Lokpal & Lokayukta Act, 2013 – Should we ‘Comply’ or ‘Complain’???

The Lokpal
& Lokayukta Act, 2013 (LLA)
is an Act intended to Regulate and Control Corruption in ‘Public Institutions’. Unfortunately NGOs and charitable
institutions which are voluntary organisations for public purposes and
public good have also been included within the purview of this Act.

 

The Act has deemed trustees and officers of
several charitable institutions and NGOs as ‘Public Servants’ and requires them under the new law to declare
their assets in the public domain! This is already making several high profile
persons serving on Boards of charitable institutions in a purely voluntary
capacity consider stepping down and off the Boards of these institutions.

Many high profile businessmen and
professionals contribute their time and other resources as trustees of these
organisations or associations out of a sense of deep concern and a clear and
committed sense of responsibility. Even senior officers of charitable
institutions work on salaries far less than their corporate counterparts. But,
now this law meant to being about transparency and accountability among
‘Government Servants’ and minimize corruption within the government sector has
drawn in trustees and officers of charitable institutions as well.

Many charitable institutions today receive
funds from ‘foreign sources’ and have High Net-worth Individuals on their Board
and these individuals would rightly be most reluctant to disclose their
personal assets in the public domain and make themselves vulnerable and exposed
to extortionists and other anti-social elements, merely because of their
involvement with a charitable institution in a purely honorary capacity.

Let us first examine who this Act applies to
and how?

Definition of ‘Public Servants’ under the Act?

Section 14(1) (f), (g) & (h) are of
particular relevance for most charitable institutions

Under
Section 14(1)(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”.

Several charitable institutions are ‘partly
financed’ by the Central Government and the term ‘partly financed’ is neither
defined nor explained where this particular sub-clause is concerned.

Under
Section 14(1)(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 Rs. 1 Crore”

This section clearly deems as ‘public
servant’ every trustee, manager, officer etc., of a charitable trust or society
which is wholly or partly financed by the Government and the annual
income of which exceeds Rs. 1 Crore.

There is also a technical loop-hole. This
sub-clause does not refer to Section 8 (earlier Section 25) companies, although
some feel Section 8 companies would get covered under “by whatever name called”,
as also, the ‘Explanation’ u/s 14(1) does clarify that a ‘corporate’ entity
would be covered under clause (f) and (g).

Under
Section 14(1)(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 lakhs Rupees in a year or
such higher amount as the Central Government may, by notification, specify.

The
Explanation under Section 14(1) adds:

“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”

‘Declaration’
by Public Servant

Under Section 44 of LLA, 2013, the deemed
‘public servant’ shall make a declaration of assets and liabilities in the
manner as provided under this Act.

To reiterate, the definition of ‘Public
Servant’ will cover every Board Member and Senior Employees of charitable
institutions and NGOs wholly or partly financed by the Government and the
annual income of which exceeds Ten Million Indian Rupees as also every Board
Member and Senior Employees of charitable institutions and NGOs which receive in
a year more than One Million Indian Rupees under FCRA 2010.

Under the Act, the declaration shall include:

1. The name of spouse, minor or dependent
children and the position held by them, details of cash and bank balances and
other moveable properties including investment, advances, vehicles, jewelry
etc.

2. Details of immovable property whether
residential, commercial, agricultural or otherwise, details of loan taken along
with the detail of loan provider.

Reporting
Authority:

The Competent Authority to whom the return
shall be filed will be the respective Ministry which has provided the maximum
proportion of the grant or donation during the previous year.

In case of foreign contribution received
the Competent Authority shall be the Ministry of Home Affairs.

Where such ‘Public Servant’ or Director and
Officer of a charitable trust or society or NGO does not make declaration of
his/her assets, it will be treated as an offence and the Lokpal shall have the power to initiate inquiry and even confiscate
the assets of such officers.

Many charitable institutions are not even
aware that compliance under this Act is due by the end of this month (31st
July 2016).

Either
‘Comply’ or ‘Complain’!

In our view it’s time to complain and lobby
for exemption. This is a classic case of
misapplication of concepts of transparency within the government sector being
foisted on the non-profit/voluntary/charitable sector. In our view, this is yet
another needless punishment or deterrent for those involved in charitable
activities!

Arise,
Awake and Advocate for scrapping applicability of
this law on voluntary and charitable institutions which are essentially filling
major gaps in the government’s own delivery systems from education and health
care to poverty alleviation and addressing environmental issues.

 

Noshir H. Dadrawala

Chief Executive, Centre for Advancement of Philanthropy

For any further queries, write to us at connect@capindia.in