Samriddha Sen & Atreya Chakraborty

Sen et al / Understanding Money-Power In Indian Politics: A Comparative Regulatory Perspective On
The Case Study Of Electoral Campaign Finance Reforms
UNDERSTANDING MONEY-POWER IN INDIAN POLITICS: A

COMPARATIVE REGULATORY PERSPECTIVE ON THE CASE STUDY
OF ELECTORAL CAMPAIGN FINANCE REFORMS
Samriddha Sen
&
Atreya Chakraborty
Second year students at the Department of Law, University of Calcutta
[samriddho66@gmail.com] [atreya326@gmail.com]
Abstract
The need for electoral campaign finance reforms has long been
considered, a vital requisite for the healthy and effective
functioning of the world’s largest democracy. ‘Free and fair’
elections are considered as the cornerstones of democratic
governance, and in the context of populous pluralistic democracies,
the robustness of convening massive elections are often
compounded by the nuances of financing periodically
corresponding social experiments. Despite the constitutional
empowerment of the Election Commission and the relative
independence of the judiciary, gaping inadequacies of existing
regulations and the contemporaneous enactment of controversial
legislations have catalysed widespread opacity and
unaccountability in the realm of campaign financing. This paper
recognizes and reaffirms upon the need for electoral funding
reformations, argued for in retrospective context of pre-existing
legislations, recent statutory amendments and in comparative
context of international common law jurisprudences. It also
produces effort to propose and recommend suggestive remedial
measures essential for fostering electoral transparency through
public disclosure of financial recipiency, adequately regulated
auditing of political entities and the proposition of electoral
contribution caps among others.
Keywords: Campaign Finance, Campaign Contributions, Election Laws, Electoral

Reforms, Electoral Bond Scheme, Electoral Trusts, Electoral Expenditure, Election
Funding, Election Commission, Electoral Income
1. Introduction
“It needs little argument to hold that the heart of the Parliamentary system
is free and fair elections periodically held, based on adult franchise,
although social and economic democracy may demand more”
— Krishna Iyer, J.1
1
See Mohinder Singh Gill v. Chief Election Commissioner, (1978) 1 SCC 405, 424, ^23.
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International Journal of Law and Policy Review (IJLPR)
Well-conditioned political competition is considered an inherent element of

any foundational democracy. Since the modus operandi of political
organisations, at the fundamental level is identical to that of any private
organisation or entity, they require significant financial resources to
effectively engage with their respective electorates. Political financing is
referred to as the act of allocating, issuing or granting financial resources for
utilisation in the election campaigning of nominated candidates, as well as to
address the expenses of political activities organised by political entities or
organisations, prior to the commencement of election.2 Albeit unfortunate, in
the world’s largest foundational democracy with an aggregate population of
1.34 billion, 3 the exorbitant costs of elections and the resultant pervasive
corruption, are to an extensive degree, inseparable. The existence of a
causative interface between corruption and certain sources of political
financing, plays a decisive role in de-stabilising the playing field, simply
because an inestimable number of candidates and a sizeable amount of local,
regional and national political parties lack equal non-partisan access to
funding.4 Furthermore, if funding of various political entities is conducted
through an opaque framework, it reinforces the significant risk of permitting
an influx of black money into the political machinery,5 which in itself is not
only in contravention to the mandates of political equality and electoral
transparency; but in addition, endangers the very foundations of our
parliamentary democracy. It also requires to be noted that despite the best
efforts of various administrations, wielding considerable political authority
over their respective tenures, the role of money in influencing and to an
extent, ascertaining the outcome of electoral results, has failed to subside.
On the contrary, it can be asserted that as a result of the opacity of existing
electoral funding mechanisms, and the rampant exploitation of loopholes
present in the current regulatory framework, often, elected representatives
are subjected to the dictates of their own financers.6
In context of the socio-political outcomes of electoral financing, the general
presumption is that acquiring access to substantial funding is an automatic
guarantor of a favourable electoral outcome, as additional funding enables
candidates and their respective parties to widen their public appeal and by
consequence, their popular and political support bases. 7 This particularly
2
Election Commission of India, Background Paper on Political Finance and Law
Commission Recommendation 1, 2015.
3
World Bank Group, Total Population (2017), accessible at https://data.worldbank.org/
indicator/SP.POP.TOTL?locations=IN (Last accessed on 20th of May, 2019)
4
Supra, note 2.
5
Id.
6
Id.
7
Transparency International, Policy Position No. 01/2009: Standards on Political Funding
and Favors, January 1, 2009, accessible at https://www.transparency.org/whatwedo/
publication/policy_position_no._01_2009_standards_on_political_funding_and_favours,
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conventional opinion, however, does not withstand the attenuating factors

