Karnataka High Court Quashes 2019 Enforcement Directorate Complaint Against Greenpeace India for Alleged Foreign Exchange Management Act Violations

A landmark Criminal Court decision in favour of Greenpeace India

A major development in this regard is that the Karnataka High Court has lately dismissed a petition by the Enforcement Directorate (ED) against Greenpeace Environment Trust and Greenpeace India Society, an NGO-related organization made in 2019. This grievance had been raised against the renowned green group against its contravention of the Indian Foreign Exchange Management Act (FEMA) about its receipt and utilisation of foreign funds.

This ruling by the one-member bench of Justice Suraj Govindaraj, issued on June 12 is a major win for Greenpeace India which has over the last few years fought multiple court battles over its financial activities. The order of the court, in addition to quashing the complaint that was filed in 2019, also cancels a show cause notice against him that the ED gave him in the matter during 2020.

The Nub of the Case: Unreferred Provision of Law

This ring of succession in the argument advanced by Greenpeace was based on a previous ruling based on a board independent of the same bench of the High Court. This earlier decision was by Kshithija Urs who was the former Executive Director of Greenpeace. Under such circumstances, which was ruled in December of the year 2024, Justice Anu Sivaraman clarified that the ED could not have applied FEMA Act Section 6-3 against Urs.

This important discovery was triggered by the fact that the Finance Act of 2015 eliminated this section of FEMA from the law. More to the point, this withdrawal took place on October 15, 2019. Because of this date, after which the complaint against Greenpeace was registered by the ED, namely, on October 25, 2019, the court decided that the grounds of the complaint were outdated.

In the decision on the Greenpeace case which was recently handed down by Justice Govindaraj, acknowledgement of this precedent was made. He observed that it was not in any way possible to contest that the proceedings against Greenpeace were brought about after the omission of Sub-section 6(3)(b) of FEMA. Thus, using the arguments and conclusions of the previous decision, the court came to the conclusion that the petition submitted by Greenpeace needed to be accepted.

AllEGATIONS OF ED, AND THE POSITION OF Greenpeace

This was because the Enforcement Directorate had accused Greenpeace whose license under the Foreign Contribution (Regulation) Act (FCRA) was cancelled, of conspiring with a certain Indian firm called Direct Dialogue Initiatives India Pvt Ltd (DDIIPL). According to the ED, this partnership was due to someone trying to increase and remit overseas funds to Greenpeace India and fund it against the norms of the FCRA, and against FEMA. The amount of violation that was alleged was quite huge amounting to approximately US$ 3.8 million.

These accusations were all the time rejected by Greenpeace in the course of these proceedings. The group argued that it was entering into a relationship with DDIIPL to reach out to potential donors only. Greenpeace claimed that any donation money given to it directly reached its accounts and there was no mal-router of foreign funds being received through DDIIPL with a view to evading regulations. It has always claimed that the organization will abide by Indian laws and work in a transparent manner.

An History of Scrutiny

Stringent government attention has been drawn to Greenpeace India over the last few years. Their problems were worsened in 2015 when its license under the FCRA was cancelled. Greenpeace had at the time been under fire from the Indian Home Ministry over suspicions that it had been involved in activities that it had termed anti-development. The Ministry claimed that many laws had been violated and hence the cancellation would effectively block Greenpeace’s capability to accept foreign donations as charity.

The ED also commenced investigations and proceedings against the organization following the cancellation of its FCRA license. In 2018, Greenpeace’s offices were raided by the ED and its bank accounts were frozen. Nonetheless, this move was also defended and was later quashed by the Karnataka High Court in 2019. The court had noted at the time that the communication issued by ED to banks on the allowance of frozen accounts was time bound and had lapsed.

Consequences of the decision

The recent ruling of the Karnataka High Court is a big relief to Greenpeace India as it has been taken to court for a long period of time. It reaffirms the idea that governmental agencies should make sure that their claims and acts are true to the laws that are currently operational. This decision highlights the relevance of legal precision and the use of appropriate methods when considering the case concerning financial regulations.

This judgment provides some form of clarity and comfort to non-governmental organizations (NGOs) in India and especially those that depend on foreign funding. Although the regulatory regime over foreign donations is still strict in India, this particular case shows that it is possible that legal action against NGOs proves to be fruitless in the face of an invalid legal system or its misuse. It once again ascertains the position of the courts in the application of the law and providing fairness even in complicated cases such as those related to foreign exchange rules.

The case is also a reminder of the complex and troublesome environment that civil society organizations in India experience particularly in areas of foreign funding. The Foreign Exchange Management Act (FEMA) and Foreign Contribution (Regulation) Act (FCRA) are essential acts in regulating the entry and utilization of foreign currency in India and an organization should go through this with caution. Although this particular finding focuses on a technical level of a legal substance due to a forgiven provision of FEMA, it still adds to the legal debate about foreign financing and NGO work in the nation.