Tuesday, 23 August 2016

MHA May Allow NGOs To Apply For ‘Prior Permission’ Only Twice

According to latest reports, the Ministry of Home Affairs may now allow NGOs to receive foreign contributions through the Prior Permission route only twice and after which it must necessarily apply for ‘Registration’ under FCRA 2010.

FCRA 2010 offers two options:

1.     Prior Permission of the Central Government (Ministry of Home Affairs -- MHA) to receive a specific sum of money from a specific foreign source.
This option is usually exercised by NGOs which are less than three years old and therefore considered ineligible for Registration under FCRA 2010.
This option is also exercised for one-off contributions.
The NGO is required to file returns under FCRA till such time as the donation/grant is completely exhausted.

2.     Registration under FCRA means the NGO can receive unlimited funds from unlimited foreign sources.

Earlier NGOs could apply for Prior Permission as often as required. However, MHA will now restrict this to a maximum of two Prior Permissions and after which the NGO must apply for Registration.

The prior permission facility, according to MHA’s fresh interpretation of Section 12 of FCRA, 2010, and Rule 9 of FCRA Rules, is essentially meant for start-ups and cannot be used more than twice for the same project.

This interpretation, if enforced, may impact certain NGOs which are not in the government of India’s good books. For example a certain NGO has reportedly applied eight times since 2000 for prior permission to receive foreign contributions of which four were approved and four denied. To get any further contributions from abroad, this NGO may now have no option but to register under FCRA.

MHA in the meantime is of the view that FCRA 2010 and the Rules notified therein are clear that an NGO cannot seek prior permission for the same project more than twice.

Section 12(4)(b) of FCRA states that the 'person', (‘person’ is a term used for both individual and institution), making an application for registration should have undertaken reasonable activity in the chosen field for the benefit of society for which the foreign contribution was proposed to be utilized. This, according to the MHA means that start-ups can get foreign funding through the prior permission route until they are eligible for registration.

As per Section 12(4)(c) of FCRA 2010: “the person making an application for giving prior permission has prepared a reasonable project for the benefit of society for which the foreign contribution is proposed to be utilized”.

Rule 9 of FCRA Rules, meanwhile, says no person shall make a second application for registration or prior permission within six months of submitting an application either for the grant of prior permission for the same project or for registration.

According to MHA, there's a reason why the rule speaks of 'second' application and not 'subsequent' applications. The only logical reasoning is that there can be no third application for foreign funding for the same project under the prior permission route. For that, the NGO must first register under FCRA … or so the MHA feels!

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