What does the Foreign Contribution Regulation Act speak?
The enactment of Foreign Contribution Regulation Act, 1976 by the Parliament was aimed for restraining constitutional institutions, political parties as well as individuals such as candidates in the election from accepting the foreign donation, which would hamper the Sovereign, democratic, Republic value of the country. The purpose of the Act was to serve as a protective shield in the legislative armoury, in conjugation with other laws like the Foreign Exchange Regulation Act, 1973, and insulate the sensitive areas of the national life like – journalism, judiciary, politics from extraneous influences stemming from beyond our borders. Section (e) of the said Act defines the “Foreign Source” which includes: –
- the government of any foreign country or territory and any agency of such government,
- any international agency, not being the United Nations or specialized agencies, the World Bank, International Monetary Fund or such other agency as the Central Government may, by notification in the Official Gazette, specify in this behalf.
- a foreign company within the meaning of section 591 of the Companies Act, 1956 (1 of 1956), and also includes
- a company which is a subsidiary of a foreign company, and
- a multi-national corporation within the meaning of this Act.
- a corporation not being a foreign entity, incorporated in a foreign country or territory,
- a multi-national corporation within the meaning of this Act,
- a company within the meaning of the Companies Act, 1956, if more than one-half of the nominal value of its share capital is held, either singly or in the aggregate, by one or more of the following, namely, –
- the government of a foreign country or territory,
- citizens of a foreign country or territory,
- corporations incorporated in a foreign country or territory,
- trusts, societies or other association of individuals (whether incorporated or not), formed or registered in a foreign country or territory.”
Delhi High Court founds BJP and Congress both guilty of violating FCRA, 1976
On 28.03.2014, in a writ petition filed by Association for Democratic Reforms (ADR) the Delhi High Court held both BJP and Congress guilty of violating FCRA, 1976. The petition highlighted the donations made to the political parties by M/s Sterlite Industries Ltd. And M/s Sesa Goa Ltd., companies registered in India under the Companies Act, 1956 and more than 50% of their issued share capital was held by Vedanta Resources PLC, a company incorporated under the Companies Act, 1985 and registered in England and Wales with registration No. 04740415. The Hon’ble High Court directed the Ministry of Home Affairs (MHA) and Election Commission of India (ECI) to take action against the two political parties within six months. But more than four years have lapsed, and none of the directions of the Hon’ble High Court has been complied with till date.
Appeal in Apex Court by Association for Democratic Reforms in Apex Court for amendment in FCRA
The petition before the Apex Court was filed by the Founder-trustee of the Association for Democratic Reforms Jagdeep S. Chhokar and former bureaucrat E.A.S. Sarma. In their petition they challenged the amendment done retrospectively in FCRA through Finance Bill, 2016 and Finance Bill, 2018 on the grounds that the legislature had made an attempt to overturn the Judgment of the Hon’ble High Court, which holds both BJP and Congress guilty of receiving foreign donations, the act of the legislature, therefore, is in contravention to the basic structure of the constitution and threat to the judiciary independence.
How Finance Bill redefined foreign companies under FCRA?
The government in order to turn down the High Court order, for the first time used the Finance Bill as a tool to bring an amendment in 2016 to the FCRA, 2010. The amendment made in the FCRA is to change the definition of what constitutes the foreign company in such a way that key beneficiaries of UK-based Vedanta Group, the BJP, and Congress, would not face legal scrutiny for donations received from 2010 onward. The amendment was brought to the definition of ‘Foreign Source’ in the FCRA, 2010 whereby a proviso has been added which states that: –
Provided that where the nominal value of share capital is within the limits specified for foreign investment under the Foreign Exchange Management Act, 1999, or the rules or regulations made thereunder, then, notwithstanding the nominal value of share capital of a company is more than one-half of such value at the time of making the contribution, such company shall not be a foreign source”.
Does the legislature have the power for retrospective amendment in order to overturn the Judgment of the court?
It is pertinent to mention that the legislature vide section 54 (1) of FCRA, 2010 had already repealed FCRA 1976 and through retrospective amendment was added to the definition of ‘Financial Source’ under section 2 in the FCRA, 2010, which means if their ownership in an Indian entity was within the foreign investment limits prescribed by the government for that sector, was made retrospectively only from 2010.
A new amendment in the Finance Bill, 2018 seeks to amend the 2016 amendment so that BJP and Congress are exempted from receiving donation after August 5, 1976, the date on which FCRA, commenced.
It seems to be from the conduct of the political parties that by misusing the legislative powers, they have moulded their usage for fulfilling their usage for personal motives than using them for the public benefit and improving the standard of their living. By extending the applicability of a retrospective amendment from 1976, the legislature has tried to breach the basic structure of the constitution and has violated the principle of separation of power.
