Foreign Contribution (Regulation) Act, 2010 – Economic, Business and Commercial Laws Important Questions

Foreign Contribution (Regulation) Act, 2010 – Economic, Business and Commercial Laws Important Questions

Question 1.
Define ‘foreign contribution’ under the Foreign Contribution (Regulation) Act, 2010. [June 2015 (5 Marks)]
Answer:
Definition [Section 2(l)(h)]: Foreign Contribution means the donation, delivery or transfer made by any foreign source, of any:

  • Article not being an article given as a gift for his personal use, if the market value of such article is not more than specified sum;
  • Currency, whether Indian or foreign; g
  • Security and includes any foreign security.

Explanation 1: Deemed to be Foreign
Contribution- Donation, delivery or & transfer of any article, currency or foreign security either directly or through one or more persons, shall also be deemed to be a foreign contribution.

Explanation 2: Deemed to be Foreign
Contribution: Interest earned on foreign contribution deposited in any bank or any other income derived from foreign contribution or interest thereon shall be deemed to be a foreign contribution.

Explanation 3:Not Foreign
Contribution: Any amount received, from any foreign source towards the cost of goods sold or serviced rendered in the ordinary course of his business, trade or commerce, whether within India or outside India, shall be excluded from the definition of Foreign Contribution.

Example: Mr Rahul Gandhi received the gift of 10,000 shares of Microsoft from Mr Bill Gates as a foreign contribution.
Mrs Soniya Gandhi received a BMW car as a gift from Mr Jackson (Italy resident) as a foreign contribution.

Question 2.
The object of the Foreign Contribution (Regulation) Act, 2010 is to legalise foreign donations and hospitality to office-bearers of political parties. Comment. [Dec. 2018 (5 Marks)]
Answer:
1. Object of the Act: The objects of the Foreign Contribution (Regulation) Act, 2010
(a) To regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and
(b) To prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.

2. Provision: Section 3(1) of the Act, imposes a restriction on acceptance of foreign contribution by

  • candidate for election;
  • correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;
  • Judge;
  • Government servant or employee of any corporation or any other body controlled or owned by the Government;
  • member of any Legislature;
  • a political party or office-bearer thereof;
  • the organisation of a political nature;
  • association or company engaged in the production or broadcast of audio news or audiovisual news or current affairs programmes through any electronic mode, or any other electronic form.

3. Conclusion: Thus, it is incorrect to say that object of the Act is to legalize foreign donations and hospitality to office-bearers of political parties.

Question 3.
State the person who is prohibited from accepting foreign contributions under the Foreign Contribution (Regulation) Act, 2010? [Dec. 2010 (3 Marks)]
Answer:
As per Section 3 of the Foreign Contribution (Regulation) Act, 2010, the following person or organization cannot accept foreign contribution:
(a) Candidate for election
(b) Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper
(c) Judge, Government servant or employee of any corporation or government company or any other body controlled or owned by the Government
(d) Member of any Legislature (i.e. MP & MLA)
(e) Political party or its office-bearer
(f) Organization of a political nature
(g) Association or company engaged in the production or broadcast of audio news or audiovisual news or current affairs programmes through any electronic mode or any other electronic form
(h) Correspondent or columnist, cartoonist, editor, owner of the association or company covered in clause (g).

Question 4.
What are the exemptions to the prohibition of acceptance of foreign contributions under the Foreign Contribution (Regulation) Act, 2010? [Dec 2010 (5 Marks)]
Answer:
As per Section 4 of the Foreign Contribution (Regulation) Act, 2010, the following transactions do not come within the purview of Section 3 if the foreign contribution is accepted subject to the provisions of Section 10:

  • Salary, wages or other remuneration received from any foreign source by way of payment in the ordinary course of business.
  • Payment in the course of international trade or commerce, or in the ordinary course of business transacted outside India.
  • Transaction made as an agent of foreign source in relation to any transaction made by such foreign source with the Central or State Government.
  • Gift or presentation made to a member of any Indian delegation, (however such gift or present was accepted in accordance with the rules made by the Central Government)
  • Foreign contribution received from relative.
  • Remittance received, in the ordinary course of business through any official channel, post office, or any authorized person in foreign exchange under the FEMA.
  • Scholarship, stipend or any payment of like nature.