which are allied with the funding acquisition process. The aforementioned
argument firstly asserts that, political figureheads or entities enjoying
predisposed authority, and by consequence of their position of authority, are
more inclined to exert coercive influence upon their sources of funding.8 The
second assertion is that, influential private sources may enter into an
unlawful arrangement of quid pro quo with the nominated candidate(s), one
that would inevitably result in a detrimental public policy paradigm shift
from social welfare to selective private or corporate welfare.9 This assertive
framework offers a brief insight into the conceptual fallacies associated with
democratic electoral processes. The main argument, in proposition of
regulating political finance, stems from cauterising the occurrence of any of
the aforesaid possibilities.10 Therefore it can be conclusively adduced that,
the two crucial consequences of campaign spending is manifested through
voter turnout by cultivating electoral awareness among voters 11 and
determining the electoral outcomes.12
The unregulated injection of money into the electoral machinery and the
resulting spree of election expenditure, by various political organisations
depict a rather alarming picture. The Bharatiya Janata Party (hereinafter
referred to as “BJP”) had recorded an unfathomable election expenditure of
Rs.280.67 (in crores) and a staggering Rs.714.28 (in crores) in 2009 and
2014 Lok Sabha elections respectively. 13 Second to the BJP, the Indian
National Congress (hereinafter referred to as “INC”) expended Rs.380.04 (in
(last accessed on 20th of May, 2019) ;See also Jhalak Kakkar, On Regulating Campaign
Finance, June 22, 2013, available at http://blog.mylaw.net/on-regulating-campaign-finance/,
(last accessed on 20th of May, 2019)
8
Id.
9
David Austen Smith, Interest Groups: Money, Information, and Influence in Perspectives
on Public Choice: A Handbook 296, 321, Cambridge University Press (1997); Matthias
Dahm and Nicolas Porteiro, Side Effects of Campaign Finance Reform, 6(5) J. EUROPEAN
ECO. ASS. 1057-1077 (2008); Gene Grossman and Elhanan Helpman, Special Interest
Politics, MIT Press (2001); Torsten Persson and Guido Tabellini, Political Economics:
Explaining Economic Policy, MIT Press (2002).
10
Daniel Daniel R. Ortiz, The Democratic Paradox of Campaign Finance Reform, 50(3)
STANFORD L. R. 893, 914 (1998).
11
John Matsusaka and Filip Palma, Voter Turnout: How Much Can We Explain?, 98
PUBLIC CHOICE 431-446 (1999); Burton Abrams & Russell Settle, Campaign-Finance
Reform: A Public Choice Perspective, 120(3/4) PUBLIC CHOICE 379-400 (2004).
12
Alan Gerber, Estimating the Effect of Campaign Spending on Senate Election Outcomes
Using Instrumental Variables, 92 AM. POL. SCI. REV. 401-411 (1998); Burton Abrams &
Russell Settle, The Effect of Broadcasting on Political Campaign Spending, 84 J. POL.
ECO., 1095-1107 (1976); Jonathan Nagler & Jan Leighley, Presidential Campaign
Expenditures: Evidence on Allocations and Effects, 73 PUBLIC CHOICE 319-333 (1992);
King Banaian & William Luksetich, Campaign Spending in Congressional Elections, 29
ECONOMIC INQUIRY 92-100 (1991).
13
Supra, note 2, at 7.
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crores) and Rs.516.02 (in crores) in the 2009 and 2014 Lok Sabha elections
respectively. 14 Other parties, despite their relatively restricted spectrum of
political influence and operations, with respect to the two major contesting
parties, were also able to expend substantial amounts of money in the Lok
Sabha elections. To cite an example, the Bahujan Samaj Party had recorded
an expenditure of Rs.21.23 (in crores) and Rs.30.05 (in crores) in 2009 and
2014 respectively. 15 Incurring identical amounts of enormous expenditure
had been possible largely due to the comparable accumulation of donated
funding from various, mostly undisclosed sources. This signifies that even if
a party, in general and an electoral candidate, in particular, adheres to the
norms and regulations of the country and is ambitious of serving the people,
these entities or candidates may not achieve an equal footing in the election
process, if they are unable to receive a relatively equitable amount of
funding. This, by consequence, also denies the aforementioned candidate or
political entity, an equal chance to engage in the electoral process. Although
there is no disagreement with regard to the fact that access to financial
resources is a prerequisite for contesting elections, the need for the same
should not denigrate the electoral process, to the extent that the party
accumulating the most substantial funding achieves electoral success without
engaging in any legitimate political contention. From a statistically neutral
standpoint, and in furtherance of the implications of the aforesaid assertion,
it has been alleged that with an estimated spending of more than $5 billion,
including a cost of approximately $600 million to the Government
exchequer, the 2014 Lok Sabha election is ranked among the costliest
democratic elections in recorded history.16
Therefore, the dearth of politically equitable access to electorally decisive
funding, serves as a reiterative necessitation of one of the most fundamental
postulates of a parliamentary democracy, which is political equality. To be
dismissive of its inherently conceptual ambiguities, political equality is
defined as a condition where “control over (governmental decisions) is
shared so that preferences of no one citizen are weighed more heavily than
the preferences of any other citizen”. 17 The correlation between (certain
sources of) electoral financing and political corruption, as argued before,
advances the subsequent assertion of an appended relationship between
corruption and the absence of political equality, the latter being a
consequence of the counter-productivity of contemporary campaign finance
14
Id.
15
Id.
16
Michael Collins, “Money Power in Indian Elections,” The Hindu BusinessLine, July 29,
2014, accessible at https://www.thehindubusinessline.com/opinion/money-power-in-indian-
elections/article20830550.ece1 (last accessed on 20th of May, 2019)
17
Robert A. Dahl and Charles Lindblom, Politics, Economics and Welfare 41, Harper and
Brothers (1953).
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regulatory frameworks. 18 It has been observed that defective election

