The Kerala High Court has set aside the rejection of FCRA renewal applications of two NGOs after the Centre relied on a report of a Central Security Agency alleging that the organisations had funded protests against the Vizhinjam Port project, as reported in LiveLaw.
The judgment was delivered by Justice Bechu Kurian Thomas while considering petitions filed by Save A Family Plan India and the Kerala Social Service Forum. The petitions challenged the rejection of their applications for renewal of registration under the Foreign Contribution (Regulation) Act, 2010, as well as the subsequent revisional orders.
The Centre had relied on a report of the Central Security Agency, identified in the proceedings as the Intelligence Bureau, to allege that the NGOs were involved in funding the Vizhinjam Port protests.
According to the allegations against Save A Family Plan India, the organisation had transferred funds to Trivandrum Social Service Society (TSSS), which allegedly diverted funds to SAKHI and SEWA, which in turn allegedly funded the protests.
In the case of Kerala Social Service Forum, the allegation was that it was the official state-level body of the Kerala Catholic Church functioning under the Kerala Catholic Bishops Council (KCBC) and had funded the protests.
Court Finds No Material Showing NGOs Funded Protests
The NGOs argued that they had held FCRA registration for decades without violations and that their registrations had been renewed previously without any adverse findings.
They maintained that they had never diverted funds to support protests and that the funds transferred to other organisations were meant for welfare programmes. They also argued that the authorities had provided no reasons for rejecting their renewal applications and had not given them an opportunity of hearing.
The High Court noted that the petitioners had not been included in the list of NGOs allegedly involved in the protests. It further observed that there was no material establishing a financial trail directly linking the petitioners to the protesters.
The Court held, “the report has not even identified any financial trail between the petitioner and any of the protestors directly…even if it is assumed that the petitioner had funded the peaceful protests, still, can it be held to be a reason to deny renewal of the certificate? The answer has to be in the negative. The right to protest is an integral part of a democracy. Every citizen has the right to demonstrate or to protest in a peaceful manner. The said right emanates from the right to freedom of speech and expression under Article 19(1)(a) of the Constitution of India.”
The Court further held that peaceful protest could not be treated as an “undesirable purpose” under Section 12(4)(a)(ii) of the FCRA.
It observed, “When the right to protest is constitutionally guaranteed, exercise of such rights cannot be labelled as ‘an undesirable purpose’ or against public interest… A peaceful protest against a project by persons who have a grievance or who apprehend injury to them, cannot be viewed as an ‘undesirable purpose’ due to a political disapproval. Executive or administrative distaste for protests or dissents, cannot convert the exercise of a constitutionally protected right into an ‘undesirable purpose’ or as against ‘public interest’.”
Centre Defends FCRA Rejections
The Centre challenged the maintainability of the writ petitions and argued that there was no fundamental right to receive foreign contributions.
It submitted that the FCRA was a national security legislation and that foreign funding could not be used for activities detrimental to national interests. According to the Centre, the field inquiry had revealed such activities in the case of the petitioners.
The Centre also argued that there was no statutory requirement to disclose the reasons for rejecting an FCRA renewal application. It maintained that where funds were diverted for “undesirable purposes”, the organisations were not entitled to renewal.
The Centre further contended that the petitioners could not be told the reasons for rejection and produced the Central Agency report before the Court in a sealed cover.
Court Says FCRA Rejection Must Give Reasons
The High Court rejected the contention that an FCRA renewal rejection could be made without providing reasons.
It held that an order rejecting renewal under the FCRA cannot be “cryptic” and must contain reasons.
The Court observed, “In a democratic country, governed by the rule of law, for rejecting an application, even if it is a renewal application for permission to receive foreign contribution, reasons are essential. An order without reason is an action born of whim and not of law. The right to be furnished with reasons is, undoubtedly, an indispensable part of a sound judicial system…There is not even a whisper about the clarifications given by the petitioner or as to how the petitioner can even be blamed for the alleged nature of use of the funds it transferred to another FCRA registered organization,”
Referring to Sections 16 and 12 of the FCRA, dealing with renewal and registration respectively, the Court held that the competent authority must record reasons when rejecting a renewal application.
It also held that merely quoting statutory provisions in an order was insufficient.
The Court observed, “the proviso to section 16(3) of the FCRA cannot be perceived as confined only to provide reasons for the delay. It would be quite preposterous to read the statute as laying down the principle that reasons must be given only for the delay and not when the application is rejected. The rights of the parties are affected not only when there is delay in considering the application for renewal, but also when the application is rejected. The very terminology used in the statute itself indicates that reasons have to justify rejection”
The Court further held that even though there was no fundamental right to receive foreign contributions and permission to receive such funds was governed by a regulatory mechanism, that mechanism could not dispense with the requirement of giving reasons for administrative decisions.
Central Agency Report Cannot Automatically Withhold Reasons
The Court also considered the Centre’s reliance on the Central Security Agency report and its decision to produce the report in a sealed cover.
It observed that the petitioners were not named in the list of NGOs involved in the protests and that the mere fact that funds transferred by one organisation were subsequently transmitted to another organisation allegedly involved in funding the protests could not by itself justify denial of FCRA renewal.
The Court also found that the report did not disclose material warranting privilege on national security grounds.
It held, “there is no mandate that can be read into section 12(5) of the FCRA that merely because there is a report of a Central Security Agency, the reasons cannot be divulged or furnished. A contrary interpretation would lead to an anomalous and arbitrary situation wherein the statutory authority can pick and choose applicants for grant or renewal of certificate of registration and deny furnishing any reason, by merely referring to a report of a Central Security Agency”
Fresh Orders Directed Within Three Months
The High Court concluded that there were no valid grounds for rejecting the FCRA renewal applications of the two NGOs.
It accordingly set aside the rejection orders and the subsequent revisional orders and directed the authorities to pass fresh orders within three months.
In one of the judgments, the Court also clarified that until a fresh decision was taken, the petitioner’s FCRA certificate would remain valid, enabling the organisation to utilise the funds it had already received.
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