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Name one thing common between BJP and Congress: Foreign funds

Jagdeep S. Chhokar | Updated on: 14 February 2017, 4:08 IST


  • The FCRA forbids political parties from accepting foreign funds
  • But both the BJP and the Congress did accept such funds

Damn the court

  • Delhi High Court asked the govt and ECI to take action
  • No concrete action has yet been taken

More in the story

  • How the govt is trying to save the two parties
  • Will it be successful?

The BJP and the Congress may be at loggerheads with each other publicly and in Parliament. But there is at least one cause that the two have in common: foreign contributions.

According to information in public domain, the top two political parties of the country accepted funding from foreign sources. And they were not supposed to.

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And going by the current government's action, it seems the two parties would not have to face any heat for breaking the law, despite a Delhi High Court order.

The law

The FCRA (Foreign Contribution Regulation Act) was first enacted in 1976. In 2010, the Act was amended to expand its scope. According to this law, political parties and their office bearers can't accept any foreign contribution.

Lawmakers, candidates for any election and organisations of political nature are also among those barred from being able to accept foreign contribution.

Political parties in India are completely exempt from income tax. To claim this exemption, however, they need to furnish a list of all donations above Rs 20,000 to the Election Commission (ECI).

The violation

In 2013, the Union government notified a scheme to let corporates set up electoral trusts for contributing to political parties. A scrutiny of the donation reports submitted by political parties, it was noticed that some parties had declared donations received from electoral trusts.

Among the parties who had received donations from electoral trusts were the Bharatiya Janata Party and the Congress. Both had declared receiving funds from one particular trust, set up by three companies.

According to the websites of the companies, all three are fully owned subsidiaries of a company registered in the United Kingdom. Thus, under the corporate veil, money received by the two parties was, in fact and in effect, foreign contributions. Therefore, they violated the FCRA.


The above sequence of action led to the filing of a public interest litigation in the Delhi High Court, requesting appropriate action against the two parties under the FCRA.

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On March 28, 2014, the court decided that both the BJP and Congress were guilty of having violated the FCRA and laid down a specific timeframe for taking action, saying:

"The second direction would concern the donations made to political parties by not only Sterlite and Sesa but other similarly situated companies/corporations. Respondents No 1 and 2 would relook and reappraise the receipts of the political parties and would identify foreign contributions received by foreign sources as per law declared by us herein above and would take action as contemplated by law. The two directions shall be complied within a period of six months from date of receipt of certified copy of the present decision."

The action or whatever it may be called

The Union of India and the ECI were repondents No. 1 and 2, respectively, as listed in the petition. The FCRA is administered by the Union Home Ministry and is the appropriate authority to ac in this case.

The ECI wrote to the MHA to take action according to the judgment. The MHA apparently wrote to the Ministry of Corporate Affairs (MCA), seeking the names of the companies falling under the category of 'foreign source', who had donated to the two parties. The MCA sent a list to the MHA, which was duly forwarded to the ECI.

Seems this is all the action taken in response to the high court judgment. Meanwhile, The BJP and the Congress filed appeals in the Supreme Court against the judgment .

And the real 'action'

A report in the Economic Times on December 21, 2015 revealed what might in fact be the 'real action' taken.

It seems the Home Ministry had proposed to amend the FCRA "to allow foreign companies that are registered in India to contribute to political parties from their corporate social responsibility fund in sectors where FDI is allowed."

It was also reported that "an earlier suggestion to bring in a notification describing any company registered in India as an 'Indian company', irrespective of its shareholding pattern, has been turned down during inter-ministerial discussions."

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It is clear from the report that the powers-that-be seem to have come to the conclusion that the judiciary cannot be depended upon to bail out the two leading political parties by blatantly disregarding the law of the land. Rear-guard action therefore seems to be underway.

When the first seemingly crude attempt to simply amend the law did not find favour with some sensitive officials, a more elaborate and multi-pronged strategy seems to have been adopted:

1. Pass the amendment, that too with retrospective effect. That way both the major parties will be off the hook completely. No Opposition is perhaps expected from any other significant party as they will hope to benefit in the future.

2. Making "foreign companies that are registered in India" and that too "in sectors where FDI is allowed" eligible "to contribute to political parties" is perhaps, and rightly, considered to be a master stroke. It makes the quid pro quo almost completely transparent to anyone who wishes to know how to get things done.

3. The proposal to allow contributions to political parties "from their corporate social responsibility fund" is a real googly. When CSR was made compulsory for some companies, the MCA had to lay down what activities would qualify. The initial proposals included contributions to political parties as one of the purposes on which CSR funds could be spent.

This was opposed by a number of interested parties, including the civil society. After extensive debate it was decided to keep contributions to political parties out of the list of approved CSR activities. Now, by including CSR funds in this proposed amendment of FCRA, that decision is attempted to being frustrated.

Where are we now, and what of the future?

The current situation is the following:

  • The BJP and the Congress are guilty of having violated the FCRA.

  • The appeals of the two parties are in the Supreme Court.

  • No worthwhile action has been taken by the MHA against the parties despite the clear orders of the Delhi High Court.

  • Attempts have been made to amend the FCRA to permit political parties to receive foreign funds.

About the future, who knows?

One thing however seems to be clear. Every time political parties are caught flouting the law of the land, made by candidates initially chosen by them and elected, there are attempts to amend the laws to protect political parties and put them above the law.

It has happened with unfailing regularity over the last 40 years at least, since 1975 when the RP Act was amended after the Kanwarlal Gupta vs Amar Nath Chawla judgment by the Supreme Court.

RP Act, the RTI Act, and now the FCRA. The list goes on. Will it ever stop? Who knows?

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First published: 6 January 2016, 1:35 IST
Jagdeep S. Chhokar @CatchNews

Jagdeep S. Chhokar is a former professor, Dean, and Director In-charge at IIM, Ahmedabad. Views are personal.