NEW DELHI: Alleging illegal diversion of foreign funds, home ministry has served notices to two NGOs run by social activist Teesta Setalvad and her husband Javed Anand. Issued on June 4, the notice has asked the NGOs to reply within 15 days and explain the alleged violations of the Foreign Contribution Regulation Act (FCRA) detected during an inspection of their accounts in April.

"If the replies are not satisfactory, or no reply is received by the stipulated date, appropriate action would be taken under law," said a senior home ministry official. Sources said it could mean suspension of FCRA registration of both the NGOs.

The notices were served to Sabrang Trust and Citizens for Justice and Peace (CJP) after search and investigations conducted at their Mumbai offices. Sources said, the violations relate to use of foreign contributions to publish a magazine 'Communalism Combat' when FCRA rules expressly prohibit use of foreign donations for media ventures. Under FCRA, diversion of funds to a non-FCRA registered body and for purposes other than the NGOs declared objectives is illegal. The probe also found accounting anomalies in the use of foreign funds by the NGOs.

Importantly, the home ministry is also mulling action against Sabrang Communications and Publishing Private Ltd (SCPPL), which is not registered under FCRA, for receiving a $2.9-lakh Ford Foundation grant made to but subsequently diverted by Sabrang Trust. "The inspection at SCPPL was completed in the first week of June and a notice will be served under FCRA to the private company once the inspection report is compiled," said a home ministry official.

According to sources, the notices asked the two NGOs to reply by June 19 to eight violations of the FCRA detected against Sabrang Trust and six violations found against CJP.

Sources said during the probe it was found that Setalvad and Anand were running "Communalism Combat" as co-editors and were printer and publisher of their company SCPPL.

CJP, which has been fighting cases for victims of 2002 Gujarat riots, had received a total foreign contribution of around Rs 1.18 crore from 2008-09 to 2013-14. According to the notice, more than 80% or nearly Rs 95 lakh was received for legal aid.

While the entity was registered for 'educational and economic' purposes, it received foreign contribution for activities such as 'Legal Aid' which is covered under purpose 'Social'. Hence, it violated the provisions of the FCRA rules, the notice says. It has also alleged that even Sabrang Trust, similarly registered, used foreign funds for cultural purposes.

The notice also alleges diversion of funds for personal use. "On review of vouchers of the association it was found that Sabrang Trust has made payment of Rs 12 lakh from FCRA designated account to Citi Bank and Union Bank of India on account of credit facilities taken through credit cards belonging to Setalvad and Anand. This amounts to use of foreign contribution for the purposes not authorized as per the provisions of FCRA 2010," the home ministry notice said.

The home ministry investigation also found that Anand has taken international medical policy for visiting Lahore and debited the amount in the account of Sabrang Trust. Even book purchases and travel expenses incurred by him to attend meetings with People's Union For Civil Liberties (PUCL) were debited in Sabrang Trust allegedly in violation of Section 8(1)(a) of FCRA, said sources.

The home ministry's inspection has also found that an amount of Rs 50 lakh was allegedly transferred by Sabrang Trust to SCPPL which is not registered under FCRA.

It also found Sabrang Trust spending more than 50% of its foreign contributions for administrative purposes which is not permitted under FCRA. The notice says the Trust received foreign contributions to the tune of Rs 48 lakh in 2010-11 and Rs 49 lakh in 2011-12. Of this it spent more than 64% and 55% as administrative expenses.

The inspection at the premises of the two NGOs was undertaken days after the receipt of a letter from the Gujarat government in April, alleging several FCRA violations by the NGOs run by Teesta and her husband Javed Anand.

The official said that while the violations by Teesta's NGOs, accused by the Gujarat government of "direct interference ... in the internal affairs of the country and also abetting communal disharmony in India", were serious enough to consider suspension of its FCRA certificate, there was also a possibility that the home ministry may invoke the rarely-used Section 11(3)(iv) of the FCRA, 2010, mandating prior clearance of its funding, irrespective of the foreign source.

Under the FCRA, no foreign contribution shall be accepted by any correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper.

FCRA rules prohibit transfer of foreign contribution to non-FCRA account unless such entity is also registered and had been granted the certificate or obtained prior permission under this Act.

Besides, different figures towards expenses incurred on legal aid in the books of accounts and in the receipts of payment accounts, closing balance of the proceeding year was allegedly not reported as opening balance and even the funds received from United Nations not found in the bank statement, the notice said.