Holding

Depositing foreign contributions in a bank other than the one specified in the registration and failing to intimate the Government violates Section 6(1)(b) of the FCRA, thereby constituting an offence under Section 23; the criminal proceedings cannot be quashed.

Summary

The respondent society applied for registration under the Foreign Contribution (Regulation) Act, 1976, specifying a particular bank branch for receiving foreign contributions. It later received drafts from a foreign donor and deposited them in a different bank branch, failing to intimate the Central Government as required. The Government issued a notification demanding prior permission for any contribution, which the High Court later quashed. FIRs were filed and a charge‑sheet was submitted under the Act. The society sought to quash the criminal proceedings under Cr.P.C. Section 482, and the High Court allowed the petition. On appeal, the Supreme Court held that depositing foreign contributions in a bank other than the one declared in the registration application violates Section 6(1)(b) of the Act and, consequently, constitutes an offence under Section 23; therefore the High Court erred in quashing the proceedings. The criminal proceedings were ordered to continue.

Issues considered

Whether depositing foreign contributions in a bank other than the one specified in the registration application and failing to intimate the Central Government amounts to a contravention of the Foreign Contribution (Regulation) Act, 1976 and its Rules, punishable under Section 23.
Whether the High Court was justified in exercising its power under Section 482 of the Criminal Procedure Code to quash the criminal proceedings.
How Section 23 should be interpreted in relation to violations of the particulars disclosed in Form FC‑1.

Legislation cited

Code of Criminal Procedure, 1973s. 482
Foreign Contribution (Regulation) Act, 1976s. 20(3), s. 23, s. 3(a), s. 5, s. 6

Subjects

Foreign Contribution Regulation ActSection 23 offenceSection 6(1)(b) violationBank account disclosureCriminal proceedings quashSection 482 CrPCRegistration of foreign contributionsSupreme Court interpretation

Judgment

A STATE REP. BY C.B.I. AND ANR.
v.
M. KURIAN CHIEF FUNCTIONARY OF THE CROSS

MARCH 26, 2001

B [G.B. PATTANAIK AND U.C. BANERJEE, JJ.]

Foreign Contribution (Regulation) Act, 1976-Sections 3(a), 5, 6, 20(3),
23-Foreign Contribution (Regulation) Rules, 1976-Rule 3-Deposit of
foreign contributions in undisclosed bank account by Registered Society in
c contravention ofprovisions of the Act-Criminal proceedings initiated quashed
by High Coun-Held, provisions of the Act violated and hence constitutes
offence under Section 23 of the Act-Quashing of Criminal proceedings will
defeat the very purpose of the Act-Criminal Procedure Code-Section 482.

Respondent-Society filed an application for registration under the
D provisions of the Foreign Contribution (Regulation) Act, 1976 disclosing
the details of bank account for receiving foreign contributions. Registra-
tion was granted to the Society. The Society received foreign contribution
of Rs. 3.65 lacs by way of Bank drafts. The Society deposited the drafts in
an undisclosed bank account and failed to intimate the Central Govern-
ment as per the provisions of the Act. The Central Government issued a
E
notification·under the Act requiring the Society to take prior permission
from it before accepting contributions. The notification was quashed by
the High Court on a Writ Petition filed by the Society. First Information
Reports were lodged before C.B.I. against the Society. C.B.I. Submitted a
charge-sheet under the provisions of the Act. The Society filed a petition
F before the High Court under Section 482 Cr.P.C. for quashing the criminal
proceedings, which was allowed. Hence the present appeal.

The appellant contended that under the provisions of the Act, the
contravention/violation of any of the terms and conditions would consti-
tute the contravention of the provisions of the Rules made under the Act;
G
that receiving foreign contributions through undisclosed mode or channel
would constitute an infraction of the provisions of the Rules; that such
infraction must be held to be punishable under Section 23 of the Act; and
that the Act had been enacted to regulate the acceptance and utilization of
foreign contribution or foreign hospitality by persons or associations with
H a view to ensure that parliamentary institutions, political associations and
706
STATE REP. BY C.B.I. v. M. KURIAN CHIEF FUNCTIONARY OF THE CROSS 707

other voluntary organisations may function in a manner consistent with A
the values of sovereign democratic republic.

The Society contended that as per Section 23 of the Act, only the
contravention of any provisions of the Act or Rules made thereunder is
punishable; that the information provided in the application form and
violation thereof would not constitute a contravention of the provisions of B
the Act or Rules; and that the penal statutes which create offences, must be
construed strictly.