expenditure and political financing regulations have enabled parties and
elected representatives to mis-utilise the government’s discretionary
executive authority to allocate resources for illegitimate electoral fundraising
and campaigning. 19 To accurately assess the financial consequences of
corruption in India, as per available estimates, approximately $419 billion in
taxable income and profits have been laundered out of the country over the
past decade, through off-shore financial depositions and tax-free circulations
across fraudulent projects. 20 The National Commission to Review the
Working of the Constitution, (hereinafter referred to as “NCRWC”) 2001 in
its published Final Report, has conclusively observed that the existing
electoral financing mechanism “creates a high degree of compulsion for
corruption in the public arena” and that “the sources of some of the election
funds are believed to be unaccounted criminal money in return for
protection, unaccounted funds from business groups, kickbacks or
commissions on contracts, etc.”. 21 It further enunciates that “electoral
compulsions for funds become the foundation of the whole superstructure of
corruption.” 22 The resultant institutional corruption, unabated by the
regulatory inefficacy of campaign finance mechanisms, has inevitably
perpetuated the designing and effectuation of fallaciously engineered
policies, which disproportionately prioritise electoral contributors over
public welfare.23
Notwithstanding the existing loopholes of concurrent electoral finance
regulatory legislations, such as the Foreign Contribution (Regulation) Act,
2010; the Representation of the People Act, 1951; the Companies Act, 2013;
and the Income Tax Act, 1961; recent unprecedented statutory amendments
introduced to the foregoing legislations, through the Finance Acts 2016,
2017 and 2018; in addition to the provisioning of Electoral Bonds, have
substantially expanded the realm of unregulated domestic and international,
private or corporate funding to contesting political entities and
18
John de Figueiredo & Charles Cameron, Endogenous Cost Lobbying: Theory and
Evidence, May, 2014, accessible at https://scholar.princeton.edu/sites/default/files/
ccameron/files/endogenouslobbying_2014_version.pdf (Last availed at 20th May, 2019);
John Wright, Interest Groups and Congress: Lobbying, Contributions, and Influence,
Pearson (2002); Kay Lehman Schlozman and John Tierney, Organized Interests and
American Democracy, Harper and Row (1986).
19
Id.
20
Rachel Hanna, Fighting Corruption in India, Harvard Political Review, May 15, 2019,
accessible at http://harvardpolitics.com/world/fighting-corruption-in-india/ (Last availed on
20th of May, 2019)
21
See M.N Venkatachaliah, Report of the National Commission to Review the Working of
the Constitution, ^4.14.1, March 31, 2002, accessible at http://legalaffairs.gov.in/
sites/default/ files/chapter%204.pdf (Last accessed on 20th of May, 2019).
22
Id.
23
Id.
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institutionalises the assurances of anonymity of any of the aforesaid sources

