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Companies Bill facilitates corporate funding for political parties and co-option of NGOs

Written By Unknown on Thursday, August 08, 2013 | 9:02 AM

August 8, 2013

Subject- Companies Bill facilitates corporate funding for political parties and co-option of NGOs


This is to draw your attention towards the passage of Companies Bill, 2012 by Rajya Sabha and The Contesting Election on Government Expenses Bill, 2012 which is pending in the Rajya Sabha. The latter was long due for putting a check on increasing use of black money in elections and political activities but the passage of former Bill appears to be a regressive step and is directed against State funding of elections. With the passage of the Bill yet another opportunity has been lost to deal with the menace of black money. I seek your urgent intervention in this matter to rectify the Bill.  

I submit that the terms of reference of Shri A K Antony who headed the Group of Ministers (GoM) on Corruption includes State Funding for Elections role. I wish to know how is this TOR consistent with the Section 182 of the Companies Bill, 2012 that provides for funding of political parties by companies.  This TOR of the GoM has been made meaningless.

This reveals double speak, insincerity and inconsistency of the Indian National Congress led UPA government and the Bhartiya Janta Party. It is the Companies Bill should have banned corporate funding for electoral campaigns but this has not happened. This is contrary to several reports of the Parliamentary and government’s committees which recommended State funding of elections to deal with black money.

I submit that the root of rampant corporate crimes committed with impunity, environmental destruction, poisoning of food chain and human rights violations by security forces has been traced to corporate funding of political parties. In the aftermath of industrial disasters, frauds and war crimes by companies world over, this Bill merits rigorous scrutiny by all sections of legislatures and society.

It may be noted that Section 182 (1) “Notwithstanding anything contained in any  other provision of this Act, a company, other than  a Government company and a company which has been in existence for less than three financial years, may contribute any amount directly or indirectly to any political party: Provided that the amount referred to in sub-section (1) or, as the case may be, the aggregate of the amount which may be so contributed by the company in any financial year shall not exceed seven and a half per cent of its average net profits during the three immediately preceding financial years”.

I submit that two contradictory things happened in the Lok Sabha on December 14, 2011. Companies Bill, 2011 was introduced by Dr Moodbidri Veerappa Moily in the afternoon that makes provision for corporate funding of parties. Within hours of the introduction of this Bill, Manish Tiwari, National Spokesperson of the Indian National Congress who stood up to speak about UPA's seriousness in dealing about Black money stated, “I feel ashamed to state that black money which is linked to our advertisement policy is related to electoral finance that needs to be rectified.”  

I submit that the Bill which has been passed has the endorsement of Shri Yashwant Sinha headed Parliamentary Standing Committee on Finance is doing the exact opposite of what was proposed by Indian National Congress.

I submit that the collusion between major parties including Indian National Congress that was witnessed in the report Indrajit Gupta headed Parliamentary Committee remains unaltered. The silence of the left parties is quite deafening in this regard. In the light of this development, the reluctance of the political parties except Communist Party of India to come under the ambit of Right to Information Act is not inexplicable.  

I submit that the 309 page Bill gives greater role to shareholders promoting shareholder democracy of sort. This Bill is meant to replace the Companies Act, 1956 that provided the legal framework within which companies function. It defined the relationship between the management of a company, the shareholders who own the company, other stakeholders, and the government. It was amended 24 times since 1956.

I submit that this is being done in pursuance of the concept paper issued in 2004 by the Ministry of Corporate Affairs on a new company law. The Ministry had constituted an Expert Committee under the Chairmanship of Dr J J Irani to suggest a framework for such a law to replace the existing Act. The Committee submitted its report in May, 2005. The history of laws creating companies which are least understood is quite old and goes further back in the colonial past that will have to be dealt with on some other occasion.

I submit that when the Companies Bill, 2009 was referred to Shri Yashwant Sinha headed Parliamentary Standing Committee on Finance on September 9, 2009. The Committee submitted its 375 page report on August 31, 2010 recommend that the prescribed maximum percentage for contributions to political parties in a financial year may be raised to 7.5% from the existing 5% of the average net profits during the three immediately preceding financial years, keeping in view the fact that the number of political parties in the country has increased and such donations are not made every financial year. Clearly, UPA government has complied with the recommendations of the Shri Yashwant Sinha headed Parliamentary Committee.

