SC asks govt consider making law to regulate NGOs, their funds

The Supreme Court today asked the Centre to examine enacting a law to regulate disbursal of public funds to over 32 lakhs NGOs and voluntary organisations and prosecute them in case of misuse or misappropriation.
The apex court, referring to the Centre's recent guidelines on regulating NGOs and voluntary organisations, said they may not "truly systematise the entire process" of regulating such NGOs since their registration, disbursal of funds, their use, audit and consequential proceedings in the event of defaults.
A bench headed by Chief Justice J S Khehar referred to an office memorandum (OM) of the Centre and said, "the guidelines, which have been proposed by the government, may not truly systematise the entire process commencing from accredition (of NGOs) and encompassing the manner of utilisation of funds and then eventual audit".

"We would therefore like the Government of India to examine and consider giving statutory status to the entire process," the bench, also comprising Justices D Y Chandrachud and Sanjay Kishan Kaul, said and asked the Centre to apprise it of the stand within eight weeks on making a law on it.
Favouring a fresh all-encompassing law, it said if the government "desires to extend statutory status to regulations, then they would not only provide for enforceable consequences, but also envisage civil and criminal action as may be considered by the legislation".
The bench, however, made it clear that its order asking the Centre to consider enacting a law, will not be considered as "any restraint" in the way of ongoing civil and criminal actions against defaulting parties, pursued by the government body, Council for Advancement of People's Action and Rural Technology (CAPART).

The court suggested to the Centre that it can legislate under Entry 97 of the Seventh Schedule of the Constitution, which provides the list of issues on which the Centre or states or both can make laws to regulate NGOs.

Entry 97 empowers the Centre to enact on "any matter not enumerated in List II (state list) or List III (concurrent list) including any tax not mentioned in either of those Lists".
The CAPART apprised the top court that it has recommended registration of 159 FIRs against various NGOs for alleged misappropriation or misuse of funds disbursed to them.
The CAPART, which works under the Ministry of Rural Development and disburses funds to voluntary organisations working in rural areas, also said initially it had blacklisted 718 NGOs for not following the due process and not submitting their accounting details.

Subsequently it had removed 15 NGOs from the black-list after they complied with the accounting norms, it said.
Lawyer P K Dey, appearing for the Centre, informed the court that the guidelines, before being put in force, have been sent to all 76 ministries and departments for their comments and suggestions.
On January 10, the apex court had asked the Centre to place before it the "guidelines/rules, which will be implemented for accredition of VO's/NGO's".
"The guidelines/rules will also provide for the procedure to initiate action for recovering of the grants in case of defalcation/misappropriation, including criminal action when called for," it had said.

Referring to details provided by senior advocate Rakesh Dwivedi, assisting the court as an amicus curiae, the court had said that a phenomenal amount of Rs 950 crore every year was being given by the Centre and state governments to NGOs.
Earlier, the government had faced some tough questions for failing to evolve a regulatory mechanism to monitor the massive amount of funds to over 32 lakh NGOs.
While hearing a PIL filed by lawyer M L Sharma, the court had said the Centre and its departments were doling out crores of rupees but were not aware of the repercussion of non-auditing.

The bench had also said that "mere blacklisting" of these organisations would not suffice and civil and criminal action should be initiated for misappropriation of public money received by them from various government departments.
"Huge amounts running into thousands of crores are doled out to these societies. There has been a case that many of them, after getting the grant, do not come back and they are merely blacklisted", the amicus curiae had said.
He said around Rs 9,000 crore has been disbursed to NGOs, societies, voluntary organisations from 2002-03 to 2008-09.
"Union of India has disbursed Rs 4,756 crore. States have disbursed Rs 6,654 crore. Rs 950 crore on an average has been disbursed per year", the amicus had said.

The apex court has been seized of the matter for nearly five years and had ordered CBI to probe into charges of misappropriation of funds by many NGOs.
CBI had in September 2015 informed the apex court that less than ten per cent of over 30 lakh NGOs functioning across the country had submitted their returns or balance sheets and other financial details to the authorities.
The apex court had expanded the scope of the PIL, filed in 2011 against an NGO, Hind Swaraj Trust, run by anti- corruption crusader Anna Hazare. The PIL had sought probe into alleged embezzlement of funds.