MADRAS| 27TH JUNE 2025– In a recent ruling, the Madras High Court emphasized that charitable institutions should not be viewed with suspicion merely because they receive foreign donations, particularly when such funds are used for legitimate and benevolent purposes. The Court made these observations while granting relief to the Ellen Sharma Memorial Trust, whose Foreign Contribution (Regulation) Act (FCRA) renewal application was earlier rejected by authorities.
CASE BACKGROUND: ELLEN SHARMA MEMORIAL TRUST V. UNION OF INDIA
The case involved the Ellen Sharma Memorial Trust, which has been operating since the early 1980s with a mission to enhance education and child welfare in India. The Trust established several institutions including:
Ellen Sharma Primary School (Karaipakkam)
Ellen Sharma Memorial Matriculation School (Sholinganallur)
School Health Centres/Clinics at Sholinganallur and Karaipakkam
The Trust relied on foreign donations, primarily from a family of Indian origin settled abroad, to support these charitable initiatives. It previously held a valid FCRA licence, a legal requirement for receiving foreign aid.
FCRA RENEWAL REJECTED WITHOUT REASON
In 2021, the Trust was notified via email—after several follow-ups—that its FCRA renewal had been rejected. This prompted the Trust and its sister NGO, the Sharma Centre for Heritage Education, to challenge the decision in the High Court. They argued that no reasons were communicated for the rejection.
COURT FINDINGS: NO EVIDENCE OF MISUSE OF FUNDS
Justice N Anand Venkatesh, presiding over the matter, found that there were no serious allegations of fund misuse by the Trust or its sister organisations.
“In the case in hand, the foreign contributions were not diverted, misused and utilized for any other purpose against national interest or for any personal gain or for undesirable purposes,” the Court stated.
The judge urged the government to approach such cases with an open mind, especially when contributions come from well-meaning individuals of Indian origin:
“Just because some institutions run with the aid of foreign contribution, it is not necessary to look at the institutions like that of the petitioners with suspicion unless there are materials to show that such foreign contribution is being misused and it is being used against public interest/national interest.
This is more so where persons of Indian origin, settled in foreign countries, earn money and want to give something back to their country by contributing funds. In such cases, unless there are serious violations of misuse of foreign contribution, the Authorities must deal with it with an open mind.
The case in hand is one where such contributions were made by persons of Indian origin settled in foreign countries and they wanted to contribute in terms of providing education to women and work for their welfare.”
ISSUE WITH SECTION 7 OF FCRA AMENDMENT (2020)
During the hearing, the Union government argued that the renewal was denied because the Trust had distributed foreign contributions to its sister NGOs without prior approval, which violated the amended Section 7 of the FCRA (2020).
However, the Court observed that the amendment came into effect only from October 2020, and the Trust’s actions fell within a five-month window when the new rules were not yet widely understood or followed:
“The amendment that came into effect from October 2020 was a happen-stance and it is impossible for a layman to take note of such procedural changes brought in by the amendment. Therefore, just because the procedural formality was not followed for that short period, it should not be completely put against both the petitioner trust as well as the appellant.”
COURT CRITICIZES HYPER-TECHNICAL APPROACH
The Court criticized the technical rigidity adopted by the authorities in denying renewal:
“One family is involved in sending the foreign contribution to provide education to children in India and such an objective should not be shot down by hyper technicalities.”
LACK OF REASONED DECISION IS UNSUSTAINABLE
The government contended that it was not obliged to disclose reasons for denying FCRA renewal under Section 12(5) of the Act. The Court disagreed:
“The contention of the respondents that they need not communicate the reasons for refusal to grant the certificate by bringing the case within the Proviso to Sub-Section (5) of Section 12 of the Act, is unsustainable.”
COURT ORDERS FCRA RENEWAL WITHIN FOUR WEEKS
The Madras High Court directed the Union of India and the Director, FCRA Wing, Ministry of Home Affairs to renew the Trust’s FCRA registration within four weeks of receiving a copy of the order.
LEGAL REPRESENTATION
For Ellen Sharma Memorial Trust: Senior Advocate Satish Parasaran, briefed by Advocate Rahul Balaji
For Sharma Centre for Heritage Education: Advocate S Ramamurthy, briefed by Advocates E Ann Priscilla Swarna Kumari and Saitanya Kesan
For the Union of India: Additional Solicitor General ARL Sundaresan, assisted by Advocate KS Jeyaganeshan