Question 5.
Discuss the powers of the Central Government to prohibit receipt of foreign contribution under the Foreign Contribution (Regulation) Act, 2010. [Dec. 2012 (5 Marks)]
Answer:
As per Section 9 of the Foreign Contribution (Regulation) Act, 2010, the Central Government may –

  • Prohibit: Prohibit any person or organization from accepting any foreign contribution.
  • Prior Permission for Foreign Hospitality: Require any person to obtain the prior permission of the Central Government before accepting any foreign hospitality.
  • Furnish Information for Foreign Contribution: Require any person to furnish intimation within prescribed time and in the prescribed manner of the source, purpose and manner of utilization of any foreign contribution received.
  • Prior Permission for Foreign Contribution: Require a specified person to obtain the prior permission of the Central Government before accepting any foreign contribution.
  • Furnish information for foreign hospitality: Require any person to furnish intimation, within the prescribed time and in the prescribed manner as to the source and manner of receipt of any foreign hospitality.

However above prohibition shall be made by the Central Government only if it is satisfied that the acceptance of foreign contribution or foreign hospitality by such person, is likely to affect prejudicially:

  • Sovereignty and integrity of India or
  • Public interest or
  • Freedom or fairness of election to any Legislature or
  • Friendly relations with any foreign State or
  • Harmony between religious, racial, social, linguistic or regional groups, castes or communities.

Question 6.
Enumerate the powers of the Central Government to prohibit receipt of foreign contribution under the Foreign Contribution (Regulation) Act, 2010 [Dec. 2019 (5 Marks)]
Answer:
As per Section 4 of the Foreign Contribution (Regulation) Act, 2010, the following transactions do not come within the purview of Section 3 if the foreign contribution is accepted subject to the provisions of Section 10:

  1. Salary, wages or other remuneration received from any foreign source by way of payment in the ordinary course of business.
  2. Payment in the course of international trade or commerce, or in the ordinary course of business transacted outside India.
  3. Transaction made as an agent of foreign source in relation to any transaction made by such foreign source with the Central or State Government.
  4. Gift or presentation made to a member of any Indian delegation, (however such gift or present was accepted in accordance with the rules made by the Central Government)
  5. Foreign contribution received from relative.
  6. Remittance received, in the ordinary course of business through any official channel, post office, or any authorized person in foreign exchange under the FEMA.
  7. Scholarship, stipend or any payment of like nature.

Question 7.
Ashok, a director of a public limited company, was on a business trip to the USA. Suddenly, he developed chest pain there and was provided medical treatment in a hospital, the funds for which were provided by one John, a US national, who happened to be his friend. Did Ashok violate the provisions of the Foreign Contribution (Regulation) Act, 2010? Give reasons. [June 2013 (5 Marks)]
Answer:
(a) Facts of Case: Ashok, a director of a public limited company, was on a business trip to the USA. Suddenly, he developed chest pain there and was provided medical treatment in a hospital, the funds for which were provided by one John, a US national, who happened to be his friend.

(b) Provision
As per Section 6 of the Foreign Contribution (Regulation) Act, 2010, the following person cannot receive foreign hospitality visiting any country without prior permission of the Central Government:

  • Member of a Legislature or office-bearer of a political party or
  • Judge or
  • Government servant or
  • An employee of any corporation or any other body owned or controlled by the Government

(c) Conclusion: By referring to the above facts and provision we can conclude that since directors of a public company are not covered u/s 6, Ashok can accept foreign hospitality and as such he or the company has not contravened the provisions of the Foreign Contribution (Regulation) Act, 2010.

Question 8.
Discuss the powers of the Central Government to prohibit receipt of foreign contribution under the Foreign Contribution (Regulation) Act, 2010. [Dec. 2014 (3 Marks)]
Answer:
As per Section 9 of the Foreign Contribution (Regulation) Act, 2010, the Central Government may –

  • Prohibit: Prohibit any person or organization from accepting any foreign contribution.
  • Prior Permission for Foreign Hospitality: Require any person to obtain the prior permission of the Central Government before accepting any foreign hospitality.
  • Furnish Information for Foreign Contribution: Require any person to furnish intimation within prescribed time and in the prescribed manner of the source, purpose and manner of utilization of any foreign contribution received.
  • Prior Permission for Foreign Contribution: Require a specified person to obtain the prior permission of the Central Government before accepting any foreign contribution.
  • Furnish information for foreign hospitality: Require any person to furnish intimation, within the prescribed time and in the prescribed manner as to the source and manner of receipt of any foreign hospitality.

