May 31, 2011
In this article an endeavor is made to discuss the basic provisions of Foreign Contribution Regulation Act, 2010 with particular focus on the changes brought about vis-à-vis Foreign Contribution Regulation Act, 1976. The basic purpose of Foreign Contribution Regulation Act, 2010 (FCRA, 2010) is to consolidate the law to regulate the acceptance and utilisation of foreign contribution (FC) or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of FC or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto. The Foreign Contribution (Regulation) Act, 2010 has come into effect from May 1, 2011. The Ministry of Home Affairs has issued the necessary Gazette Notification vide S.O. 999 (E) dated the 29th April, 2011 in this regard. The Ministry of Home Affairs has also issued a Gazette Notification vide G.S.R. 349 (E) dated the 29th April, 2011 notifying the Foreign Contribution (Regulation) Rules, 2011 made under section 48 of FCRA, 2010. The FCR Rules, 2011 have come into force simultaneously with FCRA, 2010. Some of the significant differences between the provisions of FCRA, 2010 and FCRA, 1976 are as under:
Receiving FC without registration but with Prior Permission: The procedure of obtaining prior permission to receive FC in the absence of registration will continue in the New Act. A rider is added under section 11(1) and 11 (2) of FCRA, 2010 prohibiting person having a definite cultural, economic, educational, religious or social programme from accepting foreign contribution unless such person obtains a certificate of registration/prior permission from the Central Government. Further, as per the provisions of this section, the prior permission of CG is subject to restrictions as the CG has the powers to specify the persons, the areas and source for acceptance of foreign contribution and the purpose of utilization of foreign contribution.
Registration and Grounds for Rejection specified: Section 12 of FCRA, 2010 lays down the detailed procedure for registration and for seeking prior permission for the acceptance of the foreign contribution. The conditions to be satisfied for the grant of certificate or prior permission have been specified under Section 12 (4)
Management and disposal of the FC: The FCRA, 2010 has come up with stringent provisions which empowers the CG even with the power to take over the management of the person/organization registered under the FCRA and can also utilize the FC or dispose of the assets created out of it in case adequate funds are not available for running the activities of the organization. Further Section 22 of the new Act, empowers the CG to dispose of the assets of such person who was permitted to accept FC under this Act, ceases to exist or has become defunct.
Accounts and intimation: Section 17 (1) of FCRA, 2010 also provides a single account through which the FC can be received by any person but provides the liberty to open one or more accounts in one or more banks for the utilization of the FC received. Provided that no funds other than the FC shall be received or deposited in such accounts. Section 18 of the Act makes it mandatory for every person receiving FC to intimate the same to the CG.
Revision of Orders of the CG: The FCRA, 2010 unlike the Act of 1976 has a provision for revision of any order made under a proceeding under the FCRA. The revision proceedings can be initiated either on an application for revision by the person registered under the act or suo motto. The clause also provides that the revision cannot be initiated where an appeal against the order lies but has not been made and the time within which such appeal can be made has not expired or such person has not waived his right of appeal or an appeal has been filed under this act. The limitation period for initiation of revision proceedings is 1 year
Power to call for information or document: The inspecting officer under the FCRA, 2010 has been empowered to call for information and documents for examination.
Extensive rule making powers: Under the New Act the CG has extensive rules making powers as compared to the earlier Act. The purpose behind the same has been to make the New Act sustain the further developments, which may require subsequent amendments in the law.
To conclude, FCRA 2010 is by and large an old wine in a new bottle. Unfortunately, in a number of respects the provisions have been made far more stringent than what they were under FCRA 1976. Considering the flow of funds into the country for purposes other than business, the Government has specified that acceptance of Foreign Contribution against national interest would not be permissible, requiring persons accepting FC to be subject to enhanced scrutiny
|Particulars||FCRA, 2010||FCRA, 1976|
|Foreign Contribution (FC)||Scope expanded to include securities as defined in clause (h) of section 2 Securities Contracts (Regulation) Act, 1956.||Only the foreign securities in clause (i) of section 2 of the Foreign Exchange Regulation Act, 1973|
|Prohibition to accept FC||In addition to the those prohibited under FCRA, 1976, any organisation of a political nature and any association or company engaged in the production and broadcast of audio or audio visual news or current affairs programme are also phohibited.||As per Section 4(1)(a) to (e)|
|FC received from relative||No prohibition as per FCRA, 2010.||Permitted only with the prior permission of CG except that no permission would be required in cases where the amount does not exceed Rs. 8000/- p.a and the necessary intimation is done to the CG.|
|FC accepted by way of scholarship, stipend or like payment||No prohibition as per FCRA, 2010.||Intimation to CG required in case where the amount excees Rs. 36,000/- p.a|
|Validity of registration certificate||5 years||No end date specified|
|Validity of permission of CG||Valid for the specific purpose for which it is obtained and from the specific source,||Any registration / permission granted under FCRA, 1976 would be valid for 5 years from the date of enactment of FCRA Act 2010 i.e. Five Years from 26.09.2010|
|Utilisation of FC||Sec. 8(1) provides for utilisation of FC only for the purpose for which it is received. Utilisation for speculative purposes is prohibited. Section 8(2) inserted to provide that person/association having registration under FCRA/ prior permission shall not defray more than 50% of the FC received in a financial year for administrative expenses unless prior permission is obtained||No corresponding provision|