Supreme Court, INSAF
Supreme Court, INSAF
Litigation News

Support to public causes by resorting to legitimate means cannot deprive organisation of right to receive foreign funds: Supreme Court

Shruti Mahajan

In a crucial judgment delivered on Friday, the Supreme Court held that an organization cannot be deprived of its right to receive foreign funding by being declared a political organization merely because it uses legitimate means of dissent for public causes [Indian Social Action Forum (INSAF) v. Union of India].

The judgment was delivered by a Bench of Justices L Nageswara Rao and Deepak Gupta.

It was held that under the Foreign Contributions (Regulation) Act, 2010 [FCRA], an organization termed as being of "political nature" cannot be deprived of its right to receive foreign funds merely because it engages in legitimate and political means such as hartals, bandhs etc for demonstration of dissent and for public causes.

Justices L Nageswara Rao and Deepak Gupta
Justices L Nageswara Rao and Deepak Gupta
"Support to public causes by resorting to legitimate means of dissent like bandh, hartal etc. cannot deprive an organisation of its legitimate right of receiving foreign contribution."
Supreme Court in INSAF vs Union of India

Section 5 of the FCRA deals with the right conferred upon the government to declare an organization as being one of "political nature". In 2011, guidelines were framed by the Central government under the Act. Rule 3 thereunder deals with the guidelines for declaring an organization to be of political nature. Further, Section 3 (1)(f) of the Act is bars organizations of political nature from accepting foreign contribution and

It was these provisions that were under the Court's scrutiny in the instant case.

Section 5 lays down the procedure for the government to declare an organization as being of "political nature". It empowers the governemnt to declare an organization as a political organization not being a political party. The provision states,

"The Central Government may, having regard to the activities of the organisation or the ideology propagated by the organisation or the programme of the organisation or the association of the organisations with the activities of any political party, by an order published in the Official Gazette, specify such organisation as an organisation of a political nature not being a political party..."

The provisions were under challenge before the Supreme Court on the grounds that the words "activity, ideology and programme" are vague and not specific. This, consequently, gives an "unbrindled and unfettered" power to the Executive.

The challenge was also mounted on the grounds of the provisions being violative of Articles 14 and 19 of the Constitution, among other things.

The Court examined the scope, purpose and intent of the statute to note that the legialtive intent is to keep voluntary organizations from being used by foreign entities as a channel for routing funds for political activities in the country. This is to ensure that institutions, individuals, and such working in areas of national interest are not swayed away from the ethos and principles of our sovereign state, the Court noted.

"It is clear that preventing foreign contribution into the political arena is the object sought to be achieved by the Act. Prevention of foreign contributions routed through voluntary organisations which are not connected to party politics is the reason behind introduction of Section 3 (1) (f) and Section 5 of the Act."
Supreme Court in INSAF v. Union of India

Interpreting the wording used in Section 5 and in the Rules, the Court held that only those organizations which are "actively involved in politics or associated with political parties can be declared as organisations of a political nature."

The Supreme Court therefore, read down Rule 3(v) and said that the words "political interests" used in the Rule should be construed to be in connection with active politics or party politics.

Having held thus, the Court noted,

"We are in agreement that the words ‘political interests’ are vague and are susceptible to misuse. However, possible abuse of power is not a ground to declare a provision unconstitutional."

The Bench further held,

"It is clear from the provision itself that bandh, hartal, rasta roko etc., are treated as common methods of political action. Any organisation which supports the cause of a group of citizens agitating for their rights without a political goal or objective cannot be penalized by being declared as an organisation of a political nature."
Supreme Court in INSAF v. Union of India

The Court thus clarified that only those organizations which are actively involved in party and electoral politics will be covered under the purview of Rule 3 and voluntary organizations working for public causes and such cannot be barred from receiving foreign funds.

On a concluding note, however, the Court noted,

"...Organisations used for channeling foreign funds by political parties cannot escape the rigour of the Act provided there is concrete material."

Senior Advocate Sanjay Parikh appeared for the petitioner organisation. Additional Solicitor General KM Nataraj represented the Centre.

[Read Judgment]

INSAF vs UOI - 06.03.2020.pdf
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