FCRA Suspension, Cancellation and Management of Foreign Contribution

Understand Suspension, Cancellation and Management of Foreign Contribution

Key rules to remember

Suspension period (section 13(1))

Suspension = 180 days, or such further period not exceeding 180 days as specified in the order

Reasons must be recorded in writing. It is pending consideration of cancellation on a ground in section 14(1).

Effect of suspension (section 13(2))

No receipt of foreign contribution; use of funds in custody only in the prescribed manner with prior approval

Proviso: the Government may, on application, allow receipt on terms it specifies.

Grounds of cancellation (section 14(1))

(a) false or incorrect statement in application; (b) violation of terms and conditions of certificate; (c) public interest; (d) violation of the Act, rules or orders; (e) no reasonable activity for two consecutive years, or defunct

Remember the five grounds as: false statement, breach of conditions, public interest, breach of the Act, inactive or defunct.

Natural justice (section 14(2))

No cancellation without a reasonable opportunity of being heard

An order passed without hearing is vulnerable.

Bar after cancellation (section 14(3))

Ineligible for registration or prior permission for 3 years from date of cancellation

Counted from the date of cancellation.

Surrender (section 14A)

Permitted if no contravention and management vested in authority under section 15(1)

Inserted w.e.f. 29-9-2020.

Vesting (section 15)

Foreign contribution and assets created out of it vest in the prescribed authority

Applies on cancellation under section 14 or surrender under section 14A. Authority may manage activities in public interest and may use funds or dispose of assets if funds are inadequate. It must return them if the person is subsequently registered.

Disposal of assets (section 22)

Person ceases to exist or defunct: assets disposed per the law of registration or incorporation; if none, as notified by the Central Government

The notified authority acts in the manner and procedure prescribed.

How to solve Suspension, Cancellation and Management of Foreign Contribution questions

1. 1Identify the stage: pending inquiry (suspension), final action (cancellation), voluntary exit (surrender), or aftermath (section 15 or 22).
2. 2Name the section that governs that stage and state the rule in plain words.
3. 3Check the conditions. For suspension: written reasons and the period. For cancellation: which ground in section 14(1) applies, and was a hearing given?
4. 4Apply the facts to the ground or condition. Quote the key facts, such as two consecutive years of no activity or a false statement.
5. 5State the consequences: bar on receipt, three-year ineligibility, vesting of funds and assets under section 15.
6. 6If the person has ceased to exist or is defunct, apply section 22 rather than section 15.
7. 7Close with a clear conclusion citing the Act and section.

Quickest way: Stage, section, ground, consequence

Common mistakes in Suspension, Cancellation and Management of Foreign Contribution

• Saying the Government can cancel a certificate without hearing the holder.

  Students focus on the grounds and forget the safeguard in section 14(2).

  Fix: Always write that a reasonable opportunity of being heard must be given before cancellation.

• Treating suspension as permanent or giving a wrong period.

  Students confuse suspension with cancellation and forget the 180-day limit.

  Fix: Remember: suspension is temporary, pending the cancellation question, for 180 days or a further period up to 180 days.

• Stating that a person whose certificate is cancelled can apply again immediately.

  The three-year bar in section 14(3) is overlooked.

  Fix: State that the person is ineligible for registration or prior permission for three years from the date of cancellation.

• Applying section 15 to every case of a defunct body.

  Sections 15 and 22 look similar since both deal with assets.

  Fix: Section 15 applies after cancellation or surrender. Section 22 applies where the person ceases to exist or becomes defunct.

• Forgetting that suspended holders can still use funds in some ways.

  Students assume suspension freezes everything.

  Fix: State that receipt is barred unless the Government allows it, and that funds in custody are used in the prescribed manner with prior approval.

• Omitting that vested assets are returned if the person is later registered.

  Students stop at vesting.

  Fix: Add section 15(3): the authority must return the foreign contribution and assets if the person is subsequently registered.

Worked examples