Social Justice and Empowerment Minister Thaawar Chand Gehlot told the Lok Sabha that 26 cases of alleged misuse of funds by NGOs have come to light.
Responding to a supplementary, he said a probe is on against Dr Zakir Hussain Memorial Trust and if need be an FIR would be lodged.
Former Union Minister Salman Khurshid is associated with the trust.
The complaint against the trust relates to non submission of documents in respect of utilisation of grants in aid released during 2010-11, the Minister said.
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He also said government seeks to have a better say on issues like misutilisation of funds and is examining possible "flaws" in the present system to curb such practices.
The Minister said in the event of "proven misappropriation" of funds by an NGO, the Ministry initiates action to blacklist that organisation.