"Karnataka High Court Highlights FCRA Registration Insufficient for Foreign Fund Crediting: MHA Clearance a Prerequisite
The Karnataka High Court recently emphasized that possessing a permanent registration under the 2010 Foreign Contribution (Regulation) Act (FCRA) does not confer the right to receive foreign donations directly into bank accounts. The court case, titled 'Manasa Centre For Development And Social Action Vs. The Managing Director, The Development Credit Bank Ltd,' saw Justice KS Hemalekha explaining that foreign fund transfers are contingent upon approval from the Union Ministry of Home Affairs (MHA).
Justice Hemalekha stated, 'Merely holding a permanent registration under the FCRA, 2010 does not entitle the petitioner to have the funds credited to the designated savings account, as this action is always subject to Ministry of Affairs clearance.'
The court considered a Government of India communication, which allows authorities to categorize foreign donors under 'Prior Reference/Permission Category' based on field feedback or inputs from security agencies.
This ruling came in response to a petition by the Manasa Centre For Development And Social Action, a Bengaluru-based registered society. The society had requested the release of funds held by the Development Credit Bank since 2013. Allegedly, the bank declined a cheque due to insufficient funds, despite the account having adequate balance.
The bank explained that it had set aside over ₹29 lakh and could only credit remittances from foreign entity 'Dan Church Aid' after obtaining MHA clearance. However, Manasa argued that the funds in their account came from other sources as well.
The court noted that in 2013, the Reserve Bank of India (RBI), following MHA communication, instructed banks to inform the ministry before clearing funds from 'Dan Church Aid' to any individual or entity in India. Manasa had received two inward remittances from 'Dan Church Aid,' prompting the DCB to seek MHA clearance. Subsequently, the bank was instructed not to credit the foreign contribution to Manasa's account.
Since the MHA explicitly directed the bank not to credit the 'Dan Church Aid' funds without ministry clearance, the court concluded that Manasa wasn't entitled to the funds. Consequently, the petition was dismissed due to lack of merit.
Advocate Siji Malayil represented Manasa Centre For Development And Social Action, while Advocate VL Sreenath represented the Development Credit Bank. Deputy Solicitor General Shanthi Bhushan appeared on behalf of the Union Ministry of Home Affairs."
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TAGS: Karnataka High Court FCRA Registration Foreign Contribution (Regulation) Act MHA Clearance Manasa Centre For Development And Social Action Development Credit Bank Justice KS Hemalekha Foreign Fund Crediting Ministry of Home Affairs Prior Reference/Permission Category Dan Church Aid RBI Fund Release Bank Account Court Ruling Bengaluru-based Society Remittances RBI Directive Dismissal of Petition Advocate Siji Malayil Advocate VL Sreenath Deputy Solicitor General Shanthi Bhushan.
