Supreme Court pulls up Centre for denying FCRA renewal
The top courts’ message comes at a time when several NGOs across India have faced scrutiny and denial of FCRA renewals in recent years
The Supreme Court on Friday cautioned the Union government against harassing non-governmental organisations (NGOs) and pulled up the Centre for refusing to renew the registration of two such organisations under the Foreign Contribution (Regulation) Act, 2010 (FCRA) on what it termed as “technical grounds”.
A bench of justices Vikram Nath and Sandeep Mehta dismissed the Centre’s special leave petition against a June judgment of the Madras High Court, which had quashed communications issued by the Ministry of Home Affairs (MHA) refusing renewal of registration to two sister NGOs. The high court had directed the authorities to complete the renewal process within four weeks, holding that the denial was based only on minor procedural lapses without any evidence of misuse or diversion of foreign funds.
“When they are doing some social service, what is your problem?” the bench asked Additional Solicitor General Archana Pathak Dave, who appeared for the Union government. “You have your checks and monitor their receipts and expenses, but how can you shut them? Have they bungled any funds? Is there any evidence of malpractice?” it asked the law officer.
When the ASG insisted that the NGOs’ licences were not renewed owing to FCRA violations and that the government needed time to re-examine documents despite the high court’s order, the bench curtly replied: “Do not complicate things or further harass them. Comply with the high court order.”
The courts’ caution comes at a time when several NGOs across India have faced scrutiny and denial of FCRA renewals in recent years, with critics alleging a “chilling effect” on civil society organisations.
The case arose from a challenge by the Ellen Sharma Memorial Trust and the Sharma Centre for Heritage Education, both Chennai-based organisations working in the fields of education, health and heritage. Their applications for renewal of registration under the FCRA, submitted in early 2021, were rejected by the MHA in December 2021. The rejection, however, did not specify the nature of alleged violations.
The Madras High Court had held that the refusal was unsustainable in law, since the denial relied only on a procedural breach involving transfer of foreign funds between registered sister NGOs, after the 2020 amendment to Section 7 of the FCRA prohibited such transfers without prior approval. The court noted that there was no allegation of misuse, diversion or personal gain and emphasised that mere movement of funds between registered entities could not be a ground to deny renewal.
Referring to proportionality, Justice N Anand Venkatesh of the high court had observed that even if the NGOs technically fell afoul of the amended Section 7, the alleged violation was minor and could not justify the extreme step of cancellation. “Just because some institutions run with the aid of foreign contribution, it is not necessary to look at the institutions like that of the petitioners with suspicion unless there are materials to show that such foreign contribution is being misused,” the judgment read.
It had further underlined that the NGOs were not given specific reasons for denial and were not put on notice for the alleged violation. “If, ultimately, any violation is alleged... they must be necessarily put on notice and they must be informed regarding the violation and their response must be sought for,” the high court ruled.
The Supreme Court, in its order on Friday, endorsed this reasoning by dismissing the Centre’s appeal and directing immediate compliance. “The special leave petition is dismissed,” the bench recorded in its order.
According to the MHA’s 2023-24 annual report, of the over 23,000 applications received that year, 15,638 NGOs were granted FCRA licences while as many as 7,848 were denied, underscoring the scale of regulatory scrutiny faced by the sector.
