The government need not treat non-governmental organisations with suspicion merely because they receive foreign funding, the Madras High Court said on Friday.

“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,” the court said.

Justice Anand Venkatesh said that several persons of Indian origin living abroad donate money to help India, and that alone should not raise concerns.

The court was hearing a petition by two sister organisations, the Sharma Centre for Heritage Education and the Ellen Sharma Memorial Trust, challenging the Ministry of Home Affairs’ decision to deny the renewal of their registration under the Foreign Contribution Regulation Act.

Non-profit organisations that wish to receive funds from abroad need to register themselves under the Foreign Contribution Regulation Act.

The trusts said that they had been working since 1982 to improve children’s education and health and relied heavily on foreign donations for their work that includes setting up schools and health centres in and around Chennai.

The government argued that the organisations had violated Foreign Contribution Regulation Act rules by moving funds among themselves without permission.

However, the court found that the rejection letter did not clearly explain the reasons and that the trust had not been properly informed about the rule changes made in 2020.

The court set aside the government’s rejection and ordered the authorities to process the Foreign Contribution Regulation Act renewal application within four weeks.

In 2020, the Union government amended the Foreign Contribution Regulation Act to extend tighter control over how non-profit organisations use foreign funds. Since then, several NGOs have alleged that the government has been using the law to target organisations they do not agree with.

Among organisations whose licences under the Act were cancelled or not renewed were non-profits working on human rights, such as Oxfam India and Commonwealth Human Rights Initiative, and think tanks such as Centre for Policy Research.

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