The state has legitimate interest in regulating foreign contributions in India, as foreign donations raise national security, transparency and public accountability issues. For decades, Foreign Contribution (Regulation) Act has been instrument for this. However, Foreign Contribution (Regulation) Amendment Bill, 2026 raises different question - beyond regulating foreign money, to extent state may intervene in assets and institutional activities associated with it, write Thajaswini C.B. and Siddharth Dev Prasad.
Fundamental issue is not national security but where State, pursuing legitimate regulatory goal, may cross boundary from regulating foreign contributions to exercising undue executive control over institutions that receive them.
FCRA always empowered state to scrutinise foreign funding. If violations, registrations can be withdrawn, cancellation can follow non-compliance, penalties attach to diversion or misappropriation. Bill, however, represents significant expansion of statutory consequences that can follow loss of FCRA registration. Existing FCRA already contains provision for vesting assets created from foreign funds upon cancellation. What is new is detailed statutory framework for provisional vesting, possession, management, restoration and ultimately permanent vesting and disposal.
In case of cancellation, surrender or ceasing to exist including due to non-renewal, Central government may, through Designated Authority, take possession of and manage assets created from foreign contributions and, where considered necessary and expedient in public interest, undertake management of concerned organisation's activities. This is not merely change in administrative policy - it raises constitutional question about extent to which statute regulating foreign contributions may permit executive to take possession and, in specified circumstances, management of institutional assets and activities.
Even if dichotomy between ownership and custody has legal relevance, its practical consequences are not. An entity whose registration is cancelled loses FCRA asset vesting, provisional ownership may remain formally undisturbed, but change in management control fundamentally alters relationship between institution and state. Hospital, school or laboratory is not made effective by ownership alone - it depends on its independence to administer, for charitable ends, what it owns.
Evaluation of proportionality is relevant. Supreme Court repeatedly held where state pursues legitimate objective, means must bear reasonable connection to that objective and maintain appropriate balance between public purpose and burden imposed on rights. Consequence of losing FCRA registration is provisional vesting of assets and potentially management by government-appointed authority. The safeguards for transfer must be commensurately robust.
Therefore, Bill warrants scrutiny of discretion delegated to executive, safeguards governing its exercise and standards applicable to decisions concerning possession, management and permanent vesting. The Bill provides for restoration of assets when registration is obtained, renewed or restored within prescribed period, as well as mechanisms for revision and judicial appeal. Whether these safeguards are sufficiently clear, timely and effective is constitutional question.
The Gist: FCRA always empowered state to scrutinise foreign funding. Amendment represents significant expansion of consequences following loss of FCRA registration. What previously led to ineligibility to receive foreign funds could now extend to provisional management and, if not restored within period, permanent vesting and disposal of assets. Bill warrants scrutiny of discretion delegated to executive, safeguards governing exercise and standards applicable to possession, management and permanent vesting.
None suggests government lacks authority to strengthen financial oversight or ensure lawful and proper use. But in constitutional order, management of civil society's institutional infrastructure must operate within clear legislative standards. Ultimately, question posed by FCRA Amendment Bill is not whether foreign contributions should be regulated, but how far state may go in regulating institutions and their assets.