of campaign contributions.
This paper establishes its premise by producing a critical analysis of
currently existing political funding regulations, inclusive of its deficiencies
and concomitant effects, and offers a detailed substantiation of the recently
enacted scheme of Electoral Bonds. This is succeeded by, in the second part,
a few alternative remedial measures for certifying transparency and
accountability in domestic electoral financing, proposed in comparative
referential context of parallel electoral financing regulations in developed
common law jurisdictions and relevant observations made by domestic
institutions. Concludingly, this paper provides a brief theoretic enumeration
of the need for electoral campaign financing regulations, in ensuring the
conduction of “free and fair” elections.
2. Critical Analysis of Existing Electoral Funding Regulatory

Mechanisms
Laws pertaining to and regulating electoral financing are contained under
several statutes, primarily specified under the Representation of the People
Act, 1951 and the Conduct of Elections Rules, 1961, enacted under the
aforesaid Act. The statutory ambit of the Representation of the People Act
entails the functioning of political organisations and their respective or
independently contesting electoral candidacies. Corporate donations and
contributions to political entities and independent candidates are regulated
under the provisions of the Companies Act, 2013,24 which are inclusive of
regulatory provisions retained from the pre-amended Act of 1951. 25
Regulation of foreign contributions to domestic political entities and
candidates is governed by the Foreign Contribution (Regulation) Act,
2010, 26 while the filing of income returns and deductibility of tax on
political donations and contributions is regulated by the Income Tax Act of
1961.27 Concludingly, this part performs a brief analysis on the ramifications
of the Electoral Bond Scheme in incapacitating the efficacy of existing
electoral regulatory statutes.
2.1. The Representation of the People Act, 1951

The currently existing statutory provisions with regard to regulation of
electoral campaign financing and disclosure of analogous political
expenditure, under the Representation of the People Act (hereinafter referred
24
See Companies Act, 2013, §182.
25
See Companies Act, 1956, §293A.
26
See Foreign Contributions (Regulation) Act, 2010, §3.
27
See Income Tax Act, 1961, §§ 276CC, 13A, 80GGB, 80GGC.
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to as “RPA”), 1951 are contained under Sections (§§) 10A, 29B, 29C, 77, 78
and 123, as specified below.
2.1.1. §10A of the Representation of the People Act, 1951

§10A of the Act empowers the Election Commission to disqualify a
candidate from contesting elections for three years on the ground of failing
to lodge election expenses as per the prescribed requirements of the statute.
Nonetheless, the stringent provisions of §10A are not applicable to political
parties. 28 Upon consideration of the report filed by the District Election
Officer, enumerating the relevant particulars of the defaulting candidate,29
the Election Commissioner can disqualify the said candidate from assuming
the office of a Member of Parliament, Member of Legislative Assembly or
Member of Legislative Council, if the contesting candidate has failed,
without justifiable reason, to file election expenses within the prescribed
time and manner specified. 30 However, since the stipulated period of
disqualification may conclude by the next general election to the House
concerned, the Election Commission has insisted on expanding the
prescribed disqualification period of three years to five years, as it asserted
that the existing three-year disqualification period serves no effective
purpose, other than debarring the defaulted candidate from contesting in the
odd bye-elections held within the disqualification period.31
The Supreme Court, in the case of L.R. Shivaramagowde v. P.M.
Chandrashekar, 32 held that the Election Commission has the authority to
investigate into the election expenses filed by a candidate and to disqualify
the said candidate under §10A of the Representation of the People Act,
1951, if the particulars of the account furnished is discovered to be incorrect
or untrue.
2.1.2. §§ 29B & 29C of the Representation of the People Act, 1951
§29B 33 of the Act states that political parties are entitled to receive any
amount of monetary contribution voluntarily offered to it by any person or
company, other than a governmental one. It additionally provides that no
political party shall be eligible to accept any contribution from any foreign
28
See Law Commission of India, 255th Report on Electoral Reforms 44, March 2015,
^2.28.19.
29
See Conduct of Election Rules, 1961, Rule 89(4)
30
See Representation of the People Act, 1951, §10A; See also Conduct of Election Rules,
1961, Rules 89(5)-89(8).
31
Ministry of Law and Justice, Background Paper on Electoral Reforms, accessible at
https://adrindia.org/sites/default/files/BACKGROUND%20PAPER%20ON%20ELECTOR
AL%20REFORMS.pdf (last accessed on 20th May, 2019);
32
AIR 1999 SC 252.
33
Inserted by the Election & Other Related Laws (Amendment) Act, 2003 (46 of 2003), §10
(w.e.f 11-9-2003).
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source listed under §2(e) of the Foreign Contribution (Regulation) Act,

