NGOs vs. GoI: The Conflicts and Scrutinies

Foreign Funding of Public Organizations


From UPSC perspective, the following things are important :

Prelims level: FCRA

Mains level: Issues with foreign funding

The Central government cannot brand an organisation ‘political’ and deprive it of its right to receive foreign funds for using “legitimate forms of dissent” like bandh, hartal, road roko or jail ‘bharo’ to aid a public cause, the Supreme Court held.

Why such Judgement?

  • The verdict came on a petition filed by Indian Social Action Forum challenging certain provisions of the Foreign Contribution Regulation Act (FCRA), 2010 and the Foreign Contribution (Regulation) Rules of 2011.
  • Both of these confer the Centre with “unguided and uncanalised power” to brand organisations ‘political’ and shut down their access to foreign funds.
  • The FCRA 2010 prohibited acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest, it the court said.
  • The FCRA and its Rules allowed the government to indulge in its whims and fancies to deprive organisations of their foreign contributions.
  • The terms used in the statute like ‘political objectives’, ‘political activities’, ‘political interests’ and ‘political action’ had no clarity.

Issues with FCRA

  • The provisions under challenge before the court included Section 5 (1) of the FCRA.
  • This provision allowed the Centre a free hand to decide whether a seemingly non-political organisation was actually political in nature. INSAF argued that Section 5(1) was vague and thus unconstitutional.
  • The Delhi High Court, which INSAF approached first, said the provision was “expansive” and not vague. The Supreme Court agreed with the High Court.
  • The next provision under the microscope was Section 5(4) of the FCRA.
  • INSAF said the provision did not exactly identify the authority before which an organisation could represent its grievance. But the apex court dismissed this contention.
  • INSAF had also challenged the various clauses of Rule 3 of the 2011 Rules. This provision identified the various types of ‘political’ activities for which/organisations whose foreign funding could be stopped by the government.

Foreign funds are permissible for non-political organizations

  • Any organisation which supports the cause of a group of citizens agitating for their rights without a political goal or objective cannot be penalized by being declared as an organisation of a political nature.
  • But the foreign funding pipeline could be cut if an organisation took recourse to these forms of protest to score a political goal, the court said.
  • It struck a similar balance in the cases of organisations of farmers, workers, students, youth based on caste, community, religion, language, etc.
  • It said their foreign funding could continue as long as these organisations worked for the “social and political welfare of society” and not to further “political interests”.

What about Political Organizations?

  • The court wholesomely agreed that organisations with avowed political objectives in its memorandum of association or bye laws cannot be permitted access to foreign funds.
  • Such organisations were clearly of a “political nature,” it concluded.

Why regulate foreign funding?

  • The purpose for which the statute prevents organisations of a political nature from receiving foreign funds is to ensure that the administration is not influenced by foreign funds.
  • Prohibition from receiving foreign aid, either directly or indirectly, 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, such of those voluntary organisations which have absolutely no connection with either party politics or active politics cannot be denied access to foreign contributions.



  • Government of India enacted the Foreign Contribution (Regulation) Act (FCRA) in the year 1976 with an objective of regulating the acceptance and utilization of foreign contribution.
  • The act was majorly modified in 2010 with several amendments because many NGOs were found using illegal use of foreign funding.
  • It is a consolidating act whose scope is to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies.
  • It aims to prohibit funding for any activities detrimental to the national interest and for matters connected therewith.
  • In 2016 license of about 20,000 NGOs were cancelled after reviewing their work.

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