I submit that it is explicable as to how Shri Yashwant Sinha forgot that he was a member of the Group of Ministers (GoM), headed by the then Union Home Minister, Shri L.K. Advani, to consider recommendations of the Shri Indrajit Gupta headed Committee on State funding of elections during the Bhartiya Janata Party led National Democratic Alliance (NDA) Government. The GoM was decided on August 17, 2001 by the Union Cabinet, presided over by the then Prime Minister, Shri Atal Behari Vajpayee. The Committee on State Funding of Election was headed by the former Union Home Minister and veteran CPI leader, Shri Indrajit Gupta, had submitted its report to the Government on January 14, 1999. The Indrajit Gupta panel had favoured State funding of elections, saying it was justified constitutionally and legally. It had recommended State funding in kind and not in cash.

I submit that the Union Government had constituted a Group of Ministers (GoM) on January 6, 2011 to consider measures that can be taken by the Government to tackle corruption, under your chairmanship as Union Finance Minister. Its terms of reference include ―State funding of elections. The Group of Ministers had called upon the Ministry of Law to formulate concrete proposals on Constitutional and statutory amendments which are required for introducing reforms relating to State Funding of Elections as per a PIB release dated October 15, 2011. The Group of Ministers had, in its meeting held on 6th September, 2011, asked the Ministry of Law to report progress in the consultative process already initiated by it. In the 30th September, 2011 meeting of the GoM, after the Law Ministry made a presentation on the subject, the Group of Ministers directed the Law Ministry to formulate specific proposals for consideration and decision of the GoM, excluding such areas where consultation with political parties was required. The passage of the Bill signals how these efforts seem to have been in vain.

I submit that at the Convention of Indian Youth Congress on November 29, 2011, Mrs Sonia Gandhi, Chairman, Indian National Congress led United Progressive Alliance (UPA) reiterated the need for state financing of elections as a measure against corruption in the electoral process. Earlier, she had demanded it at the Congress plenary in December 2010. Shri Salman Khurshid, the then Union Minister for Law & Justice informed the Lok Sabha on November 28, 2011 that ―Group of Ministers constituted by the Central Government is considering measures that can be taken by the Government to tackle corruption which inter alia include the introduction of state funding of elections. The Group of Ministers has discussed certain formulations those could be adopted to address this issue but no final decision has yet been taken in a written reply to a question. The passage of the Companies Bill, 2012 shows that what Mrs Sonia Gandhi told the Convention of Indian Youth Congress has not been incorporated in the Bill.

In such a backdrop, I wonder as to why does Union Law Ministry pretend forgetfulness while approving the Companies Bill that provides for corporate funding of political parties about Group of Ministers decision asking it ―to formulate concrete proposals on Constitutional and statutory amendments which are required for introducing reforms relating to State Funding of Elections? It is clear that Union Law Ministry is expected to do undertake two contradictory legislative works by the Union Cabinet.

I submit that it appears to be a case of both Congress led UPA and BJP led NDA is preaching one thing and practicing just the contrary.

I submit that it does not appear surprising because controversial companies like Dow Chemicals Company cite the opinion of two senior officer bears of BJP and Congress in their ―Q and A with respect of the Government of India's request for a Curative Petition in the matter of Bhopal's industrial disaster?. Dow says, ―according to the formal legal opinions of two respected Indian jurists, Senior Counsel, Dr. Abhishek Manu Singhvi and Mr. Arun Jaitely, Dow cannot be found liable under the laws of India. Dr Singhvi gave his 10 page opinion on the letterhead of National Spokesperson of Indian National Congress. Jaitely gave his 15 page opinion on the letter head of the Senior Advocate having phone numbers which is used by him as a Member of Parliament. Corporate funding manifests itself in myriad disguises. The Companies Bill, 2012 shows that it is unmasking itself in installments.
Reference: See the full opinions at: http://www.dow.com/sustainability/debates/pdfs/Arun_Jaitley_Opinion_EXPARTE.pdf; http://www.dow.com/sustainability/debates/pdfs/Dr.Abhishek_Manu_Singhvi_March_03_2006.pdf

I submit that the passage of this legislation re-legitimizes corporate funding of political parties instead of reversing the trend despite witnessing the Nira Radia phenomenon and awarding of contracts to biometric technology companies like Accenture and Safran Group that work with foreign intelligence agencies.