Allowing the appeal, the Court

HELD : 1.1. The main object of Foreign Contribution (Regulation) c
Act, 1976 was to regulate and keep a control over the acceptance and utili-
zation of foreign contributions. The entire purpose behind the Act was that
the recipients of such foreign contribution may not act in a manner incon-
sistent with the values of the sovereign republic which our founding fathers
have given to us. Without prohibiting the receipt of such foreign contribu- D
tion, the Act intends to regulate the same and it is for that purpose, it is
required that recipient of such contribution must intimate the Central Gov-
ernment in the manner prescribed by the Rules. Since several recipients did
not send the intimations, for effectively monitoring the rece!pt of foreign
. contribution, Section 6(1) of 1976 Act was amended making it obligatory for
E
the associations to get themselves registered with the Central Government
and then they could accept the contribution only through a specified branch
of a bank. The Act enables the Central Government to inspect the accounts
of persons or associations. The Act also prohibits acceptance of foreign con·
tribution under certain circumstances. This indicates the legislative intent
and purpose behind the Act and, therefore, the provisions of the Act are F
required to be construed accordingly. (711-A-E]

1.2. A plain reading of Section 23 of the Act would make it clear that
any receipt of foreign contribution in contravention of the provisions of
the Act or Rules made thereunder becomes punishable. Reading the
provisions of the Act and giving a literal meaning to the expressions G
contained in the provisions, the receipt of contribution and depositing the
same in a bank other than the bank indicated in the application form
would be a violation of the provisions of Section 6(1)(b) of the Act itself as
no association is entitled to accept foreign contribution, unless the associa·
tion agrees to receive the foreign contribution only through such branch of H
708 SUPREME COURT REPORTS [2001) 2 S.C.R.
A the bank, as it may specify in its application for registration. The violation
being a violation of the provisions of Section 6(1)(b), it would constitute an
offence under Section 23 and, therefore, the High Court committed serious
error in quashing the criminal proceedings on a finding that it does not
tantamount to violation of any provisions of the Act.[712-F; 713-B-C]

B 1.3. If associations and political parties are allowed to receive foreign
contribution and deposit the same in any bank they like, notwithstanding
their declaration with the Central Government at the time of registration,
then the very purpose of conferring power on the Central Government to
regulate would be frustrated and all other provisions for inspection
c and auditing conferring power on the Central Government will be futile.
In the aforesaid premises, the High Court has committed serious error
by quashing the criminal proceedings in the impugned judgment on
an erroneous interpretation of the provisions of the Act and the Rules
made thereunder. The Magistrate is directed to proceed with the matter
expeditiously. [713-D-F)
D
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal Nos.
377-379 of 2001.

From the Judgment and Order dated 27.9.99 of the Delhi High Court
in Crl.M. (M) No. 1125 and Crl.M. No. 1987/96 with Crl.M. (M) No. 1833
E of 1987.

Altaf Ahmed. Additional Solicitor General, Syed Naqvi and P.
Parmeswaran for the Appellants.

Dr. M.P. Raju and S.P. Sharma for the Respondent.
F
The Judgment of the Court was delivered by

PATTANAIK, J. Delay condoned. Leave Granted.

These appeals by the Central Bureau of Investigation are directed
against the judgment dated 27th September, 1999 of a learned Single Judge
G of Delhi High Court. By the impugned judgment, the High Court in exercise
of power under Section 482 of the Code of Criminal Procedure, has come
,
to hold that a breach of the undertaking given by an Association under
Section 6(1)(b) of the Foreign Contribution (Regulation) Ac~ 1976 [herein-
after referred to as 'the Act') would not amount to contravention of the
H provisions of the Act within the meaning of Section 23 of the said Act and
STATE REP. BYC.B.I. v. M. KURIAN CHIEF FUNCTIONARY OF THE CROSS [PATIANAIK, J.J 709
as such the criminal prosecution that had been launched, would not lie. The A
High Court having quashed the criminal proceedings, arising out of the two
F.I.Rs, the Central Bureau of Investigation is in appeal.

