Economic, Commercial and Intellectual Property Laws · Law relating to Foreign Contribution Regulation

FCRA Powers of Inspection, Seizure, Penalties and Offences

Updated 11 October 2026 · Fact-checked

Under the FCRA, 2010, the Central Government can authorise an officer to inspect accounts and records (section 23), seize them (section 24) or seize articles, currency or securities (section 25). Eligible offences can be compounded before prosecution (section 41). Answer by stating the power, its condition, and the safeguard.

Understand Powers of Inquiry, Seizure, Penalties and Offences

The FCRA, 2010 regulates foreign contribution. Rules alone do not work unless the Government can check compliance. So the Act gives powers to inspect, seize and compound. Each power has a trigger and a limit. Examiners test those triggers and limits.

Inspection (section 23). The Central Government must have a ground to suspect that the Act has been or is being contravened by a political party, person, organisation or association. It must record its reasons in writing. It then authorises, by general or special order, a gazetted officer holding a Group A post under the Central Government, or another officer, authority or organisation it thinks fit. This is the inspecting officer. The officer may enter premises at a reasonable hour, after sunrise and before sunset, to inspect the account or record.

Seizure (sections 24 and 25). Section 24 follows an inspection. If the inspecting officer has reasonable cause to believe that a provision of the Act, or of any other law relating to foreign exchange, has been or is being contravened, he may seize the account or record. He produces it before the court, authority or tribunal where proceedings for the contravention are brought. If no proceeding is brought within six months from the date of seizure, the record must be returned to the person it was seized from. Section 25 is different. A gazetted officer authorised by the Central Government may seize an article above the specified value, or currency or security (Indian or foreign), if he has reason to believe a provision of the Act has been or is being contravened in relation to it.

Compounding (section 41). An offence that is not punishable with imprisonment only may be compounded before any prosecution is instituted. The officers or authorities, and the sums, are those the Central Government specifies by notification. A repeat offence within three years of an earlier compounding cannot be compounded. Once compounded, no prosecution follows for that offence.

Suspension and cancellation. These are linked controls over the registration certificate. Under section 13 the Government may suspend the certificate for 180 days, or a further period not exceeding 180 days, while it considers cancellation. Under section 14 it may cancel the certificate on listed grounds after giving a reasonable opportunity of being heard. A cancelled holder is barred from registration or prior permission for three years. Delegation of powers is allowed by notification under section 47, except the power to make rules.

Key rules to remember

Section 23 - Inspection: Ground to suspect contravention (reasons recorded in writing) → order authorising inspecting officer → entry after sunrise and before sunset; Applies to any political party, person, organisation or association. The officer is a Group A gazetted officer or other officer, authority or organisation the Government thinks fit.
Section 24 - Seizure of accounts or records: Inspection under section 23 + reasonable cause to believe contravention of the Act or of any other law relating to foreign exchange → seize account or record → produce before court, authority or tribunal; Return the record if no proceeding is brought within six months from the date of seizure.
Section 25 - Seizure of article, currency or security: Authorised gazetted officer + reason to believe contravention → seize article above specified value, or currency or security (Indian or foreign); No prior inspection is needed. The test is 'reason to believe'.
Section 41 - Compounding: Offence not punishable with imprisonment only + before institution of prosecution + application in prescribed form and fee → compounded by notified officer for notified sum; Not available for an offence committed within 3 years of an earlier compounding of a similar offence. An offence after 3 years is treated as a first offence.
Section 13 - Suspension: Reasons in writing + pending cancellation inquiry → suspend certificate for 180 days, extendable by up to a further 180 days; No foreign contribution may be received during suspension, unless the Government allows it on application. Existing foreign contribution is used only with prior approval.
Section 14 - Cancellation: Inquiry + ground in section 14(1) + reasonable opportunity of being heard → cancellation; bar of 3 years on registration or prior permission; Grounds include false statement, breach of conditions, breach of the Act, public interest, and no reasonable activity for two consecutive years or becoming defunct.

How to solve Powers of Inquiry, Seizure, Penalties and Offences questions

Use this method for any question on FCRA inspection, seizure, compounding or certificate action.

1Identify the power asked about: inspection (s. 23), seizure of records (s. 24), seizure of article, currency or security (s. 25), compounding (s. 41), suspension (s. 13) or cancellation (s. 14).
2State the provision in plain words, with the section number.
3Check the trigger: 'ground to suspect' for inspection, 'reasonable cause to believe' for section 24, 'reason to believe' for section 25.
4Check who acts and any procedure: written reasons, authorised officer, hours of entry, hearing before cancellation.
5Apply the facts: match each fact to a condition, such as the six-month period, the three-year gap or whether the offence carries imprisonment only.
6Check the limit or safeguard: return of records, no compounding after prosecution starts, bar after cancellation.
7Write a clear conclusion that answers the question asked.

Quickest way: Trigger, Authority, Limit

When to use it: Use in a short-note or case-based question when time is tight.

Write the section and the power in one line.
Write the trigger in the Act's words.
Write who may act.
Write the limit: six months, three years, 180 days or hearing.
Close with one line applying it to the facts.

