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04 Aug 2016

Non Profit Organisations too are governed by the Lokpal Act, 2013

By: Vishal Vora
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 The Government of India legislated the Lokpal and Lokayuktas Act, 2013 (“Lokpal Act”) to specifically deter, inquire into and punish instances of corruption by Public Servants. The Act established the Lokpal at the Central Government level and enabled establishment of Lokayuktas at the State Government level.

 The preamble of the Lokpal Act is as follows:

“An Act to provide for the establishment of a body of Lokpal for the Union and Lokayukta for States to inquire into allegations of corruption against certain public functionaries and for matters connected therewith or incidental thereto.”

 However, office bearers of Non-Profit Organizations (“NPOs”) which are generally private institutions for public purposes, have also been included within the definition of the term “Public Servant”. Section 2(o) read with Section 14(1)(h) of the Lokpal Act defines “Public Servant” to include a person, inter-alia, who is or has been a director, manager, secretary or other officer of every other society or association of persons or trust which have received donation from any foreign source under the Foreign Contribution (Regulation) Act, 2010 in excess of Rs.10,00,000/- in a year.

 Section 14 of the Lokpal Act places an obligation on the Lokpal/Lokayuktas to inquire into allegations of corruption made against to Public Servants (relating to incidents during the period when s/he was holding that post or serving in that capacity), and by virtue of proviso to Section 14(1), all Public Servants under the Lokpal Act are also deemed to be Public Servants under the Prevention of Corruption Act, 1988. Therefore, provisions of the Prevention of Corruption Act, 1988 are applicable to all persons covered in the definition of “Public Servant” under the Lokpal Act. Therefore, because office bearers of NPOs fall under the above definition of “Public Servants”, they too may be investigated by the Lokpal for allegations of corruption in/by the NPO made in a complaint.

 Section 44 of the Lokpal Act mandates Public Servants to declare the assets and liabilities of him/herself, his/her spouse and dependent children to a competent authority, within 30 (thirty) days from the commencement of the Lokpal Act, or within 30 (thirty) days from taking the designation as Public Servant. It is clarified that dependent children mean sons and daughters who have no separate means of earning and are wholly dependent on the Public Servant for their livelihood.

Section 44 also mandates Public Servants to file annual returns of assets and liabilities of self, spouse and and dependent children. It is clarified by notification dated 20th June 2016 that the annual returns relating to receipt of any donations from any foreign source under the Foreign Contribution (Regulation) Act, 2010 shall continue to be filed by 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), till such time the entire amount of the donation aforesaid, received by such society or association of persons or trust stands fully utilised. The said notification also specifies that the “competent authority” in relation to Public Servants referred under section 14(1)(h) of the Lokpal Act shall be the Minister-in-charge of the Ministry of Home Affairs.

The Central Government has prescribed forms of declarations and annual returns to be filed by Public Servant under Section 44 of the Lokpal Act in the Public Servants (Furnishing of Information and Annual Return of Assets and Liabilities and the Limits for Exemption of Assets in Filing Returns) Rules, 2014 (“Lokpal Rules”).

 Though the Lokpal Rules were notified on 14th January 2014, and the Lokpal Act was made effective from 16th January 2014, the disclosure requirements were put in abeyance by the Lokpal and Lokayuktas (Removal of Difficulties) Order, 2014 and amendment to the Lokpal Rules. As it stands today, Public Servants are required to file the declaration under Section 44(1) of the Lokpal Act as on 1st August 2014 and Annual Returns under Section 44(4) of the Lokpal Act as on 31st March 2015 and as on 31st March 2016, on or before 31st December 2016.

 As per Section 45 of the Lokpal Act, if any Public Servant wilfully or for reasons which are not justifiable, fails (a) to declare his/her assets, or (b) gives misleading information in respect of such assets and is found to be in possession of assets not disclosed or in respect of which misleading information was furnished, then, such assets shall, unless otherwise proved, be presumed to belong to the public servant and shall be presumed to be assets acquired by corrupt means. The competent authority may, for reasons to be recorded in writing, exempt a public servant from filing the information in respect of any asset, if the value of such asset does not exceed four months’ basic pay of the public servant or Rupees two lakhs, whichever is higher.

 There are reports that discussions are underway for relaxing the disclosure requirements applicable to NPOs. There is speculation in some sections of the media that the rules may be amended such that while details of the NPO will be required to furnished, individual members of the management and their spouse and children are likely to be exempted from disclosure requirements.

 But till any official notifications are issued, NPOs and their office bearers are advised to be prepared to comply with the current requirement.

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