The Supreme Court on Tuesday directed the government to audit nearly 30 lakh NGOs which received public funds but consistently failed to explain how they spent the money.
A Bench of Chief Justice of India J.S. Khehar and Justices N.V. Ramana and D.Y. Chandrachud was hearing a writ petition filed by advocate Manohar Lal Sharma.
It ordered that any NGO found to have cooked its books or indulged in misappropriation should be subject to immediate criminal prosecution. Besides, the government should initiate civil recovery proceedings against such rogue organisations.
The Supreme Court demanded that the government file a compliance report by March 31.
The judicial order is unprecedented because defaulting NGOs so far have been only blacklisted by the government.
Pulling up the government for failing to put in place a regulatory mechanism to keep a watch on the financial activities of NGOs and voluntary organisations, the apex court ordered that by next hearing, the government should have framed guidelines for their accreditation, the manner in which these organisations should maintain their accounts and the procedure for recovery in case they fail to submit their balance sheets.
At one point, the court was taken aback the government seemed to be unaware that General Financial Rules, 2005 mandate a regulatory mechanism for the NGOs. “This is your [government] money and you have no record of how they [NGOs] use it?” Chief Justice Khehar asked the government.
In the forenoon, when the government sought an adjournment to produce records of the NGO audits, the Bench instead ordered the Rural Development Secretary and Director of Council for Advancement of People’s Action and Rural Technology (CAPART), which comes under the Rural Development Ministry, to be present before it at 2 p.m.
“There can be no doubt about the fact that the amounts disbursed by CAPART is public money and needs to be accounted for... the only exercise being carried out so far against those who have failed to file their balance sheets is blacklisting. It is necessary to start criminal and civil action by the Central government and CAPART,” the Supreme Court said.
In the last hearing on the writ petition filed by advocate Manohar Lal Sharma, the Supreme Court had noted that NGOs get “mind-boggling” funds and this has become a “major problem” without an effective law to regulate the flow of money.
It had considered the possibility of referring the task of framing the law to the Law Commission of India.
CBI records filed in the Supreme Court show that only 2,90,787 NGOs out of a total of 29,99,623 registered under the Societies Registration Act file annual financial statements.
In some States, the CBI said the laws do not even provide for the NGOs to be transparent about their financial dealings.
In the Union Territories, out of a total of 82,250 NGOs registered and functioning, only 50 file their returns.
New Delhi has the highest number of registered NGOs among the Union Territories at 76,566. But none of these organisations submit returns, the CBI chart showed. In Kerala, which has 3,69,137 NGOs, there is no legal provision to submit returns. The same is the case for Punjab with 84,752 and Rajasthan with 1.3 lakh NGOs.
Among other States, Uttar Pradesh, which has the highest number of NGOs at 5.48 lakh among 26 States, has only about 1.19 lakh filing returns. Tamil Nadu has about 1.55 lakh NGOs registered but only 20,277 file returns. Andhra Pradesh has 2.92 lakh NGOs, though only 186 file financial statements annually. West Bengal has 2.34 lakh registered NGOs, of which only 17,089 active NGOs file annual returns.
The Supreme Court had expanded the scope of Mr. Sharma’s PIL plea alleging misuse of funds by Anna Hazare’s NGO Hind Swaraj Trust to include the status of all NGOs.
