Companies Bill facilitates corporate funding for political parties and co-option of NGOs
Hon'ble President of India
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
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
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
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
Reference: See the full opinions at:
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 political parties.
Yours faithfullyGopal Krishna
Citizens Forum for Civil Liberties (CFCL)
Mb: 09818089660, 08227816731