Section XIV

Monitoring, Inspection & Investigation

Section XIV

What is the mechanism followed by MHA to ensure acceptance and utilisation of foreign contribution are in accordance with FCRA, 2010?

Answer: A Monitoring Unit in the FCRA Wing of the Ministry of Home Affairs has been designated to monitor the receipt and utilisation of foreign contribution to ensure that the foreign contribution received by any person for a specific purpose is not misused or misappropriated or diverted towards personal gains or for any unlawful activity detrimental to the national interest.

Whether the accounts of a FCRA registered Association which regularly files its annual returns may be further examined/audited? If so, in what manner?

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Answer: Yes.  If the Government, after inspection of the annual returns furnished by the Association, has any reasonable cause to believe that any provision of FCRA, 2010 has been, or is being contravened, it may by general or special order get the books of account of the Association audited. The provision of Section 20 of FCRA, 2010 in this regard is reproduced below‒

“Where any person who has been granted a certificate or given prior permission, fails to furnish any intimation under this Act within the time specified therefor or the intimation so furnished is not in accordance with law or if, after inspection of such intimation, the Central Government has any reasonable cause to believe that any provision of this Act has been, or is being, contravened, the Central Government may, by general or special order, authorise such gazetted officer, holding a Group A post under the Central Government or any other officer or authority or organisation, as it may think fit, to audit any books of account kept or maintained by such person and thereupon every such officer shall have the right to enter in or upon any premises at any reasonable hour, before sunset and after sunrise, for the purpose of auditing the said books of account.

 

            Provided that any information obtained from such audit shall be kept confidential and shall not be disclosed except for the purposes of this Act.”

How does the Monitoring Unit of FCRA Wing play its role?

Answer: The Monitoring Unit is entrusted with the work of monitoring the mandatory annual returns submitted by the Associations having registration or prior permission under FCRA, 2010, identification of the Associations who have defaulted in filing annual returns as also in cases where prima facie contravention of the Act is noticed or if there is a complaint of misutilisation/misappropriation and/or any other violation or if any adverse report is received from any of the law enforcing agencies against any Association. The Monitoring Unit conducts detailed inspection of the books of account and the records of the Association in terms of Section 23 of FCRA, 2010. 

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Does the Monitoring Unit conduct its inspection with due notice to the Association concerned?

Answer: Yes. Advance intimation regarding the proposed date and time for the inspection, the name & designation of the Inspecting Officer(s) as also the reasons for the proposed inspection is given to the Association. A Questionnaire (Annexure-VIII) seeking various details is also sought from the Associations concerned before the inspection is undertaken.

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Could the Inspecting Team seize any record or article or currency during such inspections?

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Answer: Yes. During the inspection process, if the Inspecting Team has any reasonable cause to believe that any provision of FCRA, 2010 or any other law relating to foreign exchange has been or is being contravened, then such account or record may be seized for production of the same before the court, authority or tribunal in which such proceedings are brought for such contravention. The Inspecting Team shall return such account or record to the person from whom it was seized if no proceeding is brought within six months from the date of such seizure. [Section 24 of FCRA, 2010]. If the Inspecting Team has any reason to believe that any person has in his possession or control any article exceeding the value specified in Section 2(1)(h)(i), i.e., Rs. 25000/-, or currency or security whether Indian or foreign, in relation to which any provision of this Act has been or is being contravened, such article or currency or security may be seized. [Section 25 of FCRA, 2010]

Where any article, currency or security is seized, the Inspecting Team shall prepare an inventory providing description and value.  Such Inspecting Officer(s) shall also make an application to any Magistrate for certifying the correctness of inventory so prepared. The Central Government may dispose of the article, currency or security keeping in view the vulnerability to theft or any other consideration after following the due procedure. The Inspecting Officer(s) shall report the seizure to the Court of Session or Assistant Sessions Judge for adjudging the confiscation. [Sections 26 to 29 of FCRA, 2010]

What is achieved through such inspections?

Answer: The inspections have twin objectives – one, to educate the Associations in respect of bonafide errors and two, to detect the wilful violators for further investigation by the Investigating Agencies and prosecution, if necessary.  The main emphasis of the inspection is to ensure that foreign contribution is being utilized properly in conformity with the declared aims and objectives of the Associations concerned and for the purposes for which the same is received.  The provision for suspension/cancellation of registration has been introduced in FCRA, 2010 to ensure compliance of the Act and, this can be achieved through proper monitoring of receipt and utilisation of FC.

What follows such inspections?

Answer: After the inspection, the Inspecting Team furnishes the findings of the inspection to the Association concerned with directions to submit its reply to the observations/findings and to rectify the technical shortcomings, if any, within a specified date.  The reply of the Association is duly examined by the Inspecting Team and thereafter, the report is submitted to competent authority in MHA for decision.  Depending on the inspection report, the competent authority in MHA decides whether the violation could be compounded or sent to the Investigating Agency concerned for further investigation or whether there are sufficient grounds for suspension/cancellation of the registration or whether the Association should be placed in PP category.  While sending any case for investigation, a decision for freezing of the bank accounts of the Association and prohibiting the Association from receiving FC and dealing with the FC in its possession in terms of Sections 9 and 10 of FCRA, 2010 is also taken.

What are the common violations found during inspections?

Answer: The following common violations are found‒

• Receipt of FC and its utilisation without registration or PP.
• Mixing up of FC with domestic funds accounts.
• Failure to furnish mandatory annual return.
• Failure to maintain accounts, vouchers and assets registers etc. in proper manner.
• Utilisation of FC on purposes different from the letter granting registration/PP.
• Utilisation of FC on purposes different from the bylaws of an organisation.
• Utilisation of FC on purposes other than for which the same was received.
• Transfer of FC to other organisations without permission of the Government.
• Diversion of FC for personal gains.

Which are the investigating agencies for investigating and prosecuting a person for violation of FCRA?

Answer: In terms of Gazette Notification S.O. 2446 (E) dated 27.10.2011, the Investigating Agency (Crime Branch) of the State Government, cause of action which arises in that State, will be the investigating and prosecuting agency for such offences that involve a prime facie violation involving receipt of FC of an amount of less than Rs. 1 crore or equivalent.  The Central Bureau of Investigation (CBI) will be the agency for investigating and prosecuting such offences that involve a prime facie violation involving receipt of foreign contribution amounting to Rs. 1 crore or equivalent or above and in any other case which may be specifically entrusted to the CBI by the Central Government.

Could the offences committed under FCRA, 1976, i.e., before FCRA, 2010 came into force, be investigated under FCRA, 2010?

Answer: Yes.

Does MHA conduct its own inspection before handing over a case to the Investigating Authorities?

Answer: Yes. However, the investigating agencies may suo moto initiate a case where any contravention of FCRA, 2010 is suspected/noticed.​

What happens after a case is handed over by MHA to the investigating authorities for investigation?

Answer: Based on their findings in the preliminary enquiry, the investigating agencies will seek sanction from the authorities concerned for prosecution of the suspect person(s) in a court of law.  The Union Home Secretary is the authorised officer for according previous sanction under Section 40 of FCRA, 2010 for prosecution of offences investigated by the CBI and the Home Secretary of the State Government concerned is the authorised officer for the purpose in respect of offences investigated by the Investigating Agencies (Crime Branch) of the State Government.  After receipt of sanction for prosecution, the case will be sent to the Court of law.  However, if in the preliminary enquiry, the investigating agency finds no material evidence for prosecution, it may submit its report seeking direction for closure of the case. The investigating agency may also close the case if, for some reason, the competent authorised officer refuses to give sanction for prosecution. ​