Interim Order Made Absolute for Operational Expenses – Supreme Court Stresses on Proper Accounting and Periodic Auditing for Smooth Functioning of Institutions”

The Supreme Court of India has focused on the utilization of frozen accounts by petitioners for salary and institutional expenses under certain conditions. This decision, outlined in the judgement of the case “Operation Mobilization India & Ors. Vs. State of Telangana & Ors.”, addresses issues related to the freezing of accounts under the Foreign Contribution (Regulation) Act, 2010.

The case originated from FIR No. 22 of 2016, which led to the freezing of the petitioners’ accounts by the CID Telangana State in November 2020. This action prompted the petitioners to approach the High Court, which upheld the account freeze, resulting in the current appeal to the Supreme Court. The issue at hand was the need for operational funds for educational and health institutions managed by the petitioners, amidst ongoing investigations under the FCRA.

Investigation Validity: The Court recognized the legitimacy of the investigation but expressed the necessity to balance it with the operational needs of the petitioners’ institutions.

Interim Relief Rationale: The Court, on April 7, 2021, provided interim relief allowing the use of frozen accounts for salary and institutional expenses, emphasizing the importance of maintaining comprehensive accounts.

Ongoing Investigations and Trials: The Court clarified that the ongoing investigations and trials in various courts should continue as per law, without any interference or observations on the merits of the case from the Supreme Court.

Contempt Petition: The Court chose not to delve into the contempt petition, leaving it to the discretion of the investigating agency or the Trial Court.

Requirement for Auditing: A key aspect of the judgement was the emphasis on proper auditing by a Chartered Accountant, with quarterly statements to be provided to the Investigating Officer or the Trial Court.

Interim Order Absolution: Ultimately, the Court made its interim order absolute, thereby allowing the petitioners to continue using the accounts for the defined purposes under strict financial scrutiny.

Decision: The petitions were disposed of with the Court making the interim order dated April 7, 2021, absolute. This allows the petitioners to use their frozen accounts for operational expenses, under the condition of strict financial discipline and auditing. The Court clarified that this order is solely for the smooth functioning of the educational and health institutions run by the petitioners and has not made any observation on the merits of the allegations.

Date of Decision: April 5, 2024

Operation Mobilization India & Ors. Vs. State of Telangana & Ors.