FCRA – a tool to intimidate & control NPOs (But not political parties)!
An
article in the Times of India (21st March 2018) and another
published in the Economic times (31st March 2018) makes compelling
reading in terms of the Government’s handling of the ominous Foreign
Contribution Regulation Act 2010. It is a classic story of how a statute which
is meant to ‘regulate’ can also be used as a tool to control and intimidate.
article in the Times of India (21st March 2018) and another
published in the Economic times (31st March 2018) makes compelling
reading in terms of the Government’s handling of the ominous Foreign
Contribution Regulation Act 2010. It is a classic story of how a statute which
is meant to ‘regulate’ can also be used as a tool to control and intimidate.
However, when political parties themselves start to feel threatened or
intimidated, the law is quickly amended to revise even a law that legally
stands repealed. Amendments to FCRA under Finance Act 2016 and more recently
under Finance Act 2018 are classic examples of political jugglery.
intimidated, the law is quickly amended to revise even a law that legally
stands repealed. Amendments to FCRA under Finance Act 2016 and more recently
under Finance Act 2018 are classic examples of political jugglery.
Amendment made to Section 2(1)(j)(vi)
Thanks
to Amendment made to Section 2(1)(j)(vi) under the Finance Act 2016, Indian companies which have more
than fifty per cent FDIs or FIIs are now not treated as
‘foreign source’ with
retrospective effect from 26th September 2010.
to Amendment made to Section 2(1)(j)(vi) under the Finance Act 2016, Indian companies which have more
than fifty per cent FDIs or FIIs are now not treated as
‘foreign source’ with
retrospective effect from 26th September 2010.
The
Finance Act 2018 now goes further to bring the said amendment with effect from
the 5th August, 1976 i.e. the date of commencement of the original
Foreign Contribution (Regulation) Act, 1976, which was repealed and
re-enacted as the Foreign Contribution (Regulation) Act, 2010!
Finance Act 2018 now goes further to bring the said amendment with effect from
the 5th August, 1976 i.e. the date of commencement of the original
Foreign Contribution (Regulation) Act, 1976, which was repealed and
re-enacted as the Foreign Contribution (Regulation) Act, 2010!
Be it
the amendment under Finance Act 2016 or the Amendment under Finance Act 2018,
the government has not relaxed the law to oblige or ease the woes of the voluntary
sector. The law had been amended in 2016 and amended even now in 2018 only to
protect political parties which had violated the provisions of Section
2(1)(j)(vi) of FCRA even more than forty years ago or from the time the law was
originally enacted during Late Mrs. Indira Gandhi’s Emergency. Any benefit that has come to NGOs is comparatively
negligible and purely incidental.
the amendment under Finance Act 2016 or the Amendment under Finance Act 2018,
the government has not relaxed the law to oblige or ease the woes of the voluntary
sector. The law had been amended in 2016 and amended even now in 2018 only to
protect political parties which had violated the provisions of Section
2(1)(j)(vi) of FCRA even more than forty years ago or from the time the law was
originally enacted during Late Mrs. Indira Gandhi’s Emergency. Any benefit that has come to NGOs is comparatively
negligible and purely incidental.
Questionable Action
Legally
FCRA 1976 stands repealed and is replaced by FCRA 2010. It is a matter of
debate how this amendment under Finance Act 2018 could be made applicable to a law that has already
been repealed?
FCRA 1976 stands repealed and is replaced by FCRA 2010. It is a matter of
debate how this amendment under Finance Act 2018 could be made applicable to a law that has already
been repealed?
FCRA
is not revenue or finance related subject and it is even more debatable how
amendment to this law can be repeatedly placed under the Finance Bill.
is not revenue or finance related subject and it is even more debatable how
amendment to this law can be repeatedly placed under the Finance Bill.
It’s
a clear case of ‘might is right’ and ‘government can do no wrong’! It is a
mockery of the current regime’s motto of ‘less government; more governance’.
a clear case of ‘might is right’ and ‘government can do no wrong’! It is a
mockery of the current regime’s motto of ‘less government; more governance’.
Real reason behind this amendment
The Delhi High Court
had in the year 2014 hauled up the Congress and BJP for receiving foreign funds
from the UK based Vedanta group and its subsidiaries, in violation of the
Foreign Contribution Regulation Act, and the Representation of People’s Act
that specifically prohibits political parties from accepting contributions from
a foreign source. The court had asked the government and the Election Commission to act
against the two political parties. In response, the government amended the Act
itself, and exempted from scrutiny all foreign funding to parties
retrospectively from 1976! How clever indeed!
had in the year 2014 hauled up the Congress and BJP for receiving foreign funds
from the UK based Vedanta group and its subsidiaries, in violation of the
Foreign Contribution Regulation Act, and the Representation of People’s Act
that specifically prohibits political parties from accepting contributions from
a foreign source. The court had asked the government and the Election Commission to act
against the two political parties. In response, the government amended the Act
itself, and exempted from scrutiny all foreign funding to parties
retrospectively from 1976! How clever indeed!
