Lokpal & Lokayukta Act, 2013 - Should we ‘Comply’ or ‘Complain’???

The Lokpal & Lokayukta Act, 2013 (LLA) is an Act intended to Regulate and Control Corruption in ‘Public Institutions’. Unfortunately NGOs and charitable institutions which are voluntary organisations for public purposes and public good have also been included within the purview of this Act.

 

The Act has deemed trustees and officers of several charitable institutions and NGOs as ‘Public Servants’ and requires them under the new law to declare their assets in the public domain! This is already making several high profile persons serving on Boards of charitable institutions in a purely voluntary capacity consider stepping down and off the Boards of these institutions.

Many high profile businessmen and professionals contribute their time and other resources as trustees of these organisations or associations out of a sense of deep concern and a clear and committed sense of responsibility. Even senior officers of charitable institutions work on salaries far less than their corporate counterparts. But, now this law meant to being about transparency and accountability among ‘Government Servants’ and minimize corruption within the government sector has drawn in trustees and officers of charitable institutions as well.

Many charitable institutions today receive funds from ‘foreign sources’ and have High Net-worth Individuals on their Board and these individuals would rightly be most reluctant to disclose their personal assets in the public domain and make themselves vulnerable and exposed to extortionists and other anti-social elements, merely because of their involvement with a charitable institution in a purely honorary capacity.

Let us first examine who this Act applies to and how?

Definition of ‘Public Servants’ under the Act?

Section 14(1) (f), (g) & (h) are of particular relevance for most charitable institutions

Under Section 14(1)(f):

“Any person who is or has been a Chairperson or Member or Officer or Employee in any Body or Board or Corporation or Authority or Company or Society or Trust or Autonomous Body (by whatever name called) established by an Act of Parliament or Wholly or Partly financed by the Central Government or Controlled by it”.

Several charitable institutions are ‘partly financed’ by the Central Government and the term ‘partly financed’ is neither defined nor explained where this particular sub-clause is concerned.

Under Section 14(1)(g):

“Any person who is or has been a Director, Manager, Secretary or other Officer of every other Society or Association of Persons or Trust (whether registered under any law for the time being in force or not), by whatever name called, wholly or partly financed by the Government and the annual income of which exceeds Rs. 1 Crore”

This section clearly deems as ‘public servant’ every trustee, manager, officer etc., of a charitable trust or society which is wholly or partly financed by the Government and the annual income of which exceeds Rs. 1 Crore.

There is also a technical loop-hole. This sub-clause does not refer to Section 8 (earlier Section 25) companies, although some feel Section 8 companies would get covered under “by whatever name called”, as also, the ‘Explanation’ u/s 14(1) does clarify that a ‘corporate’ entity would be covered under clause (f) and (g).

Under Section 14(1)(h):

“Any person who is or has been a Director, Manager, Secretary or other Officer of every other Society, or Association of Persons or Trust (whether registered under any law for the time being in force or not) in receipt of any donation from any foreign source under the Foreign Contribution (Regulation) Act, 2010 in excess of Ten lakhs Rupees in a year or such higher amount as the Central Government may, by notification, specify.

The Explanation under Section 14(1) adds:

“For the purpose of clauses (f) and (g), it is hereby clarified that any entity or institution, by whatever name called, corporate, society, trust, association of persons, partnership, sole proprietorship, limited liability partnership (whether registered under any law for the time being in force or not), shall be the entities covered in those clauses”

‘Declaration’ by Public Servant

Under Section 44 of LLA, 2013, the deemed ‘public servant’ shall make a declaration of assets and liabilities in the manner as provided under this Act.

To reiterate, the definition of ‘Public Servant’ will cover every Board Member and Senior Employees of charitable institutions and NGOs wholly or partly financed by the Government and the annual income of which exceeds Ten Million Indian Rupees as also every Board Member and Senior Employees of charitable institutions and NGOs which receive in a year more than One Million Indian Rupees under FCRA 2010.

Under the Act, the declaration shall include:

1. The name of spouse, minor or dependent children and the position held by them, details of cash and bank balances and other moveable properties including investment, advances, vehicles, jewelry etc.

2. Details of immovable property whether residential, commercial, agricultural or otherwise, details of loan taken along with the detail of loan provider.

Reporting Authority:

The Competent Authority to whom the return shall be filed will be the respective Ministry which has provided the maximum proportion of the grant or donation during the previous year.

In case of foreign contribution received the Competent Authority shall be the Ministry of Home Affairs.

Where such ‘Public Servant’ or Director and Officer of a charitable trust or society or NGO does not make declaration of his/her assets, it will be treated as an offence and the Lokpal shall have the power to initiate inquiry and even confiscate the assets of such officers.

Many charitable institutions are not even aware that compliance under this Act is due by the end of this month (31^st July 2016).

Either ‘Comply’ or ‘Complain’!

In our view it’s time to complain and lobby for exemption. This is a classic case of misapplication of concepts of transparency within the government sector being foisted on the non-profit/voluntary/charitable sector. In our view, this is yet another needless punishment or deterrent for those involved in charitable activities!

Arise, Awake and Advocate for scrapping applicability of this law on voluntary and charitable institutions which are essentially filling major gaps in the government’s own delivery systems from education and health care to poverty alleviation and addressing environmental issues.

 

Noshir H. Dadrawala

Chief Executive, Centre for Advancement of Philanthropy

For any further queries, write to us at connect@capindia.in