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FCRA : BJP Trying to Clear Way for Funding?

The Union Finance minister Arun Jaitley did a quiet job. Buried in the detailed Finance Bill 2016, he did a magic that took the Bharatiya Janata Party (BJP) and the Congress off the hook from accepting donations from companies based abroad. In 2014, the Delhi high court had ruled that both the parties have been guilty of violating the rules laid out in the Foreign Contribution Regulations Act  2010 (FCRA) and ordered the government and the Election Commission to take immediate action against two parties. The FCRA bans political parties from receiving funds from any foreign source. In its original provision, the law defines foreign source to include any company with foreign investment of above 50%.  Jaitley’s clever amendment says, “‘Provided that where the nominal value of share capital is within the limits specified for foreign investments under the Foreign Exchange Management Act, 1999, or the rules and regulations made there under, then, notwithstanding the nominal value of the share capital of a company being more than one half of such value at the time of making the contribution, such company shall not be deemed a foreign source.” This allows companies like Vendanta to pour money in the kitty of these political parties.

To discuss the issue, its implications and the details NewsClick interviewed Prashant Bhushan, Lawyer, Centre for Public Interest Litigation. Excerpts from the interview.

Rough Transcript:

Pranjal: The government changing the FCRA. So under the new definition so long as the ownership of the Indian entity is within foreign investment limit prescribed by the government for different sectors, it will be treated as Indian for the prupose of FCRA. So what do you think what are the main reason behind these amendments that have been brought that too in the budget not as any amendment in the act?

Prashant Bhushan (PB): You see, about 2 years ago the Delhi High Court delivered a very strong judgment holding both the Congress and the BJP guilty for accepting foreign donation for subsidiaries of foreign companies as well as some foreign companies in total violation of the FCRA and they directed the government to prosecute them. Both these parties Congress and BJP filed appeals in the Supreme Court. The Government of India kept on delaying filing those appeals and just seeking more and more time. Eventually, they brought this amendment by way of this budget this year. The object of this amendment is to somehow try and absolve the Congress and the BJP of these donations which they have taken from subsidiaries of foreign companies. The amendment says if you are a subsidiary of a foreign company, if you are an Indian company even if you may be a subsidiary of a foreign company if that Indian company has come in through the FEMA route which means it has foreign direct investment to the extent that FEMA allows then it can give donations to political parties without being considered to be a foreign donation. Now this will open the flood gates for any amount of foreign donations by foreign companies. All that a foreign company has to do is to set up a subsidiary in India and through their subsidiary they can go on funding these political parties. So this will defeat the whole object of the whole Foreign Contribution Regulation Act (FCRA). The main object of the act was to prevent foreign donations from being received by political parties and of course public servants etc. NGOs etc. are only marginal to the whole scheme of the FCRA. So far as NGOs are concerned, they can receive foreign donations with the permission of the government. On the one hand, the government is harassing NGOs like Teesta's NGO or Greenpeace etc. on the basis that they have done some technical violation of the FCRA. But here is a wholesale violation by mainstream major political parties like the Congress and the BJP where the High Court has held them guilty, directed the government to prosecute them and yet government wants to absolve them and open the floodgates and thereby destroying the whole object of the FCRA.


Pranjal: If I am right, it is the Vedanta which is basically funded both the BJP and the Congress and there was case that was filed. So can you throw some light on that?

PB: Yes, the major people who donated money crores of money were the subsidiaries of Vedanta. Vedanta as we all know is a company which has incorporated in England and it has several subsidiaries in India, Sterlite, Sesagoa etc. which are engaged mostly in mining activities. They had donated crores of rupees to both parties Congress and BJP and there were others also, Dow Chemicals, others who had also donated. But the main object is to somehow get around this problem of accepting donations of subsidiaries of foreign company. FCRA makes it very clear that a subsidiary of a foreign companies is also a foreign source. But that's what they want to somehow get around.


Pranjal: FCRA is an act it itself. If you want to change something in it, you need to bring in ordinance or amendment in the constitution. While the current regime is bringing it as a money bill instead. Isn't it a violation of the constitution itself?

PB: Yes, in my view it is wholly inappropriate for trying to bring this amendment by a way of a budget provision. It should have been brought I as a separate amendment of course, with the Congress and the BJP both seeking to support it, it would still be passed in parliament. If the Congress and the BJP gangup to support such an amendment.


Pranjal: It has happened also in the case of Aadhaar Bill also that both the parties have come together on a single page and supported such sorts of move.

PB: That's right.

Pranjal: The current regime also is continuously increasing FDI. So on one hand, you are bringing in FDI 100% for an investment in different sectors all together. Then on the other hand you are also harassing the NGOs for taking foreign funds. So isn't there a double speak, not they are bringing amendment altogether in FCRA?

PB: The main contradiction is that you are harassing small NGOs for technical violations of not maintaining accounts properly of foreign funds that they have received etc. but you are allowing wholesale donations from foreign companies who can set up subsidiaries and fund the political parties thereby defeating the whole objective of the foreign contribution act. The objective of the act mainly was to prevent the politics of these country being influenced by foreign companies and other foreign countries. Here, you are allowing that in a wholesale manner. It makes a mockery, it destroys the whole object of the foreign contribution act.


Pranjal: This move is also subverting of the legal judgment that was given and government has been trying continuously in different forms to subvert what judiciary is saying. So is the the legislature overtaking the judiciary that is happening?

PB: No, they are … you see retrospective amendments etc. are not illegal in the sense that .. retrospective amendments are made but they are usually made if due to some judgment some company is being given some technical benefit etc. which judgment is wrong. Here is a case of a judgment of a High Court nobody can say that the judgment is wrong or that judgment is against the object of the original FCRA. The original FCRA makes it abundantly clear that subsidiaries of foreign companies are foreign sources for the purpose of the act and therefore, this retrospective amendment being brought in through the budget is clearly a misuse and an abuse of the powers to bring in amendments retrospectively. The only object of the retrospectivity is to somehow allow Congress and the BJP to get away Scot free for this egregious violaiton of the FCRA.


Pranjal: Thanks a lot for giving you time and we will be coming back to you on such issues.

DISCLAIMER: Please note that transcripts for Newsclick are typed from a recording of the program. Newsclick cannot guarantee their complete accuracy.


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