Selective Scrutiny
According
to the report in the Times of India: “NGO founded by Olympic
medalist and nominated Rajya Sabha
Member of Parliament Mary Kom, the Rajiv Gandhi
Charitable Trust chaired by Congress leader Sonia Gandhi, IT
industry body NASSCOM Foundation and Amnesty International’s Indian arm are
among 42 organisations under scrutiny of the home ministry for alleged
irregularities in their foreign contribution receipts.”
to the report in the Times of India: “NGO founded by Olympic
medalist and nominated Rajya Sabha
Member of Parliament Mary Kom, the Rajiv Gandhi
Charitable Trust chaired by Congress leader Sonia Gandhi, IT
industry body NASSCOM Foundation and Amnesty International’s Indian arm are
among 42 organisations under scrutiny of the home ministry for alleged
irregularities in their foreign contribution receipts.”
The
report adds: “In a written reply to a Lok
Sabha question, Union junior home minister Kiren Rijiju said that while 21
NGOs had been served a standard questionnaire to check as part of preliminary
inquiry into any alleged violation of the Foreign Contributions Regulation Act
(FCRA) or Foreign Contributions Regulation Rules (FCRR). Audit and inspection
of 21 other associations, including Public Health Foundation of India and many
others with an evangelical background, had been completed for similar
violations.”
report adds: “In a written reply to a Lok
Sabha question, Union junior home minister Kiren Rijiju said that while 21
NGOs had been served a standard questionnaire to check as part of preliminary
inquiry into any alleged violation of the Foreign Contributions Regulation Act
(FCRA) or Foreign Contributions Regulation Rules (FCRR). Audit and inspection
of 21 other associations, including Public Health Foundation of India and many
others with an evangelical background, had been completed for similar
violations.”
Prominent
FCRA-registered bodies served the questionnaire include, Bengaluru-based Centre
for Internet & Society which had claimed massive leaks in the Aadhaar database last year, Rajiv Gandhi
Charitable Trust that receives a good chunk of its funds from Bill &
Melinda Gates Foundation, and Public Health Foundation of India (the latter’s
FCRA license was cancelled last year), Asianet New Charitable Trust and Mary
Kom’s boxing training school.
FCRA-registered bodies served the questionnaire include, Bengaluru-based Centre
for Internet & Society which had claimed massive leaks in the Aadhaar database last year, Rajiv Gandhi
Charitable Trust that receives a good chunk of its funds from Bill &
Melinda Gates Foundation, and Public Health Foundation of India (the latter’s
FCRA license was cancelled last year), Asianet New Charitable Trust and Mary
Kom’s boxing training school.
Anonymous donors to political parties
In the meantime
what Pavan K Varma writes (Electoral
bonds and FCRA amendments pave the way for unaccounted political funding) in
the Economic Times is even more chilling!
what Pavan K Varma writes (Electoral
bonds and FCRA amendments pave the way for unaccounted political funding) in
the Economic Times is even more chilling!
Varma states: “Earlier, the principal, but not only,
means by which parties collected vast amounts of unaccounted money was the
misuse of Section 29C of the Representation of People’s Act (RPA). This
provision allowed parties not to declare the name of donors who contribute less
than Rs 20,000. As a result, according to the Association of Democratic
Reforms, as high as 85% of donors to Congress and BJP, the two largest
political parties, were faceless people who had contributed up to Rs 19,999!
The Election Commission (EC) has made countless proposals for electoral reform,
to which no government has responded adequately. One such proposal was to
reduce the financial ceiling of faceless donations from Rs 20,000 to Rs 2,000.
Now, through an amendment of the Income Tax Act, the ceiling has been lowered
to Rs 2,000. But the efficacy of this ‘reform’ is questionable, because parties
can get away by simply saying that their unaccounted money is the result of
multiple donations of less than Rs 2,000 instead of a larger sum.”
means by which parties collected vast amounts of unaccounted money was the
misuse of Section 29C of the Representation of People’s Act (RPA). This
provision allowed parties not to declare the name of donors who contribute less
than Rs 20,000. As a result, according to the Association of Democratic
Reforms, as high as 85% of donors to Congress and BJP, the two largest
political parties, were faceless people who had contributed up to Rs 19,999!
