Political parties have reasons to feel happy with the new Companies Bill which proposes allowing firms to dole out larger amounts as political donations and awarding lesser penalty for violation of statutory norms by companies.
Under the new Bill, a company can contribute up to 7.5% of its average net profits during the three immediately preceding years. The Companies Act, 1956, permitted companies to pay only 5% of the average profit as political donations.
The Bill is awaiting Parliament approval.
Commenting on the new Companies Bill, senior partner of law firm Titus & Co Diljeet Titus said, "The decision is welcome as it will increase flow of white money into election process."
Given the rising cost of contesting elections, he said the law itself might not be able to reduce the flow of black money into the elections.
As regards penalty, the new law proposes to reduce the maximum penalty of imprisonment to officer in default for violation of statutory norms with regard to political funding to six months from three years in the existing Act. The monetary penalty, however, will be raised five times of the amount from three times.
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The government, Titus said, has done the correct thing in reducing the imprisonment for violating political funding norms, as "not more than 2-3 people have been sentenced under this provision in the last 50 years. Also as such donations are given for the benefit of the company, it is difficult to pin-point the officer in default".
Raising the amount of fine, he added, would act as a deterrent and refrain companies from violating the provisions.
"All parties receive money either in the form of cash or cheque. There are companies willing to pay more. So, the Bill has raised the limit," advisory firm Corporate Professionals Managing Director Pawan Kumar Vijay said.