I submit that Section 181 of the Companies Bill, 2012 appears is quite dangerous. It reads: The Board of Directors of a company may contribute to bona fide charitable and other funds: Provided that prior permission of the company in general meeting shall be required for such contribution in case any amount the aggregate of which, in any financial year, exceed five per cent. of its average net profits for the three immediately preceding financial years.“ This is a masterstroke to co-opt  bonafide charitable institutions and turn them into fake public interest institutions who serve corporate interests. Both are divergent interests for sure.

I submit that the Companies Bill, 2012 provides for excessive rule making powers to the executive for subordinate legislation. This is not advisable given the poor state of our national governance. The Bill makes provision for only one person to make a company-One Person Company Limited under Section 193. The India Economic Census 2005, revealed that the country has 4.2 million non-farm enterprises and less than 3 lakh active companies. This appears to be an exercise in the corportisation of the whole of non-farm enterprises. It seems to be an engineered act.

I submit that the provision of corporate funding for political parties must be looked at in the backdrop of the decision of Supreme Court of USA on January 21, 2010 in the Citizens United case, which was denounced by US President Shri Barack Obama, apparently for the sake of record. The US Court considered whether there could be a ban on corporations using their general treasury funds for elections-related expenditure. A majority (5-4) of the Court ruled that such a ban was violative of the right to free speech. Essentially, the US Court struck down certain campaign-finance limits as a violation. The impact of this ruling is that corporate entities in the USA are free to use their general treasury funds to incur election-related expenditure, in a departure from past precedents. It also raised a question do corporations have free-speech rights, just as do individuals? If this is the path of corporations very soon, indeed “We The People” will be excluded from even representative government because of Corporate Personhood. It was said in the newspapers in USA that it would turn the political class into prostitutes.

I submit that following footsteps of the trends in USA, the provisions in the Companies Bill and electoral reforms underway is all set to turn most political parties into brothels wherein made-to-order legislations will have a field day if it is not the case already. Given this trend will it be surprising if very soon there will be approval for foreign direct investments in myriad disguises to facilitate setting up of legislation manufacturing factories?

I submit that democratic institutions can only be strengthened if political parties and other political organizations are given a priority by the state through fiscal support for becoming a democracy given the fact that it is always a work in progress. Studies based on large data sets on political financing in more than 40 democracies provide empirical account of campaign finance and have brought to light hidden aspects of politics and questioning widespread beliefs about political finance, such as the rapid increase of campaign costs. The problems associated with the high cost of election campaigns and the establishment of a balanced and transparent system for their financing merit state's attention.

I submit that the experience from contemporary European democracies shows that political parties are necessary and desirable institutions for democracy and direct involvement of the state through financing election campaigns is transforming parties from their status as voluntary private associations into parties as public utilities.

I submit that the legislation in question does not appreciate that it is the dependence of political parties on non-state actors for financing elections that determines their electoral and non-electoral performance. It is a flawed legislation which is compromising the political outcomes through an inherent political engineering which is co-terminus with property based citizens‘rights.

I submit that while it has been admitted that ―there is no guarantee that economic prosperity ensures democratization, the ulterior motive of the sponsors of electoral reforms is the former and not the latter.

I submit that in the post-Citizens United era and in the era of legislated corporate funding through Companies Bill, the parliamentary elections in India in 2014 will be rewriting the political geography and will reveal its residual democratic content.

In view of the above, I wish to state that by shaping not only the strategies, rational choice but also their goals, political parties as institutions structure political situations and leave their own imprint on political outcomes. This significance underlines the inference that parties cannot be left at the mercy of non-state actors. As long as these actors shape the outcome no matter who wins in electoral battles, democracy is not a winner because our deformed political system is turning legislatures into a forum for legalized bribery. The way out could be to recommend that these very corporate donations be pooled into an electoral fund which can be used for state funding of lections. In connection with this, the six page attached Contesting Election on Government Expenses Bill (Bill No. XXXVIII), introduced by Shri Prabhat Jha, Member of Parliament merits attention.

Therefore, I wish to earnestly and solemnly appeal to you to send the Companies Bill, 2012 back with an advice to remove provision for corporate funding of political parties and substitute it with the provision of the state funding for political parties.   

Thanking You

Yours faithfully
Gopal Krishna
Citizens Forum for Civil Liberties (CFCL)
Mb: 09818089660, 08227816731,
E-mail: gopalkrishna1715@gmail.com

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