Why the Supreme Court said no right exists to receive foreign funds.

One Bank, One Account, One Country: The Supreme Court’s FCRA Verdict and What It Means for Every NGO

Noel Harper and several other trusts and NGOs walked into the Supreme Court of India with a simple plea: the 2020 amendments to the Foreign Contribution (Regulation) Act, 2010, had made their work impossible. They were not asking for a right to receive foreign money—they were asking for the right to function at all. The stakes were existential. If the amendments stood, every NGO receiving foreign funds would have to close its existing bank accounts, open a single account at one specific branch of the State Bank of India in New Delhi, stop transferring funds to other NGOs, and make its office bearers produce Aadhaar cards. For organisations working in remote villages, this was not a regulatory tweak. It was a shutdown order.

On April 8, 2022, a three-judge Bench of the Supreme Court—Justice A.M. Khanwilkar (author), Justice Dinesh Maheshwari, and Justice C.T. Ravikumar—delivered its verdict. The amendments were largely upheld. But the Court did something crucial: it read down the Aadhaar requirement, allowing Indian passports as an alternative. The judgment, reported as Noel Harper & Ors. v. Union of India & Anr., 2022 LiveLaw (SC) 355, is now the definitive word on how far the State can go in regulating foreign contributions.

The 2020 Amendments That Changed Everything

The FCRA, 2010, had been in force for a decade. Then, in 2020, Parliament amended four key provisions. Section 7 was tightened to prohibit the transfer of foreign contributions to any other person or entity. Section 12(1A) made it mandatory for every NGO to open its FCRA account only at the New Delhi Main Branch of the State Bank of India. Section 12A required all key functionaries to furnish Aadhaar numbers for registration. And Section 17(1) mandated that all foreign contributions be received only in that designated SBI account.

The petitioners—three writ petitions filed under Article 32—argued that these changes were arbitrary, impractical, and violated their fundamental rights under Articles 14, 19(1)(a), 19(1)(c), 19(1)(g), and 21 of the Constitution. They invoked the doctrine of manifest arbitrariness from Shayara Bano v. Union of India (2017) 9 SCC 1, and the reasonableness test from Maneka Gandhi v. Union of India (1978) 1 SCC 248. They also cited K.S. Puttaswamy (Aadhaar) v. Union of India (2019) 1 SCC 1, arguing that mandatory Aadhaar violated privacy.

The Union of India, represented by the learned Attorney General, defended the amendments as necessary for transparency and accountability. One counter-petitioner in WP 634/2021 even sought stricter enforcement, citing concerns about misuse of foreign funds for religious conversion—relying on Rev. Stainislaus v. State of M.P. (1977) 1 SCC 677.

What the Court Actually Held

The Supreme Court upheld Sections 7, 12(1A), and 17(1) as constitutional. It declared that no fundamental right exists to receive foreign contribution. The State, the Bench observed, has plenary power to regulate or even prohibit foreign donations entirely. The amendments, the Court said, were not arbitrary—they were reasonable regulatory measures.

But the Court did not stop there. On Section 12A, it found that mandating Aadhaar alone for Indian nationals was disproportionate. The provision was read down: Indian nationals who are key functionaries of applicant associations can now produce an Indian Passport as an alternative identification. This was a direct application of the proportionality principle from K.S. Puttaswamy, though the Court distinguished that case on facts.

THE PLAY: When challenging a regulatory amendment, do not argue inconvenience alone. Argue disproportionality. The Court will uphold the regulation, but it may read down the specific requirement that fails the proportionality test.

The Doctrine That Mattered: No Right to Receive Foreign Contribution

The single most important ratio in this judgment is this: no right inheres in any citizen to receive foreign contribution. This is not a right that flows from Article 19(1)(c) (right to form associations) or Article 19(1)(g) (right to practise any profession). The State can completely prohibit receipt of foreign donations. If that is the case, then regulatory measures—even stringent ones—are within Parliament's competence.

The Court relied on INSAF v. Union of India, AIR 2020 SC 1363, which had already upheld the FCRA as a regulatory measure. It also cited R.K. Garg v. Union of India (1981) 4 SCC 675 for the proposition that courts must exercise self-limitation in economic regulation, and Laxmi Khandsari v. State of U.P. (1981) 2 SCC 600 for the principle that individual hardship cannot invalidate a law serving broader public interest.

The petitioners had argued that the amendments were manifestly arbitrary under Shayara Bano. The Court disagreed. It held that the amendments were not arbitrary—they were designed to prevent misuse of foreign funds, ensure accountability, and enable effective monitoring. The inconvenience of opening a single account in New Delhi, the Court said, cannot attract constitutional inhibition.

The Transfer vs. Utilisation Distinction

One of the most practically significant parts of the judgment is the Court's interpretation of Section 7. The provision prohibits the transfer of foreign contributions to any other person or entity. The petitioners argued that this would prevent them from paying third-party vendors for services like printing, logistics, or consultancy.

The Court drew a clear line: transfer under Section 7 means a per se simplicitor transfer to a third party without engaging in definite activities. Paying a third party for services while the NGO itself undertakes the activities constitutes utilisation, not transfer. This distinction is critical. It means that NGOs can still hire contractors, pay for services, and operate normally—as long as they are not simply passing foreign funds to another entity without doing the work themselves.

Why the Designated Bank Account Survived

The requirement to open an FCRA account only at the New Delhi Main Branch of SBI was perhaps the most controversial amendment. Petitioners argued that it was impractical for NGOs operating in remote areas. The Court acknowledged the inconvenience but held that it was a reasonable regulatory measure for effective monitoring.

The Bench observed that Parliament understands and reacts to the needs of its people per exigencies and experience in implementation of law. This obiter dictum strengthens the presumption of constitutionality in future challenges to regulatory amendments based on operational inconvenience.

The Aadhaar Read-Down: A Partial Win

On Section 12A, the Court gave the petitioners a partial victory. It held that the provision must be read down to permit Indian nationals who are key functionaries of applicant associations to produce an Indian Passport as identification, not exclusively Aadhaar. This was a direct response to the privacy concerns raised under K.S. Puttaswamy.

But the Court did not strike down the Aadhaar requirement entirely. It merely provided an alternative. For foreign nationals or non-citizens, the Aadhaar requirement may still apply. The read-down is limited to Indian nationals.

What This Means for Practitioners

For advocates advising NGOs, this judgment is a roadmap. First, understand that the FCRA amendments are here to stay. Do not waste time challenging the designated bank account or the transfer prohibition on grounds of inconvenience. Instead, focus on the proportionality of specific identification requirements. The Court has shown a willingness to read down provisions that are disproportionate, even while upholding the regulatory framework.

For CFOs and founders of NGOs, the message is clear: compliance is mandatory, but it is not impossible. The designated SBI account in New Delhi is a logistical hurdle, but it can be managed. The transfer prohibition under Section 7 does not prevent you from paying vendors for services—it only prevents you from passing funds to another NGO without undertaking the work yourself. And for Indian nationals, a passport is now an acceptable alternative to Aadhaar.

The Bottom Line

The Supreme Court has affirmed that the State can regulate foreign contributions stringently, but it must do so proportionately—and when it fails that test, the Court will read down the offending provision rather than strike down the entire framework.