The political funding imbroglio

Jagdeep S. Chhokari
The recent controversy in the Delhi State Assembly elections about the
Aam Aadmi Party having allegedly accepted donations from some
seemingly fake companies has, once again, focussed attention on some
very fundamental issues pertaining to how elections and politics is
conducted in the country. While it is neither possible nor correct to
comment on the specific issue of the Aam Aadmi Party in the absence of
adequate and reliable information, it is worth looking at the larger issue
which is how are running of political parties and conduct of elections
funded. A related issue is how these two activities should be funded.
All the political parties have always be very secretive and cagey on these
issues. Political parties have always been extremely reluctant to disclose
where they get their money from. One attempt to unravel this mystery
began in 2006 when a civil society organisation filed an application under
the Right to Information Act asking for copies of income tax returns of
political parties. When the application was rejected, a first appeal under
the RTI Act was filed before the Appellate Authority who also rejected the
appeal. It was then that a second appeal was filed before the Central
Information Commission (CIC).
Ten senior advocates from various High Courts and the Supreme Court
appeared before the CIC on behalf of various political parties to
vehemently oppose the request in the RTI application, saying that since
income tax returns were private and confidential documents, sharing
copies of these with any third party would be a violation of privacy, and
should not be done. After hearing the arguments from both sides, the CIC
ruled on April 29, 2008, that since political parties work in the public
domain and on public issues, and since the RTI Act requires the
functioning of the government to be transparent, therefore those who
form the government, i.e., political parties, should also be transparent.
The CIC thus decided that copies of the income tax returns of political
parties should be provided to whoever asks for them.
Once the copies of the income tax returns were received, the returns were
studied. A scrutiny showed that political parties had in fact declared
income of hundreds and thousands of crores of rupees but none of them
had paid any income tax at all! A study of the Income Tax Act revealed
that Section 13-A of the Income Tax Act specifically exempts 100 per cent
of the income of political parties from income tax.
The same section, Section 13-A, however has a proviso which is that the
100 per cent exemption from income tax will be available only to those
political parties who submit a list of donations of over Rs.20,000 each to
the Election Commission of India. The same civil society organisation then

got copies of the lists of donations of various political parties from the
Election Commission by filing application under the RTI Act.
A comparison of the total donations, each more than Rs.20,000, received
by a political party with the total income declared by the same political
party, revealed that, on average across all political parties, the donations
above Rs.20,000 accounted for only 20-25 per cent of the total income of
a political party. Put another way, this shows that as much as 75 to 80 per
cent of the total income of political parties are from unknown sources.
Only 20-25 per cent of the mystery of political party funding had been
solved, 75 to 80 per cent of the mystery remained unsolved.
To discover the sources of the balance 75-80 per cent of the funding, RTI
applications were filed with all the political parties. All the applications
were returned saying that they (the political parties) were not public
authorities under the RTI Act, so the RTI Act did not apply to them. An
appeal was then filed with the CIC with a request that six national political
parties be declared public authorities under the RTI Act. Four main
arguments in support of the request were: (1) Substantial public and
government funds are spent on political parties, (2) Political parties are
required to be registered by the Election Commission of India under the
provisions of Section 29(A) of the Representation of the People Act, 1951,
(3) Political parties exercise constitutional authority under Schedule 10 of
the Constitution (Anti-Defection Law) as they have the power to unseat
peoples representatives if they vote against the whip issued by a party in
any vote in Parliament or a State Assembly, and finally (4) Political parties
themselves claim that they work for public purposes and in the public
domain.
The six national political parties strongly opposed the RTI application in
various hearings in front of the CIC. After three hearings, a full bench of
the CIC consisting of the Chief Information Commissioner and two
Information Commissioners, declared the six national political parties (the
Congress, BJP, NCP, BSP, CPM, and CPI) to be public authorities under the
RTI Act and directed them to appoint Public Information Officers within ten
weeks of the order which was issued on June 03, 2013.
It has now been 18 months since the CIC announced its decision. None of
the six national political parties, not any run-of-the-mill small or regional
party, has taken any action whatsoever to implement the CIC decision nor
has any of them in any legal or other appropriate forum. When complaints
of non-compliance were lodged with the CIC, it issues show-cause notices
to the Presidents/General Secretaries of the six parties asking them to
appear before the Commission and explain why they had not complied
with the decision of the CIC. None of the six parties paid any attention to
the notice, and none appeared in the Commission on the appointed date.

Subsequently, the CIC has issued four more notices to all the parties and
none of them has appeared before the Commission.
This blatant and persistent defiance of a statutory authority which was set
up under a law that was passed unanimously by the Parliament shows
unambiguously, without any doubt whatsoever the extent to which
political parties, which are long established, will go to prevent information
about their finances being made public.
The inescapable conclusion is that political parties must have something
really disturbing that they are trying to hide. The obvious conclusion is
that unaccounted money is being used to run political parties and to
finance elections which, as the Law Commission of India said as far back
as 1999, is a grave danger to democracy. The Law Commission also
recommended unambiguously that the financial affairs of political parties
should be made transparent by law.
As we have seen above, not only have political parties not cared to pass
any law in the Parliament, they have blatantly and arrogantly refused to
follow the lawful directions of duly constituted statutory authorities.
In such a scenario, it is for the citizens/voters, We, the People, to insist
on political parties to come clean and be transparent about their financial
affairs. For such parties to demand transparency from others who have
put their financial dealings on the web for anyone to see, sounds
hypocritical in the very least!

i Jagdeep S. Chhokar is a former Professor, Dean, and Director In-charge of Indian

Institute of Management, Ahmedabad. Views expressed are personal.