The respondent-society, submitted an application in the prescribed form
for registration under Section 6 of the Act for receiving foreign contribution.
B
It was indicated therein that the foreign contribution will be received only
through the main branch of the State Bank of India, Hyderabad and a separate
bank account was opened for the purpose. The society was allotted a
registration number by the Central Government in accordance with Section
6(l)(a) of the Act. The said society entered into an agreement with
Mis HEKS, Switzerland and the latter agreed to finance the project of c
"teaching aid non-formal education". The said Mis HEKS issued instructions
to the Canara Bank, Cantonment Branch, Bangalore, pursuant to which two
Bank Drafts were issued amounting to Rs. 2 lacs and Rs. 1.65 lacs, in favour
-f of the respondent-society by the Canara Bank, Bangalore. The respondent
society instead of depositing the same in the main branch of the State Bank D
of India, Hyderabad, in accordance with the terms of the agreement, deposited
the same into the account of Canara Bank, M.G.Road, Secunderabad. It was
further alleged that the respondent society even failed to intimate the Central
Government about the receipt of the contribution from Mis HEKS, as required
under Section 6(l)(b) of the Act. The Central Government in exercise of its
power under Section IO(b) of the Act, issued a notification, requiring the E
society to have prior permission of the Government before accepting any
contribution. But that notification was quashed by the High Court on a writ
petition being filed. The Central Government, thereafter got the accounts of
the respondent society inspected by the Assistant Director, appointed under
Foreign Contribution (Regulation) Act, in the Ministry of Home Affairs and F
on the basis of reports submitted by the said Assistant Director, two First
Information Reports were lodged against tl1e society. The investigating agency,
after inspecting into the allegations, submitted a charge-sheet under Section
6 read with Section 20(3) and it is at that stage, the respondent filed the
petition under Section 482 of the Code of Criminal Procedure for quashing
of the criminal proceedings. As stated earlier, the High Court having allowed G
the petitions and having quashed the criminal proceedings, the Central Bureau
of Investigation is in appeal before this Court.

Mr. Altaf Ahmed, the learned Additional Solicitor General, appearing
for the appellants contends that a conjoint reading of Section 6(l)(b) and H

•
710 SUPREME COURT REPORTS [2001] 2 S.C.R.
A Section 23 of the Act read with Section 3(a) and the prescribed form FC-
1, required to be filed, seeking permission of the Central Government for
accepting foreign contribution would unequivocally indicate that the contra-
vention and/or violation of any terms and conditions contained in the very
application form, would constitute the contravention of the provisions of the
Rules "made under the Act and as such would be punishable under Section
B
23 of the Act and the High Court committed an error in holding that there
has been no contravention of the provisions of the Act. Learned Additional
Solicitor General further contended that the Act in question having been
enacted to regulate the acceptance and utilization of foreign contribution or
foreign hospitality by persons or associations with a view to ensure that
c parliamentary institutions, political associations and other voluntary organi-
sations may function in a manner consistent with the values of sovereign
democratic republic, any contravention of the provisions of the Act or the
Rules made thereunder should be strictly construed, and on being so con-
strued, if an applicant indicates the mode or channel of foreign contribution
in his application and in violation of the same receives through a different
D
mode or channel, that would constitute an infraction of the relevant provisions
of the Rules, on the information given by the persons concerned and such
infraction must be held to be punishable under Section 23 of the Act and the
same cannot be lightly brushed aside.

E Dr. M.P. Raju, appearing for the respondent, on the other hand con-
tended that Section 23 of the Act makes only tl1e contravention of any
provisions of the Act or any Rule made thereunder punishable, and the
information provided in form FC-1 and violation thereof, would not constitute
a contravention of the provisions of the Act or Rules made thereunder and
F as such, the High Court rightly quashed the c1iminal proceedings. The learned
counsel contends that the penal statutes which create offences, must be
construed strictly and there is no rhyme or reason for construing the same
liberally and thus construed, violation of any particulars given in the form
for receipt of the contribution in a particular bank would not constitute a
violation of either the provisions of the Act or Rules made thereunder
G and as such, it would not be an offence within the ambit of Section 23 of
the Act.

In order to appreciate the correctness of the rival stand, it would be ,i..
necessary to examine some of the provisions of the Act and the Rules made
H thereunder. But before focussing attention on the same, it may be noticed that
t
STATE REP. BY C.B.L ~: M. KURIAN CHIEF FUNCTIONARY OF THE CROSS [PATIANAIK, J.] 711
when political associations and voluntary organisations as well as individuals A
working in important areas of national life were found to be in receipt of
foreign contribution and foreign hospitality, the Parliament came forward to
enact the Act. The main object was to regulate and keep a control over the
acceptance and utilization of foreign contribution. The entire purpose behind
the Act was that the recipients of such foreign contribution may not act in
B
a manner inconsistent with the values of the sovereign republic which our
founding fathers have given to us. Without prohibiting the receipt of such
foreign contribution, the Act intends to regulate the same and it is for that
purpose, it is required that recipient of such contribution must intimate the
Central Government withiu the time and in the manner to be prescribed by
the Rules. Since several recipients did not send the intimations, for effectively c
monitoring the receipt of foreign contribution, Section 6(1) of 1976 Act was
amended by Act 1 of 1985, making it obligatory for the associations to get
themselves registered with the Central Government and then they could
accept the contribution only through a specified branch of a bank. The act
enables the Central Government even to inspect the accounts of persons or
D
associations by insertion of Section. 15-A. The Act also has inserted Section
25-A even prohibiting acceptance of foreign contribution under certain
circumstances. This indicates the legislative intent and purpose behind the Act
and, therefore, the provisions of the Act are required to be construed
accordingly. Section 6 of the Act prohibits receipt of foreign contribution by
an association unless the association gets itself registered with the Central E
Government, and agrees to receive contribution only through such one of the
branches of a bank, as it may specify in its application for such registration.
Section 6(1) of the Act is extracted herein below in extenso:

