Indian Finance Minister Arun Jaitley (center) arrives at Parliament to present the federal budget, in New Delhi on February 1, 2017. Photo: Reuters / Adnan Abidi
Indian Finance Minister Arun Jaitley (center) arrives at Parliament to present the federal budget, in New Delhi on February 1, 2017. Photo: Reuters / Adnan Abidi

In March 2014, the Delhi High Court held India’s two principal political parties, The Bharatiya Janata Party (BJP) and the Indian National Congress (INC), guilty of illegally accepting funds from a foreign source. This was a landmark case, based on a public-interest litigation filed by the Association for Democratic Reforms (ADR), a non-profit group dedicated to cleaning up India’s elections.

In November 2016, the two political parties withdrew their appeals against the High Court order. The case revolved around the Foreign Contribution (Regulation) Act (FCRA), which stipulates strict conditions on accepting funds from abroad. The Delhi High Court had ruled that this act was violated when the BJP and Congress accepted political donations from foreign companies.

Since then, the BJP-led government of Prime Minister Narendra Modi has attempted to revise the FCRA in a bid to get a clean chit retrospectively. While a public outcry led to the withdrawal of this proposal, the government has quietly slipped in an amendment in this year’s budget proposals.

Fears of foreign interference

There was considerable apprehension in India in the mid-1970s that some foreign governments were trying to interfere in the internal affairs of the country, sometimes by funding influential Indian organizations. It was to guard against that apprehension that Parliament enacted theForeign Contribution (Regulation) Act in 1976. That law expressly prohibited any “political party or office-bearer thereof” from accepting any “foreign contribution.”

Over the years, the situation changed and Parliament, in 2010, decided to enact a new law, called the Foreign Contribution (Regulation) Act (FCRA), 2010. The earlier version, FCRA 1976, was repealed. The new law, FCRA 2010, retained the provision prohibiting political parties from accepting foreign contributions.

There had been significant debate in the country on corporates making donations to political parties, and in a quid pro quo, influencing decisions made by political parties when they formed the central government at those in various states. In order to avoid corporates making donations directly to political parties, the government in 2013 permitted the formation of what were called Electoral Trusts, which could be formed for the purpose of receiving donations meant for political parties, and then donating money to political parties. It was felt that the trusts would form a firewall between the corporate donors and the political parties receiving the donations.

While analyzing the donations made by various Electoral Trusts to various political parties, ADR discovered that one of the trusts had made significant donations to both of the leading political parties, the INC and the BJP. On further investigation, it was found that this trust had been set up by three companies registered in India.

A look at the websites of these three companies revealed that all were 100%, fully owned, subsidiaries of a business house registered in the United Kingdom, Vedanta Resources. Following the principle of “lifting the corporate veil,” it was obvious that the money donated by the trust to INC and BJP was, in effect, a “foreign contribution.”

Public interest litigation

On the basis of the above finding, ADR filed a public-interest litigation (PIL) in the Delhi High Court claiming that the INC and the BJP had violated the FCRA, and that appropriate action should be taken against them. The court, in a judgment delivered on March 28, 2014, held the INC and the BJP guilty of having violated the FCRA and ordered that appropriate action against them be taken under the FCRA within six months of the decision.

The government did not take any action against the two political parties, and on their part, they filed an appeal in the Supreme Court of India against the Delhi High Court judgment. While the appeal in the Supreme Court was still pending, the FCRA was amended by the government as part of the budget proposals presented in Parliament on February 23, 2016. The amendment changed the definition of a “foreign contribution” in such a way that it exonerated the two political parties of the violation of FCRA.

The lawyers for the two political parties claimed in a hearing in the Supreme Court in November 2016 that since the FCRA stood amended, the case was rendered infructuous. However, it was pointed out to the court and the two lawyers that the Delhi High Court had specifically stated, in Paragraph 2 of its judgment of March 28, 2014, that (a) the FCRA was originally enacted in 1976, called the FCRA 1976; (2) a fresh FCRA was enacted in 2010, called the FCRA, 2010; and (3) since the contributions under question were accepted by the BJP and the Congress before 2010 when the FCRA 2010 was not in existence, therefore the case would be decided on the basis of FCRA 1976.

Attempt to amend defunct law

What had escaped the attention of the lawyers for the two political parties was that the government, in its hurry to amend the law, amended FCRA 2010, which was the only law in existence at the time of the amendment in February 2016 because the earlier law, FCRA 1976, had been repealed. On learning this, the lawyers for the two political parties withdrew their appeals. This provided finality to the Delhi High Court judgment of March 28, 2014.

A petition for contempt of court was filed against the government of India for not taking action against the two political parties as directed by the Delhi High Court. That petition is still under hearing. While the contempt petition was still pending, the time for the 2018 fiscal budget came around.

In the budget for fiscal year 2018, presented in Parliament last Thursday, there is a proposal to amend the Finance Act of 2016 (which amended the FCRA) by replacing the expression “the 26th September, 2010,” by the expression “the 5th August, 1976.” This amendment, ostensibly of the Finance Act of 2016, is actually an attempt to amend the FCRA 1976 instead of FCRA 2010 – to rectify the mistake or oversight that happened while formulating the Finance Act 2016, in an attempt to amend the FCRA. It was this mistake or oversight that caused FCRA 2010 to be amended, whereas the true intention seemed to have been to amend FCRA 1976.

The curious legal question that arises now is: How can a 1976 law that has stood repealed since 2010, and which has been replaced by a new law passed in 2010, be amended in 2018? Does it not amount to trying to do a major surgical procedure on a person who has been dead for seven years?

This is exactly what the government of India seems to be trying to do. Didn’t someone say “truth is stranger than fiction”?

Jagdeep Chhokar

Jagdeep S Chhokar is a former professor, dean, and director-In-charge of the Indian Institute of Management, Ahmedabad. All views are personal