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FCRA: Delhi High Court dismisses plea against suspension of registration certificate

On September 03, 1993, the petitioner was granted a Certificate of Registration under the Foreign Contribution Regulation Act, 1976. Thereafter, on October 28, 2016, the petitioner’s registration was renewed up to October 31, 2021, under the Foreign Contribution Regulation Act, 2010 (FCRA).

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The Delhi High Court has dismissed a petition filed against the suspension of Foreign Contribution Regulation Act (FCRA) registration certificate by the Central government.

A single-judge bench of Justice V. Kameswar Rao passed this order while hearing a petition filed by Commonwealth Human Rights Initiative.

The petition has been filed with the following prayers:

“The petitioner, therefore, prays that in the facts and circumstances of the present case this Hon’ble Court may be pleased to:

a) Issue a writ, order, or direction in the nature of Certiorari quashing the Impugned Suspension Order dated June 07, 2021, Number F.No II/21022/58(855)/2016-FCRA(MU} passed by the Deputy Secretary to the Government of India, Foreigners Division [FCRA Monitoring Unit], Ministry of Home Affairs under Section 13 of the Foreign Contribution Regulation Act, 2010.

b) Pass such other and further orders as this Hon’ble Court may deem fit and proper in the facts and circumstances of the case.”

It is the case of the petitioner, being Commonwealth Human Rights Initiative (CHRI) that it is an independent, non-profit, civil society organisation, headquartered in New Delhi, India since 1993, working to promote access to justice, access to information and timely fulfilment of the United Nations Sustainable Development Goals (SDGs) in India and in Commonwealth countries.

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The petitioner was registered under the Societies Registration Act, 1860 on July 21, 1993.

It is stated in the petition that several institutions of the Central and State Governments including Human Rights Commissions, Central and State Information Commissions, law enforcement agencies and legal aid authorities, recognise the petitioner as a resource partner in the domains of police and prison reform and transparency in governance.

On September 3, 1993, the petitioner was granted a Certificate of Registration under the Foreign Contribution Regulation Act, 1976. Thereafter, on October 28, 2016, the petitioner’s registration was renewed up to October 31, 2021, under the Foreign Contribution Regulation Act, 2010 (FCRA).

On June 07, 2021, the petitioner’s FCRA Registration was suspended for 180 days under Section 13 of the FCRA, 2010 pending consideration of cancellation of Certificate of Registration of the petitioner under Section 14(1)(d) of the FCRA, 2010.

On June 26, 2021, the petitioner communicated its response to the suspension order, wherein it is stated that there was no violation of the FCRA, 2010 or Foreign Contribution (Regulation) Rules, 2011 (FCRR) by the petitioner as alleged.

Accordingly, the petitioner requested urgent revocation of the impugned suspension order by June 30, 2021.

On December 01, 2021, the suspension was extended for another period of 180 days. On December 07, 2021, a Show Cause Notice under Section 14(2) of the FCRA, 2010, was served on the petitioner.

According to the Show Cause Notice, the respondent had authorised an audit of the petitioner’s books of accounts and activities for the first time order dated July 29, 2021, passed under Section 20 and Section 23 of the FCRA, 2010.

The said audit was conducted from August 09, 2021, to August 14, 2021. Upon scrutiny of audited records, certain observations were drawn and shared with the petitioner vide letter dated October 07, 2021, for comments.

Arvind P. Datar and Chandra Uday Singh, Senior Counsels, appearing on behalf of the petitioner submitted that Section 13 of the FCRA, 2010 requires recording of reasons as to why the Competent Authority was satisfied that the drastic and optional action of suspension was necessary pending consideration of the question of cancellation of the certificate on any of the grounds mentioned in Section 14(1) of the FCRA, 2010. However, no such reason(s) explaining the necessity of suspension has been recorded or communicated through the impugned order dated June 07, 2021.

They further contended that given the drastic nature of the power of suspension under Section 13(1) to bring an organisation to a grinding halt and to threaten its existence as well as damage its reputation, this particular safeguard of recording reasons for the necessity of suspension enshrines an important principle of natural justice, which has been violated.

That apart, they contended that the order is ultra vires to Section 13(1) of the FCRA, 2010 as the reasons in the order of suspension are wholly alien to the scheme of suspension under Section 13(1) of the FCRA, 2010.

Moreover, they stated that the order has made a hotchpotch of the provision of suspension under Section 13(1) along with the provision for cancellation under Section 14 of the FCRA, 2010.

According to them, the Competent Authority without any inquiry and without giving any opportunity of being heard to the certificate holder, has concluded that certain provisions of FCRA, 2010 have been violated and on that basis proceeded to suspend the certificate under Section 13(1) of the FCRA, 2010.

In this regard, they also contended that the order has been passed in the exercise of a power not vested with the respondent under Section 13 of the FCRA, 2010.