However above prohibition shall be made by the Central Government only if it is satisfied that the acceptance of foreign contribution or foreign hospitality by such person, is likely to affect prejudicially:

  • Sovereignty and integrity of India or
  • Public interest or
  • Freedom or fairness of election to any Legislature or
  • Friendly relations with any foreign State or
  • Harmony between religious, racial, social, linguistic or regional groups, castes or communities.

Question 9.
Which organizations/individuals are specifically prohibited from receiving foreign contributions under the Foreign Contribution (Regulation) Act, 2010? [Dec. 2015 (3 Marks)]
Answer:
As per Section 3 of the Foreign Contribution (Regulation) Act, 2010, the following person or organization cannot accept foreign contribution:
(a) Candidate for election
(b) Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper
(c) Judge, Government servant or employee of any corporation or government company or any other body controlled or owned by the Government
(d) Member of any Legislature (i.e. MP & MLA)
(e) Political party or its office-bearer
(f) Organization of a political nature
(g) Association or company engaged in the production or broadcast of audio news or audiovisual news or current affairs programmes through any electronic mode or any other electronic form
(h) Correspondent or columnist, cartoonist, editor, owner of the association or company covered in clause (g).

Question 10.
Which organizations/individuals are specifically prohibited from receiving foreign contribution under the Foreign Contribution (Regulation) Act, 2010? [June 2016 (5 Marks)]
Answer:
As per Section 3 of the Foreign Contribution (Regulation) Act, 2010, the following person or organization cannot accept foreign contribution:
(a) Candidate for election
(b) Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper
(c) Judge, Government servant or employee of any corporation or government company or any other body controlled or owned by the Government
(d) Member of any Legislature (i.e. MP & MLA)
(e) Political party or its office-bearer
(f) Organization of a political nature
(g) Association or company engaged in the production or broadcast of audio news or audiovisual news or current affairs programmes through any electronic mode or any other electronic form
(h) Correspondent or columnist, cartoonist, editor, owner of the association or company covered in clause (g).

Question 11.
Which are the organizations and persons who are specifically debarred from receiving foreign contributions under Foreign Exchange Regulation Act, 2010? [Dec. 2018 (3 Marks)]
Answer:
As per Section 3 of the Foreign Contribution (Regulation) Act, 2010, the following person or organization cannot accept foreign contribution:
(a) Candidate for election
(b) Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper
(c) Judge, Government servant or employee of any corporation or government company or any other body controlled or owned by the Government
(d) Member of any Legislature (i.e. MP & MLA)
(e) Political party or its office-bearer
(f) Organization of a political nature
(g) Association or company engaged in the production or broadcast of audio news or audiovisual news or current affairs programmes through any electronic mode or any other electronic form
(h) Correspondent or columnist, cartoonist, editor, owner of the association or company covered in clause (g).

Question 12.
Write a short note on the Cancellation of a certificate under the Foreign Contribution (Regulation) Act, 2010 [Dec. 2013 (5 Marks)]
Answer:
(a) As per Section 14 of the Foreign Contribution (Regulation) Act, 2010, the Central Government by order may cancel the certificate, if it is satisfied after making such inquiry that:

  • The holder of the certificate has made an incorrect or false statement for the grant of registration or renewal.
  • Holder of the certificate has violated any of the terms and conditions of the certificate or renewal.
  • In the opinion of the Central Government, it is necessary for the public interest to cancel the certificate.
  • Holder of the certificate has violated any of the provisions of the Act or rules or order.
  • Holder of the certificate has not been engaged in any reasonable activity in its chosen field for the benefit of the society for 2 consecutive years or has become defunct.

(b) The person concerned has to be been given a reasonable opportunity of being heard before cancellation of the certificate.