Common mistakes in Powers of Inquiry, Seizure, Penalties and Offences

Treating section 23 and section 24 as the same power.
Both concern accounts and records, so they seem alike.
Fix: Section 23 allows inspection only. Section 24 allows seizure after inspection, on reasonable cause to believe contravention.
Saying seized records can be kept indefinitely.
Students remember the power but forget the proviso.
Fix: State that the record must be returned if no proceeding is brought within six months from the date of seizure.
Saying any offence can be compounded.
Students ignore the condition in section 41(1).
Fix: Compounding applies only to offences not punishable with imprisonment only, and only before prosecution is instituted.
Forgetting the three-year rule on repeat compounding.
The sub-section and its Explanation are read in a hurry.
Fix: A similar offence within three years of compounding cannot be compounded. After three years, the next offence is deemed a first offence.
Confusing suspension with cancellation.
Both affect the certificate, so students blur them.
Fix: Suspension is temporary (180 days, extendable by up to 180 days) and is used pending cancellation inquiry. Cancellation ends the certificate, needs a hearing, and bars fresh registration for three years.
Saying section 25 needs a prior inspection.
It is read together with section 24.
Fix: Section 25 stands alone. An authorised gazetted officer acts on reason to believe a contravention in relation to the article, currency or security.

Worked examples

Example 1

The Central Government suspects that Sahyadri Seva Trust, a Pune NGO, has misused foreign contribution. An inspecting officer inspects its accounts and has reasonable cause to believe the Act was contravened. He seizes the accounts on 1 March. No proceeding is brought against the Trust. On 15 September the Trust demands the accounts back. Advise.

Show the solution

Provision: under section 23, the Central Government, with reasons recorded in writing, may authorise an officer to inspect accounts of any person, organisation or association. Under section 24, after such inspection the officer may seize the account or record on reasonable cause to believe a contravention, and produce it before the court, authority or tribunal.
Facts: the inspection and the seizure on 1 March were valid, as the officer had reasonable cause to believe a contravention.
Proviso to section 24: the record must be returned if no proceeding is brought within six months from the date of seizure.
Six months from 1 March ended on 1 September. No proceeding was brought by then, and 15 September is after that date.

Answer: The seizure was valid, but the six-month period has expired with no proceeding. The authorised officer must return the accounts to the Trust.

Example 2

Himalaya Welfare Society's FCRA offence was compounded on 10 January 2024. It commits a similar offence on 20 June 2025 and applies to compound it, before any prosecution. Can it be compounded? Would your answer change if the second offence were committed on 20 June 2027?

Show the solution

Provision: under section 41(1), an offence not punishable with imprisonment only may be compounded before prosecution, by the officers and for the sums notified by the Central Government.
Section 41(2): compounding is not available for an offence committed within three years from the date a similar offence was compounded.
First case: three years from 10 January 2024 runs to 10 January 2027. An offence on 20 June 2025 falls within this period.
Second case: 20 June 2027 is after the three-year period. By the Explanation, it is deemed a first offence.
Even then, the offence must not be punishable with imprisonment only, and the application must be made before prosecution is instituted.

Answer: The 2025 offence cannot be compounded because it falls within three years of the earlier compounding. An offence on 20 June 2027 would be treated as a first offence and could be compounded, subject to the other conditions of section 41.

Exam tips

Learn the trigger words: 'ground to suspect' (s. 23), 'reasonable cause to believe' (s. 24), 'reason to believe' (s. 25). Examiners reward exact use.
Always give the six-month return rule when you write on section 24.
In compounding questions, check three things: not imprisonment-only, before prosecution, and the three-year gap.
For a 'differentiate suspension and cancellation' question, use two columns of points: purpose, duration, hearing, consequence.
Cite the Act and section in every answer, then end with a one-line conclusion.

Practice questions from Law relating to Foreign Contribution Regulation

Powers of Inquiry, Seizure, Penalties and Offences: frequently asked questions

What does section 24 of the FCRA say?

After an inspection under section 23, the inspecting officer may seize an account or record if he has reasonable cause to believe the Act, or any other law relating to foreign exchange, has been or is being contravened. He produces it before the court, authority or tribunal. If no proceeding is brought within six months of seizure, the record must be returned.

Can every FCRA offence be compounded?

No. Section 41 covers offences not punishable with imprisonment only. Compounding must happen before prosecution is instituted. It is not available for a similar offence within three years of an earlier compounding.

What is the difference between suspension and cancellation under FCRA?

Suspension under section 13 is temporary. It runs for 180 days, extendable by up to a further 180 days, while cancellation is being considered. Cancellation under section 14 ends the certificate after a reasonable opportunity of being heard, and the holder cannot get registration or prior permission for three years.

Who can inspect accounts under the FCRA?

An inspecting officer authorised by the Central Government under section 23. He is a gazetted officer holding a Group A post under the Central Government, or another officer, authority or organisation the Government thinks fit. The Government must have recorded its grounds to suspect a contravention in writing.