"Section 6( 1) : No association [other than an organisation referred to
in sub-section (1) of Section SJ having a definite cu!tural, economic, F
educational, religious, or social programme shall accept foreign
contribution unless such association -

(a)registers itself with the Central Government in accordance with the
rules made under this Act; and
G
(b) agrees to receive such foreign contributions only through such
one, of the branches of a bank as it may specify in its application for
such registration,

and every association so registered shall give, within such time and
in such manner as may be prescribed, an intimation to the Central H
712 SUPREME COURT REPORTS [200 I] 2 S.C.R.

A Government as to the amount of each foreign contribution received
by it, the source from which and the manner in which such foreign
contribution was utilised by it :

Provided that where such association obtains any foreign con-
tribution through any branch other than the branch of the bank
B through which it has agreed to receive foreign contribution or fails
to give such intimation within the prescribed time or in the prescribed
manner, or gives any intimation which is false, the Central Govern-
ment may, by notification in the official Gazette, direct that such
association shall not, after the date of issue of such notification, accept
c any foreign contribution without the prior permission of the Central
Government."

Section 23 which is the penal provision, provides thus:

"Sec. 23. - Punishment for the contravention of any provision of the
D Act. - (!) Whoever accepts, or assists any person, political party or
organisation in accepting, any foreign contribution or any currency
from a foreign source, in contravention of any provision of this Act
or any rule made thereunder, shall be punished with imprisonment for
a term which may extend to five years or with fine or with both.
(2)Whoever accepts any foreign hospitality in contravention of any
E provision of this Act or any rule made thereunder shall be punished
•
with imprisonment for a term which may extend to three years, or
with fine, or with both."

A plain reading of Section 23 would make it clear that any receipt of foreign
contribution in contravention of the provisions of the Act or Rules made
F
thereunder becomes punishable. Section 30 confers power on the Central
Government to make Rules for carrying out the provisions of the Act. In
exercise of such powers, the Central Government has framed the Rules called
the Foreign Contribution (Regulation) Rules, 1976 [hereinafter referred to as
'the Rules']. The expression 'Form' has been defined in Rule 2(b) to mean
G a form appended to the rules. Rule 3 provides that an application for obtaining
prior permission of the Central Government to receive foreign contribution
under sub-section (I) of Section 5, or clause (a) of sub-section (2) of that
Section, shall be made in Form FC-1. The aforesaid Form FC-1 at serial No.
5, stipulates that the applicant should intimate the mocle/channel of receipt.
H The foim also provides the declaration, which the applicant must declare to
STATE REP. BY C.B.L v. M. KURlAN CffiEF FUNCTIONARY OF THE CROSS (PATIANAIK, J.] 713
~

the effect that the particulars furnished by the applicant are true and correct. A
This form must be held to be a statutory form being appended to the Rules
and being the form prescribed under Rule 3 for obtaining pennission to
receive foreign contribution. Reading the aforesaid provisions together and
giving a literal meaning to the expressions contained in the aforesaid provi-
sions, the conclusion is irresistible that receipt of contribution and depositing
B
the same in a bank other than the bank indicated in the application form FC-
1, would be a violation of the provisions of Section 6(1)(b) itself inasmuch
as no association is entitled to accept foreign contribution, unless the asso-
ciation agrees to receive the foreign contribution only through such one of
the branches of the bank, as it may specify in its application for registration.
The violation being a violation of the provisions of Section 6(1)(b), it would C
constitute an offence under Section 23 and, therefore, the High Court, in our
opinion, committed serious error in quashing the criminal proceedings on a
finding that it does not tantamount to violation of any provisions of the Act.
Needless to mention that if associations and political parties would be allowed
to receive foreign contribution and would deposit the same in any bank they
D
like notwithstanding their declaration with the Central Govenunent at the time
of registration, then the very purpose of conferring power on the Central
Government to regulate, would be frustrated and all other provisions for
inspections and auditing conferring power on the Central Government would
be futile. In the aforesaid premises, we have no hesitation to come to the
conclusion that the High Court committed serious error by quashing the E
criminal proceedings in the impugned judgment on an erroneous interpreta-
tion of the provisions of the Act and the Rules made thereunder, as stated
above and we, accordingly set aside the same. These appeals are allowed. The
Magistrate is directed to proceed with the matter expeditiously.
F
B.S. Appeals allowed.

·'