The Election Commission (EC) has made countless proposals for electoral reform,
to which no government has responded adequately. One such proposal was to
reduce the financial ceiling of faceless donations from Rs 20,000 to Rs 2,000.
Now, through an amendment of the Income Tax Act, the ceiling has been lowered
to Rs 2,000. But the efficacy of this ‘reform’ is questionable, because parties
can get away by simply saying that their unaccounted money is the result of
multiple donations of less than Rs 2,000 instead of a larger sum.”
Electoral Bonds
Varma adds: “In
the 2017 Budget, the government announced a new scheme of electoral bonds.
Under this, bonds for contributions to political parties can be issued by the
State Bank of India, and can be bought by any donor with a KYC compliant
account. Donors can donate their bonds to any party of their choice, which can
deposit it in their designated account. Donations will be tax deductible, and
the benefitting political party will get a tax exemption for the amount
received anonymous. Moreover, the value
of donations can be unlimited.”
the 2017 Budget, the government announced a new scheme of electoral bonds.
Under this, bonds for contributions to political parties can be issued by the
State Bank of India, and can be bought by any donor with a KYC compliant
account. Donors can donate their bonds to any party of their choice, which can
deposit it in their designated account. Donations will be tax deductible, and
the benefitting political party will get a tax exemption for the amount
received anonymous. Moreover, the value
of donations can be unlimited.”
Prior to 2017,
Section 182 of the Companies Act, 2013, stipulated that a company can donate
only up to 7.5% of its average profit of the last three years, and must
disclose this amount and the beneficiary political party. Now, through the electoral bonds, there is no
limit to the amount companies can donate, and the requirement for such firms to
have existed for the last three years on a profit making basis has also been
deleted.
Section 182 of the Companies Act, 2013, stipulated that a company can donate
only up to 7.5% of its average profit of the last three years, and must
disclose this amount and the beneficiary political party. Now, through the electoral bonds, there is no
limit to the amount companies can donate, and the requirement for such firms to
have existed for the last three years on a profit making basis has also been
deleted.
The implication
is that even loss-making companies or shell companies can be used to purchase
electoral bonds. Essentially, then, corporate entities and individuals can now
funnel unlimited amounts to a political party through electoral bonds,
anonymously.
is that even loss-making companies or shell companies can be used to purchase
electoral bonds. Essentially, then, corporate entities and individuals can now
funnel unlimited amounts to a political party through electoral bonds,
anonymously.
Moreover, under
Section 13A of the Income Tax Act, companies contributing through electoral
bonds will not even be required to keep records of such donations, and if no
records are mandatorily maintainable, no questions can presumably be asked by Income
Tax authorities.
Section 13A of the Income Tax Act, companies contributing through electoral
bonds will not even be required to keep records of such donations, and if no
records are mandatorily maintainable, no questions can presumably be asked by Income
Tax authorities.
Further, the Representation
of People Act has been amended to exempt parties to inform Election Commission
of any amount received above Rs 2,000, if made through electoral bonds. The
result is complete financial opacity: The Election Commission cannot name the
donors, and the Income Tax department, even if questioned under the Right to Information
Act, can claim confidentiality granted to Assesses.
of People Act has been amended to exempt parties to inform Election Commission
of any amount received above Rs 2,000, if made through electoral bonds. The
result is complete financial opacity: The Election Commission cannot name the
donors, and the Income Tax department, even if questioned under the Right to Information
Act, can claim confidentiality granted to Assesses.
Furthermore, the
amended Companies Act now allows any foreign company registered in India to
make contributions through bonds to political parties, overruling legitimate
doubts about who or where its real owners are, or what its source of funding
is.
amended Companies Act now allows any foreign company registered in India to
make contributions through bonds to political parties, overruling legitimate
doubts about who or where its real owners are, or what its source of funding
is.
Is this transparency?
Was our Election Commission
consulted on such sweeping changes? Major democracies have increasingly
tightened disclosure rules. In the US, there is a requirement to provide the
name, occupation, employers and addresses of all individuals who contribute
more than $200 to political entities. In the UK, any contribution above £7,500
must reveal the name of the donor. By contrast, in India, the world’s largest
democracy, electoral ‘reform’ has legitimized financial opacity.
consulted on such sweeping changes? Major democracies have increasingly
tightened disclosure rules. In the US, there is a requirement to provide the
name, occupation, employers and addresses of all individuals who contribute
more than $200 to political entities. In the UK, any contribution above £7,500
must reveal the name of the donor. By contrast, in India, the world’s largest
democracy, electoral ‘reform’ has legitimized financial opacity.
The two reports can be read at: