Applicability of Lokpal and Lokayuktas Act 2013 on Charitable Organizations

The implications, applicability and compliance of Lokpal and Lokayuktas Act 2013 is being widely debated in the Non-Governmental Sector (NGOs) created in whatsoever form with the primary object of dealing with the subject of charity and charitable activities without aiming to earn surplus from such activities.

Going back to the history these organizations use to get registered as societies, trusts and companies to function within a legal framework. These organizations use to operate in a particular district, state or country and the funds collected through various means were utilized locally for the attainment of the objectives for which such organizations were created. Initially these charitable organizations use to operate for the benefits of the society in general thus were considered as an alternative to the state authorities in execution of their objectives which otherwise is the responsibility of the state authorities. Conceptually this was the reason why such organizations were given some concessions including exemption from paying tax on their surplus, if any, earned by them.

Since these organizations are easy to operative so for as processes, compliance and decision making is concerned the state authorities started using them for the promotion of their policies in different sectors be it at domestic or international level. This was the reason behind transferring funds as grants to such charitable organizations and work as partners for the propagation of certain policies of the state. These not for profit organizations were preferred by the state authorities over commercial organizations which are created to earn profit. Thus the fear of corruption or keeping a margin out of the grants received from the state was ruled out by spending through these charitable organizations which is in line with the state policies.

With the growth of charitable organizations and flow of funds for charitable purposes from one country to another country the necessity to impose certain checks and balances by the state to minimize the risk of misuse of such funds was considered necessary. This was the reason behind enacting a legislation presently called as Foreign Control Regulations Act 2010 (FCRA). This act was amended whenever felt necessary to match with the new challenges and situations. The main aim of this act is to keep trail of the funds received in the country as grant ,aid or donation from any foreign source and its utilization within the country. There are instances when such funds were diverted for restricted and illegal activities or for destabilizing the political system of a country.

During the past decade or so a demand was raised in political as well as social circles to curb the menace of increasing corruption and corrupt practices as it was seen a threat to the interests of the society and development of nation. During the process, which involved strikes, dharanas, court cases, public interest litigations etc., demand was raised to have a dedicated and powerful independent authority to inquire about the complaints received by such authority/authorities about the corruption being practiced by any public servant in a free and fair manner.

Here came the idea of appointing Lokpal and Lokayuktas under the newly enacted legislation i.e. Lokpal and Lokayuktas Act 2013. One of the key initiative to curb the corruption is to monitor the pace at which the assets of a public servant grew over a period of time and whether it matches with the known sources of earnings or not. This initiative requires a data bank to be created for all public servants and thereafter monitoring and analyzing the same on an ongoing process.

Who is public servant: Generally, a government employee or employees of those establishments which have been directly or indirectly created by the government are treated as public servants. The intention of enacting Lokpal and Lokayuktas Act, 2013 was to kill corruption thus anybody or organization receiving and spending public money need to be answerable for misuse of such funds. This concern has been addressed by the act under section 14(1) (a) to (h). Most important thing one need to remember is that this legislation was enacted at the demand of general public thus we are duty bound to co-operate for its success and help in curbing corruption. The Jurisdiction with respect to inquiry of Lokpal and Lokayuktas have been defined under Section 14 of the Lokpal and Lokayuktas Act, 2013 which read as:

“14. (1) Subject to the other provisions of this Act, the Lokpal shall inquire or cause an inquiry to be conducted into any matter involved in, or arising from, or connected with, any allegation of corruption made in a complaint in respect of the following, namely: —

(a) any person who is or has been a Prime Minister:

Provided that the Lokpal shall not inquire into any matter involved in, or arising from, or connected with, any such allegation of corruption against the Prime Minister, —

(i) in so far as it relates to international relations, external and internal security, public order, atomic energy and space;

(ii) unless a full bench of the Lokpal consisting of its Chairperson and all Members considers the initiation of inquiry and at least two-thirds of its Members approves of such inquiry:

Provided further that any such inquiry shall be held in camera and if the Lokpal comes to the conclusion that the complaint deserves to be dismissed, the records of the inquiry shall not be published or made available to anyone;

(b) any person who is or has been a Minister of the Union;

(c) any person who is or has been a member of either House of Parliament;

(d) any Group 'A' or Group 'B' officer or equivalent or above, from amongst the public servants defined in sub-clauses (i) and (ii) of clause (c) of section 2 of the Prevention of Corruption Act, 1988 when serving or who has served, in connection with the affairs of the Union;

