FCRA Amended to Condone Illegal Foreign Funding to BJP, Congress; Challenged in Supreme Court

The Modi government used Budget 2018 to once again give the BJP and Congress a get-out-of-jail card for having illegally accepted funding from foreign companies.

The parties got a free pass for violations of the law going back 40 years.

In 2016, finance minister Arun Jaitley inserted a surreptitious amendment in that year’s finance bill which shielded both political parties from having violated the Foreign Contribution (Regulation) Act 2010 (FCRA) when they accepted donations from London-based multinational Vedanta.

The amendment was a thinly disguised attempt to overturn a 2014 Delhi High Court order that found both the Congress and BJP guilty of violating the FCRA and ordered the government and Election Commission to act against them.

The move came even as the government was cracking down on NGOs for allegedly violating the FCRA, freezing the bank accounts of Greenpeace and Citizens for Justice and Peace and even instituting criminal proceedings against the anti-communal activist Teesta Setalvad.

However, the 2016 amendmentwhich changed the FCRA to redefine foreign companies as “Indian” if their ownership in an Indian entity was within the foreign investment limits prescribed by the government for that sectorwas made retrospective only from 2010, which is when the latest version of the FCRA was introduced. The original Foreign Contribution (Regulation) Act commenced in 1976; it was repealed and re-enacted as a separate piece of legislation in 2010 with minor changes.

This meant that donations received from foreign companies prior to 2010 were not covered by the retrospective amendment. Ironically, the impugned Vedanta donation itself was from before 2010.

Jaitley probably realised the limitation of the 2016 amendment only later, and so sought to make amends by inserting a new amendment in the Finance Bill 2018 that sought to amend that 2016 amendment so that the BJP and Congress are off the hook for any donation received after August 5, 1976the date of the commencement of the original FCRA Act. On March 30, 2018, the Ministry of Finance notified the Finance Act, 2018 amending FCRA 2010 with effect from 1976.

The new amendment has let both political parties off the hook for receiving foreign donations from companies before 2010 as well.

There are at least 20 instances of the Congress and the BJP receiving funding from the ‘Indian’ subsidiaries of various foreign companies before 2010. As the table below, compiled by Association for Democratic Rights, shows, the parties have received funding in the range of Rs 5 lakh to Rs 5 crore from the Indian subsidiaries of Vedanta, Dow Chemicals and Switzerland-based Win Pharma over the course of six years from 2004 to 2010.

Company

Amount

(In Rupees)

Year of Donation

Political Party

Parent Company

Hyatt Regency

5,00,000

FY 04-05

INC

American Origin Company

Sterlite Industries Ltd

100,00,000

FY 04-05

INC

Vedanta

Sesa Goa Ltd

12,00,000

FY 04-05

INC

Vedanta

Adani Wilmer Ltd

2,50,000

FY 05-06

INC

A 50:50 joint venture between the Adani Group and Wilmar International Limited

Sesa Goa Ltd

10,00,000

FY 05-06

INC

Vedanta

Sesa Goa Ltd

2,00,000

FY 06-07

INC

Vedanta

Sesa Goa Ltd

15,00,000

FY 07-08

INC

Vedanta

Adani Wilmer Ltd

50,00,000

FY 08-09

INC

Adani – Wilmer JV

Solaris Holdings Ltd

100,00,000

FY 09-10

INC

Avantha Group

Sterlite Industries Ltd.

