On January 1, the government of India informed more than 170 non-profit organisations, including the Indian arm of the leading global charity Oxfam, that their licence to receive foreign funds had not been renewed.

The news came as a crushing blow to the organisations but one clause in the government’s public notice issued the previous day, on December 31, left them particularly anxious. It said these organisations were not eligible “either to receive the foreign contribution or utilise the foreign contribution received”.

If the organisations cannot utilise existing funds, then what happens to that money and the assets bought with it?

Legal amendments made in 2020 to the Foreign Contribution (Regulation) Act 2010 and its Rules empower the government to take control of foreign funds and assets created using foreign funds if the organisation surrenders its FCRA licence or it does not apply for it to be renewed.

However, experts point out that there is still ambiguity on what will happen to the foreign funds and assets created using foreign funds in case an organisation applies for renewal but the government rejects it.

Around 13,000 organisations are waiting for their licences to be renewed.

The government’s December 31 missive has left these organisations fearing the worst. FCRA experts say that this is the first time there has been a communication asking organisations not to use existing foreign funds.

“Earlier the government only asked the organisations to not raise additional foreign funds,” Sanjay Agarwal, an FCRA expert and author of a handbook on FCRA, told Scroll.in. “But this time they have also asked to not utilise existing funds.”

Scroll.in sent queries to the Union Ministry of Home Affairs about the procedure being followed to reject renewals and the bar on the use of existing foreign funds. This article will be updated if a response is received.

Screenshot from the public notice put out by the Ministry of Home Affairs on December 31.

Post facto freeze

The answer to why the government has asked organisations whose FCRA renewal was rejected not to use existing funds might be in the 2020 amendments to the FCRA Act and Rules.

In 2020, among many changes, the government amended Rule 12(5) of the FCRA Rules to say that if an organisation’s FCRA certificate has “ceased to exist”, then the organisation cannot raise additional foreign funds or utilise the funds already raised until their licence has been renewed. Some FCRA experts believe that this amendment is the basis for the government to ask over 170 organisations not to use existing foreign funds after December 31.

However, some disagree with this explanation. “Though the December 31 notice is clear on this, the relevant rules only apply to organisations which do not apply for the renewal themselves,” Agarwal said. He suggests that this does not apply to the 170 organisations that applied for their licences to be renewed but were turned down.

However, other lawyers have pointed out that there may be two ways to interpret the rules. “Some can interpret that this will also apply where the government has not renewed someone’s licence,” said Prasanna S, a lawyer who works on FCRA issues. “This will have to be tested in a court of law.”

Many organisations are unclear about what will follow. “If say for example [an organisation whose licence has not been renewed] they appeal, and let us say they lose that appeal, what will happen [to the funds]?” Ingrid Srinath, Director of the Centre for Social Impact and Philanthropy at Ashoka University, told Scroll.in, speaking in a personal capacity. “My sense is that this will result in a large number of legal challenges.”

Growing legal barriers

It isn’t only Rule 12(5): the Centre has brought in a raft of legal changes that give it broader powers to take control of foreign funds and the assets created using these funds.

Before 2020, the Act mentioned that foreign funds and assets will vest with the government only if it cancels the licence of an organisation. However, new grounds were brought in the 2020 amendment: this would now also apply when the organisation voluntarily surrendered their licence as well as if the organisation did not apply for it to be renewed.

However, as noted, it is unclear what will happen if the organisation’s request is rejected.

Other than these amendments, a notification from 2018 also made the process of taking over funds and assets more structured. Now the additional chief secretary (home) or the principal secretary of the state government will take control of foreign funds and assets created out of foreign contributions.

“Earlier when a certificate was cancelled, they sent a copy to the district magistrate to take control over the assets,” ” Agarwal said. “However, they have made the process more formalised by specifying the authority” in the 2018 notification.

Many of these changes have left organisations exasperated. “I know of people who want to voluntarily surrender their licenses because they are fed up,” said Noshir Dadrawala, an FCRA legal expert. “But if voluntarily surrendered, then as per the amended rules, your [existing] contributions go away. Thus, people are hesitating. This is a major concern.”

A state of chaos

The legal fog as a result of these amendments means that even many organisations whose renewals have not been explicitly denied are confused about how to proceed.

Take Increasing Diversity by Increasing Access, an organisation that works to provide access to legal education, for example. The organsation’s licence was to expire in March 2020. It filed its FCRA renewal application in November 2019. More than two years later, it is still pending. As per the law, the government has to reply to the renewal application within 90 days, and in case it does not then it has to communicate its reasons.

“We have stopped using our funds and assets till our licence gets renewed,” Shishira Rudrappa, a trustee at IDIA, told Scroll.in. There is a lack of clarity on the consequences of using foreign funds with an expired licence pending renewal.

IDIA is not alone: many among the 13,000 organisations waiting for their licences to be renewed, are fearful that if the government does not renew their license, they will be denied access to even their existing foreign funds. Meanwhile, over 5,700 organisations have not applied to renew their license.

Weak legal options

In spite of questions around the legality of these changes, approaching the courts is not an easy decision since organisations fear that this will put them in the spotlight. This is a risky strategy, given that the Union Home ministry has a significant amount of arbitrary discretion in dealing with FCRA certifications. In many instances, FCRA non-renewals and cancellations are carried out without giving the organisations adequate opportunities to be heard.

For instance, the government often does not give concrete reasons for why an organisation’s certificate was not renewed. On December 25, it refused to renew FCRA permissions for Mother Teresa’s Missionaries of Charity, cryptically citing “adverse inputs”. Sometimes even that is not provided: the order merely lists the FCRA section that the organisation has allegedly violated.

As a consequence, organisations are left in the dark about why their certificates were not renewed. This leaves them in ambiguity about whether to try to renew their FCRA certificates or file legal challenges.

This arbitrary decision making leaves organisations wary of raising their voices in public, fearing reprisals. Several NGO officials spoke to Scroll.in about their concerns but did not want to be quoted, even without being identified.

“People are very scared. They do not want to talk,” said Aakar Patel, former India head of Amnesty International, a global nongovernmental organisation focused on human rights. “They do not want to put their head above the parapet.”

Legality of the new provisions

Some legal challenges are already pending before courts. For instance, there is a case in the Supreme Court on whether the 2020 amendments place unreasonable restrictions on NGOs that receive foreign funding and whether this contravenes the right to equality, right to life and freedom of association and occupation as guaranteed under the Constitution.

Other than that, a constitutional challenge to the provisions on cancellation of FCRA licences and the vesting of foreign funds and assets in the government is pending before the Andhra Pradesh High Court.

Many lawyers also question the framework brought in 2020 for taking over foreign funds and assets in situations where an organisation does not apply for FCRA renewal or their licence ceases to exist. “They have only made changes to the Rules,” advocate Prasanna S told Scroll.in. “It is not there in the law.”

Given that Rules are simply meant to implement legislation, they cannot contain anything not there in the original Act. This might be grounds to challenge their legality, legal experts said.