It was further contended that the first three allegations in the impugned order of non-intimation of specific accounts are erroneous vide petitioner’s response to the suspension order dated June 26, 2021, the petitioner has demonstrated that the accounts / details referred to in the order had in fact been furnished by the petitioner and there was no violation of Sections 17(1), 18, and 19 of the FCRA, 2010 read with Rules 9(1)(e) and 17 of the FCRR, 2011 as alleged.

Moreover, the findings of fact relating to such violations are extraneous to an order of suspension under Section 13(1) of the FCRA, 2010.

According to the respondent, as there exists a need for deeper scrutiny and inquiry, which is already underway, the MHA has conducted an audit as well as inspection of the petitioner’s association under Section 20 and 23 of the FCRA, 2010 from August 09, 2021 to August 14, 2021.

It is also stated that pending decision on cancellation of FCRA registration certificate under Section 14(d) of the FCRA, 2010, the FCRA registration Certificate of the petitioner’s association was suspended Order dated June 07, 2021, in the exercise of the powers conferred by Section 13 of the Act for a period of 180 days with effect from the date of the order or until further orders whichever is earlier.

It is submitted by the respondent that the suspension order dated June 07, 2021, is a reasoned / speaking order that cites the reasons for the suspension. That apart, as far as the right of opportunity of being heard is concerned, there is no such provision(s) envisaged under Section 13 of the FCRA, 2010, to offer an opportunity to the registration certificate holder of being heard before suspending the registration certificate.

The first plea of Datar and Chandra Uday Singh is that the Central Government without an inquiry and without giving opportunity, has concluded that certain provisions of FCRA, 2010, have been violated and on that basis issued the suspension order, which is impermissible. Suffice to state that Section 13(1) of the FCRA, 2010 does not provide for any opportunity to be given to the certificate holder before the suspension of the certificate. Wherever the legislature intended to stipulate inquiry / opportunity, it had said so, like in Section 14(1) and 14(2) of the FCRA, 2010.

Not prescribing inquiry / opportunity to the holder of the certificate before suspension under Section 13(1) of the FCRA, 2010 has also to be understood from the perspective, that the FCRA, 2010 is to consolidate the law, to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or association or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith.

Therefore, the provisions for suspension of certificate under Section 13 and cancellation of certificate under Section 14 are measures in keeping with the general mandate of the Act and the rules. So, if reasons exist, that the utilisation of the contribution is not in accordance with the mandate of the Act, the Central Government by recording in writing the reasons, can suspend the certificate.

The suspension under Section 13(1) of the FCRA, 2010 is pending consideration of the question of cancelling the certificate under Section 14. A suspension is not a final action but an interim measure for a period of 180 days, extendable by a further 180 days. The only effect of suspension is that the certificate is kept in abeyance and the certificate holder does not receive contribution during that period.There is also a safeguard, that is, in case of hardship, the certificate holder can apply to the Central Government for receiving the financial contribution or utilising the foreign contribution in its custody which may be allowed by the Central Government.

The Court said that the only caveat is that the power of suspension should not be exercised in an arbitrary manner and without any reasonable ground or as a vindictive misuse of power. It is precisely to obviate arbitrariness, that Section 13(1) of the FCRA, 2010 contemplates recording of reasons in writing, which shows the satisfaction of the Central Government that pending consideration of the question of cancellation of the certificate, it is necessary to suspend the certificate.

The Court was of the view that the reasons to be recorded is on the basis of the material available on record, which can include the material filed by the certificate holder as per the provisions of the Act / Rules and Order which prima facie reveal case against the certificate holder, that grounds as stated in Section 14(1) of the FCRA, 2010 exist, requiring the suspension of the certificate.

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“I must state, Section 13(1) of the FCRA, 2010 gives discretion to the Central Government to suspend the certificate only if it is satisfied that it is necessary to do so. It is not necessary that in all cases suspension is resorted to,” the court said.

“Suffice to state, there is nothing in the provision to show that these violations cannot be construed as reasons which weighed with the Central Government, to suspend the certificate. Surely, if the violation makes a strong prima facie case against the certificate holder, if proved, would lead to cancellation of certificate under Section 14(2), then the Central Government will be justified in suspending the certificate. In other words, suspension order can be passed by the Central Government considering the gravity of violations, the nature of evidence available and effect on public interest,” the court held.

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“Insofar as, stating the reasons for suspension is concerned, as concluded above, I am of the view that the reasons have been given in the impugned order. To that extent, the judgment has no applicability. Insofar as the conclusion of the Court by the time the suspension order was passed neither an inquiry was initiated nor any Show Cause notice was issued is concerned, it is my conclusion that the process of inquiry was started in the year 2017. So, it is not a case where neither any inquiry was initiated nor any Show Cause notice was issued. So, the judgment relied upon by Datar and Singh is clearly distinguishable,” the Court observed.

“In view of my above discussion, I do not see any reason to interfere with the impugned order dated June 7, 2021. The writ petition is dismissed. No costs. In view of the fact that I have decided the writ petition on the scope of Section 13 and 14 of the FCRA, 2010 and dismissed the petition, these applications also are liable to be dismissed,” the Court ordered.

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