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The Delhi High Court on Friday held the Congress and the Bharatiya Janata Party had "prima facie" violated the provisions of the Foreign Contribution Regulation Act. It directed the Centre and the Election Commission (EC) to probe the funding receipts of the two parties within six months.
"We have no hesitation in arriving at the view that, prima facie, the acts of the respondents inter se, as highlighted in the present petition, clearly fall foul of the ban imposed under the Foreign Contribution (Regulation) Act, 1976, as the donations accepted by the political parties from Sterlite and Sesa accrue from 'Foreign Sources' within the meaning of law," held the court of Justice Pradeep Nandrajog and Justice Jayant Nath.
The Congress said no law was violated. The head of its legal cell, K C Mittal, said: "There is no violation of the law. Under Section 591(2) of the Companies Act, if a company is incorporated abroad but has Indian shareholding above 50 per cent, it is deemed to be an Indian company." The same issue had come up in 2009 when Vedanta had made a donation, he added.
BJP spokesperson Sudhanshu Trivedi said he was yet to see the court order. "But it is our party's stated policy that we do not accept any funding from abroad. We are trying to follow this to the best of our understanding and the best of our capability," he said, welcoming any investigation the high court might order. "All political parties are answerable to the Election Commission about their funding and the EC can ask any party to explain the source of their funding."
Aam Aadmi Party leader Arvind Kejriwal was jubilant. "The Congress and the BJP accused us of taking foreign funding. The high court now finds it is they who are guilty of violating the FCRA," he tweeted.
Vedanta Resources had earlier said, "We will like to confirm that all political donations made by Sterlite Industries India Ltd (SIIL) and Sesa Goa Limited (Sesa) in specific years were strictly in accordance with the provisions of Section 293 A of the Indian Companies Act, 1956, after taking due approval of the respective boards of directors and audit committees and full disclosures have been made as per law." It had also added that the provisions of FCRA do not apply to these contributions as these are not "foreign contributions" at all.
The high court judgment was given on a public interest litigation filed by the Association for Democratic Reforms (ADR) last year, seeking action against the two parties for allegedly violating foreign funding norms and illegally receiving contributions from government-owned companies.
ADR had made the allegations with regard to donations received by the two political parties in 2009 from companies such as Vedanta PLC, Sesa Goa and Malco.
Vedanta PLC is incorporated in London, with 50 per cent of its issued shares owned by non-resident Indian citizen Anil Agarwal. Sterlite and Sesa Goa are incorporated in India, but more than 50 per cent of shares in Sterlite and Sesa Goa are owned by Vedanta.
ADR had said the two national parties had indulged in "a blatant violation" of the Foreign Contribution (Regulation) Act, 1976, and the Representation of the People Act, 1951, by taking donations from foreign sources and from government-owned companies. The FCRA prohibits acceptance of foreign contribution by political parties in India, while the RP Act prohibits donations to political parties by government-owned companies.
The government in its response to the plea had argued that since an Indian citizen owned Vedanta, donations from the company and its subsidiaries would not be counted under "foreign donations." With regard to the allegation that the Congress had received donations from State Trading Corporation and Metals and Minerals Trading Corporation of India, the party had claimed that these were for a function organised by the National Students Union of India (NSUI) and had been "incorrectly shown" in the accounts of the Indian National Congress.
The Bench has, however, held that Vedanta and its subsidiaries would be considered "foreign companies" under the FCRA as Vedanta is incorporated outside India. The court also held that under Section 2(e)(vi) of the Foreign Contribution (Regulation) Act, 1976, if more than one-half of the nominal value of the share capital of a donor company is held by "corporations incorporated in a foreign country or territory," it would be considered a "foreign contribution".
The court also pulled up the government, observing that "the response by the Union of India" and the two political parties was "found to be based on a wrong understanding of the law."
The court also referred to the serious issues raised during parliamentary debates on the FCRA in 1976, observing that members had expressed "deep concern" regarding the "extra-terrestrial loyalty" being encouraged among Indian politicians, non-government organisations and journalists by "foreign powers" which were contributing large sums as "donations."
"It had dawned that India had degenerated into a playground for world powers; which were coining ingenious means to latently push across huge sums of money through puppet organisations and destabilise the country. The Members of the House unanimously supported the Aim and Object(s) of the legislation and the mischief of pervasive foreign influence on our polity that it sought to suppress," observed the court.
The government has now been directed to "relook and re-appraise the receipts of the political parties and would identify foreign contributions received by foreign sources as per law" and to "take action as contemplated by law." Further, the government and the Election Commission have been directed to "investigate" the accounts of the Congress and the NSUI "with respect to the justification given to find out whether the same is a stray incident and possibly a mistake or otherwise."
