Foreign Contribution, Asset Vesting and Enforcement Exposure: The FCRA Framework and Where the PMLA Meets It

The Foreign Contribution (Regulation) Act, 2010 governs the acceptance and utilisation of foreign contribution by persons carrying on a definite cultural, economic, educational, religious or social programme, and is administered by the Ministry of Home Affairs. It does not govern foreign direct investment, external commercial borrowing or commercial receipts, which fall under the Foreign Exchange Management Act, 1999. Under Section 15 of the Foreign Contribution (Regulation) Act, 2010 as it presently stands, foreign contribution and assets created from it vest in a prescribed authority upon cancellation of a certificate of registration. The Foreign Contribution (Regulation) Amendment Bill, 2026, introduced in the Lok Sabha on 25 March 2026 and referred to a Joint Parliamentary Committee on 12 August 2026, proposes to replace that mechanism with a Designated Authority and a two-stage vesting regime. The Bill has not been enacted, and its provisions will take effect only if it is passed and brought into force.

I. What the FCRA regulates — and what it does not

The most consequential misunderstanding in this area is one of scope, and it is worth resolving before anything else.

The Foreign Contribution (Regulation) Act, 2010 regulates foreign contribution. That expression is defined in the statute and refers, in substance, to the donation, delivery or transfer of currency, securities or articles by a foreign source. The Act applies to persons having a definite cultural, economic, educational, religious or social programme, and requires such persons to hold a certificate of registration, or prior permission, before accepting foreign contribution.

It does not regulate foreign investment. Foreign direct investment, external commercial borrowing, share subscription proceeds, export receipts, fees for services rendered to an overseas client and payments received in the ordinary course of business are not foreign contribution. They are governed by the Foreign Exchange Management Act, 1999 and the rules and regulations made under it.

The distinction matters because the consequences differ entirely. An ordinary commercial company receiving foreign capital is not exposed to the FCRA asset-vesting regime, and no amount of restructuring under the Foreign Exchange Management Act, 1999 creates FCRA exposure. Conversely, an entity that carries on a programme within Section 1 of the Foreign Contribution (Regulation) Act, 2010 — including a Section 8 company, a trust, a society, or a hybrid entity with charitable objects alongside commercial activity — may hold obligations under both statutes simultaneously.

Where genuine complexity arises, it is at that overlap: a corporate foundation, a CSR implementing agency, an educational or healthcare institution with a corporate parent, or a not-for-profit company that also earns commercial revenue. Determining which receipts are foreign contribution and which are not is the threshold compliance exercise, and it is done wrongly more often than it is done at all.

II. The framework as it presently stands

Three features of the existing regime are relevant to any discussion of asset risk.

Registration is time-limited. A certificate of registration under the Foreign Contribution (Regulation) Act, 2010 is valid for five years and requires renewal under Section 16. Failure to renew has consequences that many organisations do not anticipate, because the practical assumption is that a lapse can be regularised later.

Vesting on cancellation already exists. Section 15 of the Foreign Contribution (Regulation) Act, 2010 provides that where a certificate is cancelled, the foreign contribution and assets created from it vest in such authority as may be prescribed, with provision for management and for return in defined circumstances. The concept of statutory vesting is therefore not an innovation of the 2026 Bill — what the Bill proposes is a restructuring and expansion of a mechanism that has existed since 2010. Commentary describing vesting as a new threat is inaccurate.

The Rules were revised in 2026. The Foreign Contribution (Regulation) Amendment Rules, 2026 were notified in June 2026 and, unlike the Bill, are in force. Their principal operational change is that registration certificates specify the purpose and the geographical area for which foreign contribution may be received, with a transition period for existing organisations to furnish those particulars.

That change deserves attention precisely because it is the part of the 2026 package that is actually operative. An organisation whose activities have expanded beyond the purpose or territory recorded in its certificate faces a live compliance question now, not a prospective one.

The scale of the regime is considerable. Ministry of Home Affairs portal data indicates that, as at mid-July 2026, there were approximately 14,400 active FCRA certificates, against approximately 22,500 cancelled and approximately 15,200 treated as expired. The number of organisations that have lost registration substantially exceeds the number that hold it.

III. The 2026 Bill: what it proposes, and where it stands

The Foreign Contribution (Regulation) Amendment Bill, 2026 was introduced in the Lok Sabha on 25 March 2026. It was listed for passage on 2 April 2026 but deferred, and on 12 August 2026 it was referred to a Joint Parliamentary Committee.

A Bill referred to a committee is not law. Its provisions may be modified, and it will take effect only if passed by both Houses, assented to, and brought into force by notification. Nothing in the paragraphs below describes the law as it presently stands. Any advice on a live matter must proceed on the statute in force, and the current status of the Bill should be verified at the time of advising.

Subject to that, the principal proposals are these.

