Case Title: Indian Social Action Forum (INSAF) V. Union of India
The Foreign Contribution (Regulation) Act (FCRA) 2010 and the Rules enacted thereunder do not prohibit groups promoting public causes without political ties from taking foreign contributions, the Supreme Court ruled.
An "organisation of political nature" as defined by the Central Government is prohibited from collecting foreign donations under Section 3(1)(f) of the FCRA. The Centre established the requirements for designating an organisation in accordance with Rule 3 of the FCRA Rules 2011.
An organisation called the Indian Social Action Forum questioned the legitimacy of these standards, calling them ambiguous and arbitrary (INSAF). Judges L. Nageswara Rao and Deepak Gupta, a division bench, read down the challenged Rules 3(v) and 3(vi), and they concluded:-
"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".
The majority of the Bench ruled that the FCRA does not apply to groups that promote public issues by organising bandhs, hartals, strikes, etc. These groups are not subject to the FCRA's restriction on such activities.
The Court noted while interpreting Rule 3 of the FCRA:-
"Any organisation which habitually engages itself in or employs common methods of political action like 'bandh' or 'hartal', 'rasta roko', 'rail roko' or 'jail bharo' in support of public causes can also be declared as an organisation of political nature, according to the guideline prescribed in Rule 3 (vi). Support to public causes by resorting to legitimate means of dissent like bandh, hartal etc. cannot deprive an organisation of its legitimate right of receiving foreign contribution."
The Court also outlined the need to strike a balance between the goal of the Act and the rights of non-profit organisations to obtain foreign contributions. While it was crucial to uphold the sovereign's ideals, it cannot be ruled out that organisations working for social and economic benefit without regard to politics will receive foreign funding.
The Court heavily relied upon Tata Engineering and Locomotive Co. Ltd. v. State of Bihar and Shree Sidhbali Steels Ltd. vs. State of Uttar Pradesh and concluded by stating that, to prevent the clause from being ruled as illegal, Rule 3 (vi) only applies to organisations having ties to active politics or that participate in party politics. To be clear, Rule 3(vi) does not apply to organisations that are not actively engaged in party politics or active politics.