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Case Title: MANSA–Centre for Development and Social Action v. Managing Director, Development Credit Bank & Others.

Case No: WRIT PETITION No.6111/2014

Date of Order: 11-08-2023

 

INTRODUCTION

The Karnataka High Court has recently decided that possessing a permanent registration according to the Foreign Contribution (Regulation) Act (FCRA) does not grant an absolute entitlement to deposit overseas donations into their specified savings account without approval from the Ministry of Home Affairs.

FACTS

The case’s background involves the petitioner, who informed the court about obtaining permanent registration under FCRA. Despite having sufficient funds, the bank (DCB) declined a cheque due to “insufficient funds” and rejected other cheques from the same account. Upon inquiry, the bank provided a letter stating that around Rs. 29,12,890.96 had been set aside. The bank explained that any funds received from “Dan Church Aid” could only be deposited into the petitioner’s account after obtaining approvals from the Ministry of Home Affairs, leading them to freeze these credits.

The petitioner argued that the frozen funds were not from “Dan Church Aid” but from different contributors. They claimed that the freezing was arbitrary and unjustified.

The respondents’ stance was that their actions followed a directive from the Ministry of Home Affairs, which prohibited crediting funds from “Dan Church Aid” without ministry clearance. This directive was aligned with FCRA and RBI regulations. They stressed that having permanent FCRA registration did not automatically allow fund crediting; clearance from the Ministry of Home Affairs was necessary. A letter from the Ministry dated 20.11.2018 to the ASGI was presented as support for the Ministry’s directive.

COURT’S ANALYSIS

The court recognized that the Foreign Contribution Regulation Act (FCRA) aims to regulate foreign contributions and hospitality to prevent activities detrimental to national interest. The Ministry assessed information from various sources, including security agencies, and categorized foreign donors into a “Prior Reference/Permission Category.” Banks were instructed not to deposit foreign funds until the Ministry provided clearance. In this case, “Dan Church Aid” was flagged by the Ministry due to negative information, leading to a directive to the petitioner’s bank not to deposit the funds.

The court emphasized that decisions to categorize donors as “Prior Reference/Permission” would be based on feedback and inputs from the field/security agency, in accordance with FCRA provisions. The Union’s “Prior Reference/Permission Category” was communicated to the Reserve Bank of India (RBI), which instructed banks to inform the Ministry before crediting funds from “Dan Church Aid” to recipients’ accounts.

Due to adverse inputs about “Dan Church Aid,” the court ruled that the Ministry informed DCB Bank not to deposit the foreign contribution into the petitioner’s MANASA Centre for Development and Social Action account. As a result, the court dismissed the petitioner’s plea, as it was in line with the Ministry’s directive.

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Written by- Shreya Sharma