A Designated Authority and two-stage vesting. The Bill proposes to replace Section 15 with a new chapter providing for a Designated Authority appointed by the Central Government. On cancellation, surrender or cessation of a certificate, foreign contribution and assets created from it would vest provisionally in that Authority, which would take possession, and supervise, manage and preserve the assets. Where the organisation obtains fresh registration, renewal or restoration within the prescribed period, the unutilised contribution and provisionally vested assets would be returned. Where it does not, vesting would become permanent, and the assets would be applied for public purposes, including by transfer to a government department, authority or local body.

Deemed cessation. A proposed new Section 14B would provide that a certificate ceases automatically where no renewal application is made, where a renewal application is refused, or where the certificate is not renewed before expiry — with the consequence that the organisation may not receive or utilise foreign contribution unless the certificate is subsequently renewed. This is the provision of greatest practical significance, because it converts an administrative lapse into a trigger for the vesting regime.

Places of worship. The Bill contains an express safeguard requiring that where a permanently vested asset is a place of worship, the Designated Authority entrust its management appropriately and maintain its religious character.

Rationalisation of penalties. The maximum term of imprisonment under certain provisions is proposed to be reduced from five years to one year.

Revision and appeal. The Bill proposes a right of revision and an appeal to the District Judge against orders of the Designated Authority.

Centralisation of investigation. An amendment to Section 43 is proposed, requiring prior approval of the Central Government before a State agency or law enforcement body initiates an investigation under the Act.

Key functionary liability. The Bill expands the persons who may be held responsible, extending to directors, partners, trustees, office bearers and persons in control of management, subject to defences of absence of knowledge and due diligence.

The Bill has attracted substantial constitutional criticism, principally directed at the vesting of property by administrative process and its relationship with Article 300A of the Constitution, and at the breadth of the Designated Authority's powers. The Supreme Court held in Noel Harper v. Union of India (2022) that there is no fundamental right to receive foreign contribution, while recognising that regulation must not be arbitrary. How the constitutional questions raised by the present Bill would be resolved, if it is enacted in its current form, is not settled.

IV. Where the PMLA genuinely intersects

The connection between the Foreign Contribution (Regulation) Act, 2010 and the Prevention of Money Laundering Act, 2002 is real, but it is narrower and more specific than general commentary suggests, and stating it precisely is what makes it useful.

The offence under Section 3 of the Prevention of Money Laundering Act, 2002 requires proceeds of crime, defined in Section 2(1)(u) as property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence. The Schedule to that Act is the gateway. A contravention of the Foreign Contribution (Regulation) Act, 2010 does not, of itself and without more, constitute money laundering. What matters is whether the conduct alleged engages an offence in the Schedule.

That is where the exposure actually arises. Conduct that begins as an FCRA compliance failure — a diversion of foreign contribution, falsification of utilisation records, receipt through undisclosed accounts, or fabricated documentation submitted for registration or renewal — may simultaneously constitute an offence under provisions of the penal law that are scheduled. Where that is so, the property involved may be alleged to be proceeds of crime, and the enforcement architecture of the Prevention of Money Laundering Act, 2002 becomes available.

Two consequences follow, and both are structural rather than speculative.

Provisional attachment operates independently of the regulatory outcome. Section 5 of the Prevention of Money Laundering Act, 2002 permits provisional attachment of property believed to be involved in money laundering, subject to the conditions in that section, with the attachment placed before the Adjudicating Authority for confirmation. That process runs on its own timetable. A favourable outcome in FCRA proceedings does not by itself dissolve an attachment.

The two proceedings have different subject matter. An FCRA proceeding asks whether the statutory conditions for holding a certificate are met. A proceeding under the Prevention of Money Laundering Act, 2002 asks whether identified property is proceeds of crime. Positions taken in one are examined in the other, which is why representations made in a regulatory reply require the same care as pleadings.

V. The bail position, stated accurately

Section 45 of the Prevention of Money Laundering Act, 2002 imposes twin conditions on the grant of bail: the Public Prosecutor must be given an opportunity to oppose, and where opposed, the court must be satisfied that there are reasonable grounds for believing that the accused is not guilty of the offence and is not likely to commit an offence while on bail. The section contains exceptions, including for a person who is a woman, subject to the terms of the proviso.

The provision has a contested history. In Nikesh Tarachand Shah v. Union of India (2018) the twin conditions were struck down. They were revived by amendment through the Finance Act, 2018, and in Vijay Madanlal Choudhary v. Union of India (2022 SCC OnLine SC 929, decided 27 July 2022) a three-judge Bench upheld the amended Section 45, together with provisions concerning arrest, provisional attachment, statements recorded under Section 50, and the reverse burden under Section 24. A review petition against that decision is pending; there has been no stay, and the judgment remains binding.