(c) Any person whose certificate has been cancelled shall not be eligible for registration or grant of prior permission for a period of 3 years from the date of cancellation of such certificate.

Question 13.
State the procedure for making an application for renewal of a certificate under the Foreign Contribution (Regulation) Act, 2010 [Dec. 2015 (3 Marks)]
Answer:
Renewal of certificate [Section 16]:

  • The time limit for renewal: Every person who has been granted a certificate shall have such certificate renewed within 6 months before the expiry of the period of the certificate.
  • Application to CG: The application for renewal of the certificate shall be made to the Central Government in the prescribed form and along with the prescribed fee.
  • Renewal time and Term: The Central Government shall renew the certificate within 90 days from the date of receipt of an application for renewal and grant a certificate of renewal for a period of 5 years.
  • Reason for Not renewing: In case the Central Government does not renew the certificate within 90 days, it shall communicate the reasons to the applicant.
  • Refusal for renewal: The Central Government may refuse to renew the certificate in case where a person has violated any provisions of the Act or rules made thereunder.

Question 14.
Discuss briefly provisions relating to the confiscation of article/currency/security obtained in contravention of the Foreign Contribution (Regulation) Act, 2010.
Answer:
Confiscation of article or currency or security obtained in contravention of the Act [Section 28]: Any article or currency or security which is seized u/s 25 shall be liable to confiscation if such article or currency or security has been adjudged u/s 29 to have been received or obtained in contravention of the Act.

Adjudication of confiscation [Section 29]: Any confiscation may be adjudged without limit by the Court of Session within the local limits of whose jurisdiction the seizure was made.

Cases of adjudication of confiscation can also be dealt with by an officer, not below \ the rank of an Assistant Sessions Judge as the Central Government may by notification in the Official Gazette specify on this behalf.

The Sessions Judge or Assistant Sessions Judge may make such order as he thinks fit.
Procedure for confiscation [Section 30]: No order of adjudication of confiscation shall be made unless a reasonable opportunity of making a representation against such confiscation has been given to the person from whom any article or currency or security has been seized.

Question 15.
Joseph, a resident in India has failed to comply with some provisions of the Foreign Contribution (Regulation) Act, 2010 in relation to the receipt of foreign contribution and in this regard a complaint has been filed in a Court by somebody inimical to Joseph. Explain briefly whether Court can take cognizance of violation of the provisions of the Foreign Contribution (Regulation) Act, 2010?
Answer:
(a) Facts of the case: Joseph, a resident in India has failed to comply with some provisions of the Foreign Contribution (Regulation) Act, 2010 in relation to the receipt of foreign contribution and in this regard a complaint has been filed in a Court by somebody inimical to Joseph.

(b) Provision: As per Section 40 of the Foreign Contribution (Regulation) Act, 2010, no Court shall take cognizance of any offence under the Act, except with the previous sanction of the Central Government or any officer authorized by that Government in this behalf.

(c) Conclusion: In the present case, the complaint against Joseph has been made by a person who is inimical to Joseph and not by taking the previous sanction of the Central Government or any officer authorized by that Government on this behalf. Therefore, Court cannot take cognizance of an offence under the Foreign Contribution (Regulation) Act, 2010.

Question 16.
Stale the provisions regarding the penalties and punishment provided under the Foreign Contribution (Regulation) Act, 2010. [Dec. 2019 (4 marksJ]
Answer:
(a) Penalty for article or currency or security obtained in contravention of section 10 [Section 34]

  1. Any person, on whom any prohibitory order has been served under Section 10 of the Act, pays, delivers, transfers or otherwise deals with, in any manner whatsoever, any article or currency or security, whether Indian or foreign, in contravention of such prohibitory order, he shall be punished.
  2. Imprisonment up to 3 years or fine or both.

(b) Punishment for contravention of any provision of the Act [Section 35]

  1. Whoever accepts, or assists any person, political party or organisation in accepting, any foreign contribution or any currency or security from a foreign source, in contravention of any provision of this Act or any rule or order made thereunder
  2. Imprisonment up to 5 years or fine or both

(c) Offence by Companies is dealt with in Section 39

(d) Composition of certain offence is dealt with in Section 41

Economic, Business and Commercial Laws Questions and Answers

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