5,00,00,000

FY 09-10

INC

Vedanta

Sesa Goa Ltd

30,00,000

FY 09-10

INC

Vedanta

Sesa Goa Ltd

5,00,000

FY 05-06

BJP

Vedanta

Win Medicare (P) Ltd

25,00,000

FY 05-06

BJP

Swiss origin company

Sesa Goa Ltd

2,00,000

FY 06-07

BJP

Vedanta

Dow Chemical Int (P) Ltd

1,00,000

FY 06-07

BJP

Union Carbide acquirer

Sesa Goa Ltd

27,50,000

FY 07-08

BJP

Vedanta

Adani Wilmar Ltd

50,00,000

FY 08-09

BJP

Adani – Wilmer JV

The Madras Aluminum Ltd

3,50,00,000

FY 09-10

BJP

Vedanta

Sesa Goa Ltd

60,00,000

FY 09-10

BJP

Vedanta

Win Medicare (P) Ltd

25,00,000

FY 09-10

BJP

Swiss origin company

Activists Challenge Amendments in the SC

On July 2, acting on a petition filed by founder-trustee of ADR Jagdeep S. Chhokar and former bureaucrat E.A.S. Sarma challenging these amendments to the FCRA, a Supreme Court bench comprising Chief Justice Dipak Misra and Justices A.M. Khanwilkar and D.Y. Chandrachud issued notice to the Centre on July 2 seeking its response. Represented by advocates Prashant Bhushan, Kamini Jaiswal and Pranav Sachdeva, the petitioners alleged that the amendments to the FCRA through the Finance Act, 2016 and the Finance Act, 2018 were introduced in order to overturn the judgment passed by the Delhi High Court in March, 2014, holding the two major political parties (the BJP and the Congress) guilty of taking foreign funding in violation of the FCRA Act.

The petition stated that this also went “against settled principle of separation of powers since it has overruled the Delhi high court judgment.” Elaborating on the issue, it said: “It is a settled law the legislature cannot over-turn any court judgment; it can only remove the basis of the judgment.” The petition argued that “it is a settled principle of law that the legislature can pass an amendment to an existing law to cure the defect in that law.” Therefore, it said, “when the Court held BJP and INC guilty of accepting donations from ‘Financial Source’ as prohibited in FCRA, 1976, then in no circumstance whatsoever can any political party in power use the powers vested in the legislature to cure the guilt on its part by bringing any law or amendment to an existing law.”

The ADR had challenged the amendment made in FCRA 2010 through the Finance Act 2016 in a petition filed by it before the Supreme Court, on which the Court had issued notice on October 3, 2017. Despite this matter being sub-judice, the petition noted, “the parliament has now made the amendment with retrospective effect from 1976 vide Finance Act, 2018 which has come into force from 1st April 2018.”

The petition recalled that “in 1976, the Foreign Contribution (Regulation) Act, 1976 was enacted by the parliament to serve as a shield in legislative armoury, in conjunction with other laws like the Foreign Exchange Regulation Act, 1973, and insulate the sensitive areas of national lifelike journalism, judiciary and politicsfrom extraneous influences stemming from beyond our borders. It imposed prohibition on candidates for election from accepting foreign contribution from foreign sources.” Though the Parliament repealed the earlier FCRA 1976 and enacted FCRA 2010, the petition said that however, the definition of ‘foreign source” remained unchanged.

The petitioners further contended before the Supreme Court that the amendments introduced in FCRA 2010 by Finance Act, 2016 and Finance Act, 2018 be declared “void, illegal and unconstitutional” as they have “opened the floodgates to unlimited corporate donations to political parties and anonymous financing by Indian as well as foreign companies which can have serious repercussions on the Indian democracy.”

Asserting that these “amendments pose a serious danger to the autonomy of the country and are bound to adversely affect electoral transparency, encourage corrupt practices in politics and have made the unholy nexus between politics and corporate houses more opaque and treacherous and is bound to be misused by special interest groups and corporate lobbyists,” the petition had also claimed that they were “in violation of Articles 14 and 21 of the Constitution of India.”

The petition further cautioned that “if the recent amendments are not set aside, foreign countries and corporate houses and extremely wealthy lobby groups can have a stranglehold on the electoral process and governance. Such activities, if allowed, can result in a situation that legislation, regulations etc. can be ultimately be passed and laws brought in to favour of these corporates and lobby groups at the expense of the common citizens of the country.”