The position has, however, developed since. In Prem Prakash v. Union of India (2024) the Supreme Court reiterated the principle that bail is the rule and jail the exception in the context of proceedings under the Prevention of Money Laundering Act, 2002, and in Ramkripal Meena v. Directorate of Enforcement (2024) it observed that the rigours of Section 45 may be suitably relaxed to afford conditional liberty. Prolonged incarceration with trial not in sight has been treated as a material consideration.

Describing bail under the Prevention of Money Laundering Act, 2002 as unobtainable is therefore inaccurate. It is stringent, and the burden is structurally adverse, but the jurisprudence is not static.

As to the Unlawful Activities (Prevention) Act, 1967, a note of precision is required. Section 43D(5) of that Act bars release on bail where the court, on a perusal of the case diary or report, is of the opinion that there are reasonable grounds for believing that the accusation is prima facie true. That is a demanding threshold. But the Act applies to offences under its own chapters, which concern terrorist acts, terrorist organisations and the raising of funds for terrorism. A failure of ultimate beneficial ownership disclosure, or a lapse in FCRA reporting, does not of itself engage that statute. Its invocation requires the ingredients of the offences it creates. Commentary suggesting that ordinary compliance irregularity carries terrorism exposure overstates the position and should be treated with caution.

VI. Comparison of the three regimes

VII. What governance actually requires

For an organisation within the FCRA framework, the measures that materially reduce risk are unglamorous and largely documentary.

Treat renewal as a fixed obligation, not an administrative task. Under the Bill as proposed, non-renewal is itself a trigger. Even under the present Act, lapse creates difficulty that is disproportionate to the effort of timely filing. Renewal timelines should sit with a named person and a calendar entry, not with whoever handled it last time.

Keep foreign contribution segregated and traceable. Separate ledgers, the designated account, and a clear audit trail from receipt to utilisation. Where an asset is created partly from foreign contribution and partly from domestic funds, the proportion and its basis should be documented at the time of acquisition — not reconstructed years later under scrutiny.

Reconcile activities against the certificate. Following the 2026 Rules, purpose and geographical area are specified on the certificate. Activities outside those particulars require attention.

Document the assessment of what is, and is not, foreign contribution. For hybrid entities this is the single most valuable record to hold. A contemporaneous, reasoned classification of receipts is far more persuasive than an explanation constructed after a notice issues.

Record due diligence at functionary level. Where liability may attach to office bearers subject to a defence of due diligence, the defence depends on evidence that diligence was exercised. Board minutes recording compliance review are that evidence.

Prepare the response architecture before it is needed. Who receives a notice, who instructs, what is preserved, and what is not communicated — settled in advance, because the timelines do not accommodate deciding it afterwards.

VIII. How Sagar & Sagar Law Offices approaches this work

Sagar & Sagar Law Offices has practised in India since 2000, with a regulatory and enforcement practice covering proceedings under the Prevention of Money Laundering Act, 2002 before the Enforcement Directorate, the Adjudicating Authority and the Appellate Tribunal; regulatory compliance and adjudication; and civil, writ and appellate litigation before the High Courts and the Supreme Court of India. Founding partner Sanjeev Sagar was designated a Senior Advocate by the High Court of Delhi in November 2024 and is available as senior counsel in complex and appellate matters.

The firm's approach in matters of this kind reflects three considerations.

Regulatory and enforcement exposure are assessed together. Because the firm conducts regulatory work and financial crime defence within the same practice, a compliance question is examined for what it may become, and a response to a regulatory notice is drafted in the knowledge that it may be read in a subsequent enforcement proceeding.

The record is built early. Replies, representations and internal documentation are prepared on the footing that they will be scrutinised — before an adjudicating authority, on appeal, and potentially in a criminal court.

Position is kept consistent across proceedings. Where regulatory, civil and criminal proceedings arise from the same facts, they are managed with reference to one another rather than as separate mandates.

Related work is described on our White Collar Crime & Financial Crime Defence and Regulatory, Competition & Compliance pages.

Related practice areas

• White Collar Crime & Financial Crime Defence — PMLA proceedings, attachment, adjudication and appeals
• Regulatory, Competition & Compliance — regulatory investigations, compliance frameworks and adjudication
• Litigation & Dispute Resolution — writ and appellate proceedings against regulatory action
• Corporate, M&A, Private Equity & Capital Markets — foreign investment and FEMA advisory

For enquiries relating to foreign contribution compliance, regulatory proceedings or enforcement matters, please use the details on the Contact page, or see the firm's wider practice areas.

This post is general commentary on law and pending legislation and does not constitute legal advice, nor does it create an advocate–client relationship. The Foreign Contribution (Regulation) Amendment Bill, 2026 is pending before Parliament and its provisions are subject to change; statutes, rules and judicial decisions referred to are subject to amendment and further consideration. The position in force should be verified before it is relied upon.