(e) any Group 'C' or Group 'D' official or equivalent, from amongst the public servants defined in sub-clauses (i) and (ii) of clause (c) of section 2 of the Prevention of Corruption Act, 1988 when serving or who has served in connection with the affairs of the Union subject to the provision of sub-section (1) of section 20;

(f) any person who is or has been a chairperson or member or officer or employee in any body or Board or corporation or authority or company or society or trust or autonomous body (by whatever name called) established by an Act of Parliament or wholly or partly financed by the Central Government or controlled by it:

Provided that in respect of such officers referred to in clause (d) who have served in connection with the affairs of the Union or in any body or Board or corporation or authority or company or society or trust or autonomous body referred to in clause (e) but are working in connection with the affairs of the State or in any body or Board or corporation or authority or company or society or trust or autonomous body (by whatever name called) established by an Act of the State Legislature or wholly or partly financed by the State Government or controlled by it, the Lokpal and the officers of its Inquiry Wing or Prosecution Wing shall have jurisdiction under this Act in respect of such officers only after obtaining the consent of the concerned State Government;

(g) any person who is or has been a director, manager, secretary or other officer of every other society or association of persons or trust (whether registered under any law for the time being in force or not), by whatever name called, wholly or partly financed by the Government and the annual income of which exceeds such amount as the Central Government may, by notification, specify;

(h) any person who is or has been a director, manager, secretary or other officer of every other society or association of persons or trust (whether registered under any law for the time being in force or not) in receipt of any donation from any foreign source under the Foreign Contribution (Regulation) Act, 2010 in excess of ten lakh rupees in a year or such higher amount as the Central Government may, by notification, specify.

Explanation. —For the purpose of clauses (f) and (g), it is hereby clarified that any entity or institution, by whatever name called, corporate, society, trust, association of persons, partnership, sole proprietorship, limited liability partnership (whether registered under any law for the time being in force or not), shall be the entities covered in those clauses:

Provided that any person referred to in this clause shall be deemed to be a public servant under clause (c) of section 2 of the Prevention of Corruption Act, 1988 and the provisions of that Act shall apply accordingly.

(2) Notwithstanding anything contained in sub-section (1), the Lokpal shall not inquire into any matter involved in, or arising from, or connected with, any such allegation of corruption against any member of either House of Parliament in respect of anything said or a vote given by him in Parliament or any committee thereof covered under the provisions contained in clause (2) of article 105 of the Constitution.

(3) The Lokpal may inquire into any act or conduct of any person other than those referred to in sub-section (1), if such person is involved in the act of abetting, bribe giving or bribe taking or conspiracy relating to any allegation of corruption under the Prevention of Corruption Act, 1988 against a person referred to in sub-section (1):

Provided that no action under this section shall be taken in case of a person serving in connection with the affairs of a State, without the consent of the State Government.

(4) No matter in respect of which a complaint has been made to the Lokpal under this Act, shall be referred for inquiry under the Commissions of Inquiry Act, 1952.

Explanation. —For the removal of doubts, it is hereby declared that a complaint under this Act shall only relate to a period during which the public servant was holding or serving in that capacity.”

The applicability of section 14 (g) and (h) is clear and as per the explanations provided in the act itself makes it mandatory for the organizations and individuals, not being a part of the state authorities directly or indirectly, to comply with the provisions of this act if:

The grant of rupees one crore or more is received in a year form the government. Here grant cannot be interpreted in a limited manner as the act u/s 14(g) says:

…………………….. wholly or partly financed by the Government and the annual income of which exceeds such amount as the Central Government may, by notification, specify;

The word used is financed not grant and the central government was authorized to notify the basic threshold which has been put at rupees one crore and above in a year.

And or

Is in receipt of any donation from any foreign source under the Foreign Contribution (Regulation) Act, 2010 in excess of ten lakh rupees in a year or such higher amount as the Central Government may, by notification, specify.

Presently the threshold for compliance has been maintained at Rs 10 lakhs a year. There can be debate on the word donation. In general parlance donation can be funds received which can be spent without the control or accountability towards donor. But when funds are received through FCRA designated account it is treated as grant or donation which limits the scope of discussion as to whether the money is donation or not.

Amendment to Lokpal & Lokayukta Act 2013 is the only solution to exempt charitable organization/individuals covered under section 14(1)(g) & (h). At present the best favor government can do to the organizations/individuals covered under section 14(1)(g) &(h) is to raise the threshold limit and extend time for the submission of details of assets to the concerned authorities.