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Case No.: 105 of 2024 (Contempt Petition) with SLP(CRL.) D. NO. 4235 OF 2021.
Date: April 5, 2024.
Court: Supreme Court of India.
Quorum: Hon’ble J. Vikram Nath, J. Prashant Kumar Mishra.

Facts of case:
This case arises from an FIR (No. 22 of 2016) lodged by the respondent against Operation Mobilization India & Others, the petitioners, under Sections 409, 420, 477(A), and Section 37 of the Foreign Contribution (Regulation) Act 2010. The Economic Offences Wing (CID), Telangana State, took up the investigation into alleged criminal breach of trust, cheating, falsification of accounts, and violations of the FCRA by the petitioners. The challenge to the FIR was rejected by the Supreme Court in a case in 2017, and the investigation was directed to be concluded promptly. However, there was only a slow progress, leading the informant to file another petition. The Supreme Court observed that if the petitioner had any grievance with the progress, they must approach the appropriate forum, including the High Court.
In 2019, the respondent filed a writ petition before the High Court, seeking directions for the investigation to be conducted by the CBI. The CBI, filed a counter affidavit declining any role in the investigation, citing reasons mentioned in the matter. On November 2020, after more than four years of the FIR registration, the CID Telangana State froze the accounts of petitioners, which included Operation Mobilization India, involved in running educational institutions and healthcare centres across India. The petition approached the High Court challenging the freezing of their accounts, but the High Court rejected it. Aggrieved by the High Court’s order, the petitioners filed a Special Leave Petition before the Supreme Court, seeking the relief against the freezing of accounts, which was required for the operations and payment of salaries and expenses.

Legal issues:
1. Whether the CID Telangana State is authorized to investigate cases under the FCRA involving an amount of more than Rs. 1 crore?
2. Whether the order freezing the accounts of the petitioners should be stayed to allow them to pay salaries and institutional expenses?

Legal provisions:
1. Indian Penal Code,1860
• Section 409 – Criminal breach of trust by a public servant.
• Section 420 – Cheating and dishonestly inducing delivery of property.
• Section 477A – Falsification of accounts.

2. Section 37 of the Foreign Contribution (Regulation) Act, 2010 which prescribes the punishment for contravention of any provision of the Act.

Contentions of petitioners:
The learned counsel for the petitioner mainly contented that the CID-TS lacked the authority to investigate cases under the FCRA when the amount involved exceeded Rs. 1 crore. They relied on the notification issued by the Ministry of Home Affairs, which designated the CBI as the competent authority to conduct investigation in FCRA cases involving amounts above Rs. 1 crore as per as their claim. The petitioners challenged the CID-TS’s order on November 2020, which froze their accounts. They contended that this action hampered their ability to carry out essential operations, including paying salaries to employees and meeting expenses in educational institutions and healthcare centres across 18 states in India. The petitioners argued that there was inordinate delay and lack of progress in the investigation and these were unjustified. The petitioners stated that they were willing to maintain a proper and complete statements of accounts for their institutional and salary expenses, get them audited by Chartered Accountants, and provide regular quarterly statements to the investigating agency or the Trial Court. This demonstrated their commitment to transparency and accountability in the use of funds. The petitioners sought interim relief from the Supreme Court by requesting a stay on the order freezing their accounts. They argued that this would enable them to continue their operations, particularly the payment of salaries and meeting institutions expenses, without disrupting he educational and healthcare services they provided to thousands of beneficiaries across the country.

Contentions of respondents:
The learned counsel for the respondents argued that the respondent through its letter to the Ministry of Home Affairs, expressed doubts about the jurisdiction of the CID-TS to investigate cases under the FCRA involving amounts more than Rs. 1 crore. This was written after the Supreme Court issued notice in the present case, indicating the state’s uncertainty about its investigative authority in such matters. In the same letter, the State of Telangana sought clarification and directions from the Ministry of Home Affairs on whether to permit the CID-TS to continue the investigation to the CBI. While the respondent admitted that petitioner ran numerous educational institutions and healthcare centres across the country, necessitating the availability of funds, they insisted on strict compliance with accounting practices. The respondents contended that the petitioners should maintain proper and complete statements of accounts, duly audited by CAs and make them available to the investigating agency regularly.
The respondents raised questions about the petitioners’ conduct and alleged violations of the FCRA and other provisions of the IPC. They argued that the freezing of accounts was a justified measure in light of the alleged offenses and the need to preserve evidence and prevent further misappropriation of funds. They challenged the claims of petitioner regarding the maintenance of accounts and the use of funds solely for institutional and salary expenses pointing towards potential misuse of funds or diversion of resources, necessitating a thorough investigation of the accounts. The respondents insisted on the continuation of the investigation should proceed unhindered, subject to the Court’s directions on maintaining audited accounts and providing regular statements.

Analysis of the Judgement:
The Supreme Court took note of the respondent’s admission, through its letter to the Ministry of Home Affairs, expressing doubts about the CID-TS’s authority to investigate cases under the FCRA involving amounts exceeding Rs. 1 crore. This letter raised question about the jurisdiction and competence of the state agency to handle such high – value FCRA cases. The Court recognised the need to find a balance between allowing the investigation to proceed and ensuring that the petitioner’s essential operations were not disrupted. This consideration arose from the contention by petitioner that the freezing of accounts has interfered their ability to pay salaries and meet expenses. The court granted interim relief by staying the order freezing the accounts insofar as salary and institutional expenses are concerned. This enabled the petitioners to continue their operations and uphold the public interest in maintaining the functioning of institutions and facilities. However, the court imposed conditions to ensure accountability in the use of fund by petitioners. It directed them to maintain proper and complete statements of accounts from institutional and salary expenses from the frozen accounts, get these accounts audited by charters accountants, and provide quarterly statements to the concerned authorities. The order aimed to ensure smooth functioning of 103 educational institutions and dozens of primary healthcare centres run by the petitioners. The Court allowed the pending proceedings before other forums to continue in accordance with the law, where parties could raise their contentions. It clarified that it had not made any observations on the merits of the case and the order was passed only to ensure the functioning of centres by recognising the public interest behind them.

Conclusion
The decision in this case demonstrates a judicious approach in addressing the concerns of both parties while prioritizing the functioning of the petitioners’ centres. It ensures the accountability and transparency in the use of funds. The judgement also highlights the need for clarity on investigative authority in FCRA cases involving large sums of money. Overall, the judgement strikes a balance between public interest and preserving the rights of all parties involved in the petition.

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Judgement reviewed by Maria Therese Syriac.

Click here to read the full Judgement.