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Case Title: Manasa Centre For Development And Social Action Vs. The Managing Director, The Development Credit Bank Ltd

Date of Order: 11/08/2023

CORAM: Justice KS Hemalekha

INTRODUCTION

The Karnataka High Court has recently stated that holding a permanent registration under the Foreign Contribution (Regulation) Act of 2010 (FCRA) does not establish any entitlement for an individual or entity to have foreign donation funds deposited into their bank account.

FACTS

The Court highlighted that mere possession of a permanent registration under the FCRA, 2010 does not grant automatic entitlement to receive foreign funds without additional clearance from the Ministry of Home Affairs.

The Government of India’s letter indicated that foreign donors could be placed under a ‘Prior Reference/Permission Category’ based on feedback from field or security agencies.

The Reserve Bank of India (RBI) had issued a directive in 2013, based on MHA’s communication, requiring banks to inform the Ministry about any fund flow from ‘Dan Church Aid’ before granting clearance.

The MHA had specifically instructed the bank not to credit the amount received from ‘Dan Church Aid’ to the account without clearance.

Given the MHA’s clear instruction in a letter dated October 31, 2013, the Court concluded that Manasa was not entitled to the funds without obtaining clearance from the ministry.

As a result, the Court found the petition lacking in merit and dismissed it.

 COURT’S ANALYSIS

The Court emphasized that merely possessing a permanent registration under the FCRA, 2010 did not confer automatic entitlement for the reception of foreign funds, and it stressed that additional clearance from the Ministry of Home Affairs (MHA) was imperative. This stance was underscored by a letter from the Government of India, which revealed the possibility of categorizing foreign donors as subject to ‘Prior Reference/Permission’ based on inputs from field or security agencies. In 2013, the Reserve Bank of India (RBI) mandated banks to notify the Ministry before granting clearance for any fund inflow from ‘Dan Church Aid’, as per communication from the MHA. Notably, the MHA specifically directed the bank not to credit funds from ‘Dan Church Aid’ to any account without proper clearance. Given the unequivocal directive provided in the MHA’s letter dated October 31, 2013, the Court reached the verdict that Manasa could not claim entitlement to the funds without obtaining clearance from the ministry. Consequently, the Court found the petition without merit and dismissed it.

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Written by- Shreya Sharma