Foreign Contribution Regulation Act, 2010 (“FCRA”) is the centerpiece legislation against undue and illegal foreign interference in the domestic affairs of the country. Previously, FCRA 1976 was enacted to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain persons or association to ensure that the parliamentary institutions, political association, academic, and other voluntary organizations, as well as other individuals, may function in a manner consistent with the values of a sovereign democratic republic.  FCRA  was enacted to consolidate the law regulating the acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest and matters connected therewith or incidental thereto.

In the present case we are concerned with the prohibition instituted by FCRA on receiving foreign funding on ‘organizations of political nature’. A political organization need not be engaged in electoral and representative politics but may still play an integral role in influencing the general polity of the State. However, restrictions on funding if not properly delineated may run foul of the constitutional guarantees enshrined in the Constitution. The clash of interpretation in this instant is over the ambit of ‘political nature’ under FCRA. A less restrictive interpretation of ‘political nature’ may widen the net of restrictions and thereby complicate the rights-restriction calculus under Part III of the Constitution.

 In Indian Social Action Forum (INSAF) v. Union of India, Petitioner sought a declaration that the Section 5(1) and 5(4) of the FCRA and Rule 3(i), 3(v) and 3(vi) of the FCR Rules, 2011 are violative of Article 14, 19(1)(a), 19(1)(c) and 21 of the Constitution. The order of constitutionality challenge by the Petitioner operates principally on three levels; firstly, the impugned section itself is challenged; secondly, the impugned rules were canvassed as being ultra vires to the Parent Legislation; thirdly, a direct constitutionality challenge was mounted upon the impugned rules.

Constitutional Challenge to Section 5(1) of the Act 

Section 5 stipulates that the Central Government shall specify an organization as an organization of a political nature not being a political party as referred to in Section 3(1)(f) having regard to the activities of the organization or the ideology propagated by the organization or association of the organization with the activities of any political party.

Section 5(1) of the FCRA prescribes that any organization of a political nature not being a political party shall not accept foreign contribution except with the prior permission of the Central Government. Procedurally, Section 5 of FCRA is the source of jurisdiction for notification of an entity as an ‘organization of political nature’ for the purpose of FCRA. This requires Central Government to issue a notice in writing informing the organization in respect of which the order is proposed to be made of the grounds on which an order under Section 5(1) is proposed.  The entity, as per Section 5(3) of the FCRA, is allowed to submit its representation which shall be considered within the time prescribed in Section 5 and order is required to be passed recording the reasons prompting the notification.

While challenging the constitutionality of Section 5(1) of FCRAT, the Petitioners assailed the wording of the Section as being vague and ill-defined; this imprecise character of the provision was claimed to have conferred unbridled and unfettered power to the executive as far as a designation under Section 5 of the FCRA is concerned. The center-point of this challenge is whether the words ‘having regard to the activities of the organization or the ideology propagated by the organization or the programme of the organization or the association of the organization with the activities of any political party” offer sufficient guidance for the exercise of power to notify an organization as an organization of political nature.

he High Court of Delhi ruled that the presence of words such as ‘activities of the organization, the ideology propagated by the organization and the programme of the organization’ bears a nexus to the activities indicative of political nature and are thus incapable of being termed as vague or uncertain. The principal challenge of the Appellant-organization to Section 5(1) of the Act is on the ground that the terms ‘activity, ideology, and programme’ are vague and have not been defined in the Act which results in conferring unbridled and unfettered power on the executive.

The power to declare impugned legislation as unconstitutional due to vagueness arises out of the prohibition against arbitrariness under Article 14 of the Constitution. Article 14 offers little by means of remedy to the petitioner who is aggrieved with the presence of insufficient or ineffective safeguards in the exercise of impugned section. While it is comparatively easier to equate the absence of guidance with arbitrariness, the same cannot be said for legislations with  “insufficient” guidance. The ground of arbitrariness cannot be used by the petitioner to legislate “guidance” into the impugned legislation through litigation.

Hon’ble Supreme Court found that the impugned Section offered guidance for the exercise of power conferred upto the extent that the impugned section cannot be termed as being violative of Article 14 of the Constitution.

Constitutional Challenge to Section 5(4) of the FCRA

The Petitioner also challenged Section 5(4) of the Act on the ground that the impugned section does not specify the relevant authority to whom a representation under Section 5 of the FCRA Act is to be made by the applicant.

Hon’ble Supreme Court ruled that Section 5(4) of the FCRA cannot be declared as unconstitutional solely on the ground that the authority to whom representation should be made has not been specified. 

Constitutional Challenge to Rule 3 of FCR Rules, 2011

The petitioner assails the vagueness and the scope of misuse and abuse while roping voluntary organizations within the sphere of the Act. Petitioner also argues that Rule 3(i), 3(v), 3(vi) suffers from the vice of over-breadth and is liable to be declared as unconstitutional. Petitioner points out that unfettered discretion would result in a purely voluntary organization being deprived of their right to receive foreign contributions based on vague guidelines prescribed in Rule 3 of FCR Rules, 2011. This deprivation was also claimed by the Petitioners as a violation of freedom of speech and expression and the right to form association protected under Article 19(1)(a) and 19(1)(c) of the Constitution.

 Petitioner highlighted that the words ‘political objectives’, ‘political activities’, ‘political interests’ and ‘political action’ used in Rule 3 have no clarity and any activity though not connected with party politics can be brought into the fold of Rule 3. The aforementioned safeguard under Section 3 of FCRA offers direction to the exercise of power to notify an organization as an organization of political nature. The claim of vagueness appears well-placed given the obvious duplication of coverage amongst entries listed under Section 3 of the Rules. Significantly, the Court ruled that guidelines that are prescribed by the Rules indicate that only those organizations which are actively involved in politics or associated with political parties can be declared as organizations of a political nature. The Court, relying on the doctrine of reading down, sought to strike a balance between the object that is sought to be achieved by the legislation and the rights of the voluntary organizations to have access to foreign funds. The expression ‘political interests’ in Rule 3(v) has to be construed to be in connection with active politics or party politics. The use of the phrase “active” implies that the prohibition from receiving foreign aid, by those who are involved in active politics is to ensure that the values of a sovereign democratic republic are protected. On the other hand, voluntary non-political organizations working for the social and economic welfare of the society cannot be brought within the purview of the Act or the Rules by enlarging the scope of the term ‘political interests’. The balancing involved also ringfences the right of such an organization to support public causes by resorting to legitimate means of dissent without being deprived of its legitimate right to receive foreign contribution. Thus, only those organizations which have a connection with active politics or take part in party politics are covered by Rule 3 (vi). In other words, an organization that is not involved in active politics or party politics do not fall within the purview of Rule 3 (vi) of the FCR Rules of 2011.

Additionally, a key remark of the Court which I think is often lost on Petitioners is the distinction between conferment of power and the exercise of power especially when it concerns challenges of constitutionality through the instrument of writ jurisdiction. It must be reiterated that a declaration of constitutionality does not inoculate against a Court-based remedy for arbitrary exercise of power and similarly, an arbitrary exercise  of power much less an apprehension cannot be a proxy to decide upon the unconstitutionality of the provision.  Nevertheless, the Judgment postulates a stringent bar that does justice not only to the express wording but also the intent of the legislation.