Under FCRA Act, 2010, any person can receive a foreign contribution subject to having a definite economic, religious, cultural, religious or social programme and it must obtain the FCRA Registration. However, the Ministry of Home Affairs or MHA recently cancelled many FCRA Registration under the FCRA Act, 2010. In this write-up, we will discuss different reasons for the cancellation of FCRA Registration in India.
Purpose of FCRA Act, 2010
The Parliament has enacted this Act to consolidate the law to regulate the acceptance & utilisation of foreign contribution or foreign hospitality by certain associations or companies or individuals and to prohibit acceptance & utilisation of foreign hospitality or foreign contribution for any activities detrimental to national interest & for matters connected therewith or incidental thereto.
A person under FCRA Act, 2010 can obtain foreign contributions subject to having an economic, education, social, cultural, or religious purpose. In terms of FCRA, 2010, a person includes:
- An association;
- A HUF (Hindu Undivided Family);
- An individual;
- A Company incorporated under Section 25 of the Companies Act, 1956 (now Section 8 of the Companies Act, 2013).
The following are prohibited from receiving foreign contributions:
- Candidate for election;
- Member of any Legislature;
- The organisation of a political nature;
- Associations of individuals who have been prohibited from receiving Foreign contributions;
- Government servant, public servant, judge, or employee of any corporation or any other body controlled or owned by the Government;
- A political party or Office Bearer thereof;
- Company or Association involved in the production or broadcast of audio news or audio-visual news or current affairs programmes via any digital mode or any other digital form as prescribed under Clause (r) of sub-section (1) (Section 2) of the IT Act, 2000 or any other mode of mass communication;
- Columnist, editor, printer, correspondent, cartoonist, or publisher of a registered newspaper.
From the above discussion, it is clear that it is compulsory to have FCRA Registration for a specified person to take Foreign Fund & please note that FCRA Registration is valid for a period of 5 years thereafter, it is needed to be renewed before six months of the expiry date. From the reports, around 20,673 Registration has been cancelled, which means approx. 50% Registration has been cancelled over the Registration granted. Now, we are going to discuss various reasons behind the cancellation of FCRA Registration in India.
Reasons for Cancellation of FCRA Registration in India
If the Ministry of Home Affairs observed that mandatorily compliances have not been followed, it shall make an order to cancel FCRA Registration. Following are the reasons that can lead to the cancellation of FCRA Registration.
- Non-Filing of Annual Returns: Every Registration FCRA Association or Company is required to file an Annual Return in FC-4 within stipulated period & not filing of annual return is a violation of Section 18 of the Act with Rule 17 of the Foreign Contribution (Regulation) Rules, 2011 and hence in the exercise of the power given by Section 14 of the FCRA Act, the Central Government can give the order for the Cancellation of FCRA Registration of Registered Associations.
Note: Once FCRA Registration has been cancelled, shall not be eligible for registration/grant of prior permission for a period of 3 years from the date of cancellation of FCRA Registration.
- Not maintaining proper FCRA Account: As per Section 17 of the FCRA Act, it is compulsory to open a bank account in one or more banks that have integrated their system with PFMS (Public Financial Management System). If it has been noticed by the Central Government that Registered Association or Company hasn’t complied with the stated requirement, then they can issue an order against the Association for Cancellation of FCRA Registration Certificate.
- Making of False Declaration, Statement, or Delivering False Accounts: If NGO or Association or Society intentionally gives false intimation or statements under Clause (c) of Section 9/Section 18 or seeks prior permission/Registration by means of false representation/concealment of material fact, then that can also lead to cancellation of FCRA Registration Certificate.
- Not Working in Public Interest: Registered FCRA Association must work for the public interest. A religious, economic, social, cultural, or education programme is defined object to taking FCRA Registration from the Central Government and said object should be in the public interest. Hence, not working in the public interest can lead to the cancellation of FCRA Registration & other penal provision also applicable.
- The utilisation of Foreign Contribution for Administrative Purpose: The primary object of raising funds from foreign by the registered Association is to fulfil the core area of the NGO, which should be related to a religious, educational, cultural, or social programme. Avoid more than 50% of foreign contribution received in a particular year to administrative expenses, as this can become a reason for the cancellation of the FCRA Registration Certificate.
- Acceptation of Foreign Contribution in Undisclosed Bank Account: Foreign Contribution should be received in Foreign Contribution designated account only & Registered Association shouldn’t have more than one foreign designated account. Further, hiding of source, amount & manner in which Foreign Remittance or Contribution was received can lead to the cancellation of Registration.
What Happen with the Cancellation of FCRA Registration?
Cancellation of FCRA Registration means that the NGO will no longer be able to receive foreign funds from donors as the FCRA is compulsory for NGOs & associations to get foreign funds. The one whose Registration Certificate has been revoked is not eligible to register for a Certificate/receive a grant of prior permission for 3 years from the date of the cancellation.
It is vital for companies or associations receiving foreign funds to register under FCRA and obtain FCRA Registration Certificate. But, the entities need to follow all the compliances to avoid the cancellation of FCRA Registration. Furthermore, the Renewal of the FCRA License before expiry is also very important to extend the validity of the license.
Read our Article:What is the process to get FCRA registration?