In Supreme Court, EC Criticises Modi Govt’s Electoral Bonds and Foreign Funding Tweaks

The EC said it has "time and again" voiced the importance of declaration of donation received by political parties and the manner in which they are expended.

New Delhi: The Election Commission (EC) has criticised the Narendra Modi government’s electoral bond scheme and its decision to allow foreign funding of Indian political parties in a move that sets the stage for a legal battle against corporate influence on elections in the country.

In an affidavit filed before the Supreme Court on Wednesday, the commission said that the electoral bond project and removal of caps on the extent of corporate funding would have “serious repercussions/impact on the transparency aspect of political finance/funding of political parties”.

On the Centre’s decision to amend the Foreign Contribution Regulation Act, the EC noted that it would allow “unchecked foreign funding of political parties in India” and that this could lead to “Indian policies being influenced by foreign companies”.

The Supreme Court is currently in the process of hearing several petitions – filed by non-government organisations and the Communist Party of India (Marxist) – that challenge the constitutional validity of a number legislative changes that have altered the landscape of campaign financing in India.

The next hearing is scheduled on April 2, 2019.

As part of the apex court’s hearings, the Election Commission has filed its own affidavit that reiterates its opposition to the electoral bond scheme while noting it has over the past 15 years warned the Indian government of the need to bring in more transparency.

In its submission, the electoral body however notes that being a “constitutional authority” it does not plan on taking a side in the current challenge before the Supreme Court.

“The answering respondent [Election Commission] does not propose to take any contentious issues or to join any submission on merits etc, as these are matters between contending parties. The answering respondent would however like to explain broadly the position of law on the subject, besides placing its position on record,” the affidavit notes.

Two letters

In its submission, the EC has also attached two letters (reproduced below in full) it wrote to the Modi government in early 2017.

The first letter, dated March 15, 2017, came one month after finance minister Arun Jaitley announced the electoral bond scheme and talks of how various changes should be made to the Income Tax Act, 1961 and the Representation of People Act, 1951.

The second letter, dated May 26, 2017, says the Modi government’s efforts to clean up corporate funding of elections will actually have a serious and negative impact on transparency.

EC Letters by The Wire on Scribd

On the issuance of electoral bonds, the commission noted that “any donation received by a political party through an electoral bond has been taken out of the ambit of reporting under the Contribution Report as prescribed under Section 29C of the Representation of the People Act, 1951”.

“In a situation where contributions received through Electoral Bonds are not reported, on persual of the contribution reports of the political parties, it cannot be ascertained whether the political party has taken any donation in violation of provisions under Section 29-B of the Representation of the People Act, 1951, which prohibits the political parties from taking donations from government companies and foreign sources”.

On amendments made to the Companies Act that remove caps on corporate funding, the EC warned that this would open up the  possibility of “shell companies being set up for the sole purpose of making donations to political parties, with no other business of consequence having disbursable profits.”

In its affidavit before the Supreme Court, the electoral body has weighed in on the controversial changes to the Foreign Contribution Regulation Act – changes that critics have alleged were made to retrospectively legalise donations accepted by the BJP and Congress.

Also Read: Finance Ministry ‘Misled’ Parliament About Electoral Bonds

“The answering respondent submits that insofar as the changes made in the Foreign Regulation Contribution Act, 2010 through the Finance Act, 2016 is concerned, the said amendment allows donations to be received from foreign companies having majority stake in Indian companies, provide that they follow the FEMA guidelines pertaining to foreign investment in the sector in which they operate,” the EC’s submission notes.

“This is a change from the existing law barred donations from all foreign sources as defined under the Foreign Contribution Regulation Act. This would allow unchecked foreign funding of political parties in India which could lead to Indian policies being influenced by foreign companies.”

Critics alleged the changes were made to retrospectively legalise donations accepted by the BJP and Congress. Credit: PTI

Consistent need for transparency

The Modi government’s electoral bond scheme, which came into effect from January 2018, gathered over Rs 600 crore in political funding as of October 2018. Various media reports have noted that the ruling BJP has been the biggest beneficiary of the scheme.

For instance, of the Rs 220 crore in bonds that were purchased as of March 2018, Rs 210 crore went to the right-wing saffron party.

Former senior officials of the Election Commission have also publicly, on record, stated that the NDA-II government has not addressed concerns that were put forth.

As the EC notes in the conclusion of its affidavit:

“It is evident from a perusal of the aforementioned letters/communications and proposals that the Answering Respondent has time and again voiced the importance of declaration of donation received by the political parties and also about the manner in which those funds are expended by them, for better transparency and accountability in the election process.”