The Supreme Court in State of Karnataka and Ors. v. The Karnataka Pawn Brokers and Ors. held that the Parliament has the power to amend laws with retrospective effect. But this can be done to remove causes of invalidity. When such a law is passed the Legislature basically corrects the errors which have been pointed out in a judicial pronouncement. Resultantly it can amend the laws, by removing the mistakes committed in the earlier legislation, if this is done than it would not amount to statutory overruling. However, the legislature cannot set aside the judgment which has been pronounced by amending the law, not for the purpose of making corrections or removing anomalies but to bring in new provisions which did not exist earlier. Meaning thereby, the legislature may have the power to remove the basis or foundation of the judicial pronouncement but the legislature cannot overturn or set aside the judgment, that too retrospectively by introducing a new provision.
This is what legislature has done, in order to turn down the judgment of the Hon’ble High Court, it passed a retrospective amendment to the FCRA through the support of Finance Bill, 2016 and Finance Bill, 2018 which validates their foreign contribution from 2010 and 1976 respectively. As seen from the Hon’ble High Court Judgment, there doesn’t arise question to rectify anything or remedy the situation, hence the legislature action of bringing such amendment to turn down the judgment of the Hon’ble High Court is against the law.
The government amended FCRA bypassing Rajya Sabha treating it as Money Bill
Since the Government is not in the majority in the upper house, it cleverly introduced amendments in the Finance Bill, 2018 and passed it as a Money Bill, thereby bypassing the Rajya Sabha, which is therefore unconstitutional and against the basic structure doctrine. Article 110 (1) defines money bill and Article 109 provides for the special procedure in respect of the money bill which states that the money bill can be introduced only in the lower house. Meaning thereby the upper house doesn’t play any vital role in the passing of Money Bill, it can only provide a suggestion to the lower house, which it is not bound to accept. A money bill as per article 110 (1) is a bill which contains provisions dealing with all or any of the following matters, namely-
- The imposition, abolition, remission, alteration or regulation of any tax;
- The regulation of the borrowing of money or the giving of any guarantee by the Government of India or the amendment of the law with respect to any financial obligations undertaken or to be undertaken by the Government of India;
- The custody of the Consolidated Fund or the Contingency Fund of India, the payment of money into or the withdrawal of money from any such Fund;
- The appropriation of money out of the consolidates Fund of India;
- The declaring of any expenditure to be expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure;
- The receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State; or
- Any matter incidental to any of the matters specified in sub-clause (a) to (f).
According to the provisions of the article 117 (1) of the constitution of India, a bill which makes provisions for any of the above-mentioned matters, and additionally with any other matter is called a Financial Bill. Therefore, the finance bill may be a money bill if it deals only with the matters specified above, and not with any other extraneous matter as otherwise it would be categorized as a Financial Bill. Since the Lok Sabha has effectively bypassed the Rajya Sabha by passing it as Money Bill, therefore an amendment to FCRA cannot be stated to be an amendment which can be covered in the definition of a Money Bill.
Amendment in FCRA poses a serious threat to the internal interference of the Foreign Companies
The citizens of India through democratic process elect their representatives through the election to form the government so as to build a welfare state and to protect the citizens from socio-economic and political oppression and exploitation from external and internal forces. The amendments made in the Companies Act and Foreign Contribution (Regulation) Act which now permitted political parties and candidates to take unlimited contributions from corporate and foreign institutions will be obliged government to protect the interest of these corporate and foreign institutions and the political and economic policies and regulations would be favouring them and the resultant losers are the citizens of India, thereby it is the failure of the India democracy.
The conclusion is drawn out from the above facts specifically denies the political parties to receive any grant from the foreign company and the corporate houses as such activity of the political parties are in a gross violation of the FCRA. Also for the Sovereign, Socialist, Democratic and Republic country like India, the internal interference of the foreign companies will be a setback to the constitutional ethos, therefore leading to the crony-capitalist era, where political parties after forming government will act as an agent of corporate houses for fulfilling their demands, the reason being that these companies funded political parties, therefore, political parties will be obliged to work for them.
It is also significant to witness the eagerness of the Modi Government and silence of the Congress to get exempted from the foreign funding, thereby turning down Delhi High Court Judgments through introducing new amendments to the Finance Bill, 2016 and the Finance Bill, 2018 which make their foreign donations post August 5, 1976, valid. Therefore the petition filed by the ADR and E.A.S. Sarma has blatantly opposed such move by the government while raising serious questions over government intentions.