NGOs need not always be viewed with suspicion just because they run on foreign aid: Madras High Court

The Madras High Court on Friday urged the Indian government not to view charitable institutions with suspicion merely because they receive foreign donations [Ellen Sharma Memorial Trust v. Union of India and anr]..The Court made the observation while granting relief to the Ellen Sharma Memorial Trust, a charitable trust whose application for the renewal of its Foreign Contribution (Regulation) Act (FCRA) registration was rejected by the authorities.Such FCRA registration is mandatory for organisations to receive foreign aid to run operations in India. Justice N Ananad Venkatesh found that there were no serious allegations of fund misuse by the Ellen Sharma Memorial Trust or its sister organisations to justify the rejection of its FCRA renewal application. "In the case in hand, the foreign contributions were not diverted, misused and utilized for any other purpose against national interest or for any personal gain or for undesirable purposes," the Court said. .The Court proceeded to opine that the government should deal with such cases with an open mind unless there are serious allegations of misusing foreign funds for anti-national activities. "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 and it is being used against public interest/national interest. This is more so where persons of Indian origin, settled in foreign countries, earn money and want to give something back to their country by contributing funds. In such cases, unless there are serious violations of misuse of foreign contribution, the Authorities must deal with it with an open mind. The case in hand is one where such contributions were made by persons of Indian origin settled in foreign countries and they wanted to contribute in terms of providing education to women and work for their welfare," Justice Venkatesh observed..The trust had commenced operations in the early 1980s with the object of improving education and the overall welfare of children in India. To this end, it established the Ellen Sharma Primary School at Karaipakkam, the Ellen Sharma Memorial Matriculation School at Sholinganallur for orphaned children and refugees from Tibet and the School Health Centres/ Clinics at Sholinganallur and Karaipakkam.The trust told the Court that it depended on foreign donations to run its social and charitable activities. It also held an FCRA licence to receive such donations from abroad. The foreign donations were being supplied by an Indian-origin family residing abroad. However, in 2021, it was informed via email, after repeated queries, that its application to renew its FCRA registration had been rejected. This was challenged before the High Court, where the trust and a sister NGO, the Sharma Centre for Heritage Education, argued that no reasons were given for the non-renewal of the FCRA registration. .During the hearing, the government revealed that the FCRA renewal was denied as the trust was found to have distributed foreign donations to its sister NGOs without prior permission. This violated Section 7 of the FCRA as it stood amended in 2020.The Court, however, observed that the amended provision only applied to the trust for a period of roughly five months. There was no requirement for prior permission before 2020 under the earlier Section 7 of FCRA. The Court reasoned that the trust may have made a bona fide mistake in not seeking prior permission before distributing the foreign aid it received between its sister NGOs."The amendment that came into effect from October 2020 was a happen-stance and it is impossible for a layman to take note of such procedural changes brought in by the amendment. Therefore, just because the procedural formality was not followed for that short period, it should not be completely put against both the petitioner trust as well as the appellant," the Court said.It added that such a hyper-technical approach should not be adopted in matters concerning charitable activities. "One family is involved in sending the foreign contribution to provide education to children in India and such an objective should not be shot down by hyper technicalities," the ruling said. The Court also disagreed with the government's argument that they were not bound to disclose reasons for deciding not to renew the trust's FCRA registration. "The contention of the respondents that they need not communicate the reasons for refusal to grant the certificate by bringing the case within the Proviso to Sub-Section (5) of Section 12 of the Act, is unsustainable," the single-judge made it clear. .The Court proceeded to order the respondent authorities to grant a renewal of the petitioner-trust's FCRA registration within four weeks after receiving a copy of the order. .Advocate S Ramamurthy briefed by advocates E Ann Priscilla Swarna Kumari and Saitanya Kesan appeared for the Sharma Centre for Heritage Education.Senior Advocate Satish Parasaran briefed by advocate Rahul Balaji appeared for the Ellen Sharma Memorial Trust.Additional Solicitor General of India ARL Sundaresan assisted by advocate KS Jeyaganeshan represented the Union of India (Ministry of Home Affairs, FRCA Wing) and the Director, FRCA Wing, Ministry of Home Affairs..[Read Judgment]