centre for UNESCO (ACCU), Japan.
91. Commonwealth Secretariat, London.
92. Afro-Asian Rural Reconstruction Organisation (AARRO), New Delhi.
93. Centre on Integrated Rural Development for Asia and the Pacific, (CIRDAP), Dhaka.
94. International Centre for Genetic Engineering and Biotechnology (ICGEB), New Delhi.
95. Asia and Pacific Centre of Transfer of Technology (APCTT), New Delhi.
96. Centre for Science and Technology of the Non-Aligned and Other Developing Countries (NAM S&T Centre). New Delhi.
97. Commonwealth Agricultural Bureaux International (CABI), UK.
98. The Asia Pacific Association of Agricultural Research Institution (APAARI), Bangkok
99. The Regional Co-ordination centre for Research and Development of coarse Grains, Pulses, Roots and Tubercrops in the Humid Tropics of Asia and the Pacific (CGPRT Centre), Indonesia.
100. The Regional Network for Agriculture Machinery (RNAM), Bangkok.
101. Commission on Genetic Resources for Food and Agriculture (CGRFA), Rome.
102. The International Seeds Testing Association (ISTA), Zurich.
103. International Water Management Institute (IMI), Sri Lanka.

Notified in the Gazette of India, Extraordinary, Part II-Section 3¬Sub-section (ii) vide S.O. No. 1014 (E) dated the 13th November, 2000).

1. World Trade Organisation (WTO), Geneva, Switzerland
2. International Organisation for Standardisation (ISO), Geneva, Switzerland
3. Common Fund for Commodities (CFC), Amsterdam, Netherlands
4. International Cotton Advisory Committee, Washington, USA
5. The Global Fund to Fight Aids, Tuberculosis and Malaria, Geneva, Switzerland.
(Added vide Gazette of India, Extraordinary, Part II-Section 3¬Sub-section (ii) vide S.O. No. 1133 (E) dated the 1st May, 2009).
6. Global Development Network (GDN)
(Added vide Gazette of India, Extraordinary, Part II-Section 3¬Sub-section (ii) vide S.O. No. 1433(E))