1976. The term “contribution” has the same meaning as defined under
§293A of the Companies Act, 1956 and includes any donation or any
subscription offered by any person to a political party.34
§29C35 of the Act regulates the declaration of donations received by political
parties. It requires the treasurer of a political party or any other person
authorised by the said party on this behalf, to prepare a report on the amount
of contribution received by the party in excess of Rs.20,000, in each
financial year;36 and submit the said report prior to the expiry of the due date
for submitting the yearly tax return.37 If a political party fails to file such
report or has defaulted in complying with the aforementioned rules, then in
accordance with §29C(4) read along with §13A of the Income Tax Act of
1961, the same party will not be entitled to any tax relief under the said Act.
Subsequently, an amendment introduced through §136 of the Finance Act
2017, reduced the abovementioned cap of Rs.20,000 to Rs.2,000.38
Emphasising on the necessity of disclosing the sources of political funding,
the Supreme Court has made the following observation:
“We wish however to point out that through the practice
followed by political parties in not maintaining accounts of
receipts of the sale of coupons and donations as well as the
expenditure incurred in connection with the election of its
candidate appears to be a reality, but it certainly is not a
good practice. It leaves a lot of scope for soiling the purity of
election by money influence.”39
Prior to the enactment of the Finance Act 2017, which reduced financial
ceiling of faceless donations, i.e. donations which are not required to be
disclosed in the annually filed income tax reports, from Rs.20,000 to
Rs.2000; the pre-existing provisioning of §29C of the RPA provided that all
contributions in excess of Rs.20,000 must be incorporated in the annual
financial report of the political party. However, the loophole from the
wording of the said section itself has precipitated widespread financial
unaccountability and unrestricted opacity, by enabling political entities to
conceal the identity of the donors who have contributed below the ceiling of
34
See Representation of the People Act, 1951, § 29B, Explanation clause (c).
35
Inserted by the Election & Other Related Laws (Amendment) Act, 2003 (46 of 2003), §2
(w.e.f 11-9-2003).
36
See Representation of the People Act, 1951, §29C(1); See also Conduct of Election Rules,
1961, Rule 85B.
37
See Representation of the People Act, 1951, §29C(3).
38
Ministry of Law and Justice, Finance Act 2017, Gazette of India, 31st March 2017,
accessible at https://taxindiaonline.com/RC2/pdfdocs/Finance_Act_2017.pdf (last accessed
on 20th May, 2019).
39
Gajanan Krishnaji Bapat v. Dattaji Raghobaji Meghe, (1995) 5 SCC 347.
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Rs.20,000. As a result of such a provision, as brought to attention by the

Association for Democratic Reforms, an estimated 85% of donors to the
Indian National Congress and the Bharatiya Janata Party, were anonymous,
who had avoided the ceiling disclosure clause by contributing up to
Rs.19,999.40 The cap of Rs.20,000, as statutorily prescribed by §29C which
aimed to foster financial transparency and funding accountability, stood
incapacitated by its preceding sub-section (B) of §29 of the said Act, which
statutorily provides for no limitations on the number of donations to be
received by political organisations. By exploiting the aforementioned
statutory logjam, political parties were able to accrue enormous funding
through allowance of incalculable donations encashed at Rs.19,999, while
also deliberately defaulting on incorporating the said earning particulars in
their respective annual financial reports.41
Subsequent to numerous proposals for electoral reforms suggested by the
Election Commission of India, the prescribed financial ceiling of faceless
donations was reduced from Rs.20,000 to Rs.2,000, through an amendment
made to the Income Tax Act of 1961.42 Although it can be argued that the
newly stipulated financial ceiling may be considered too low for political
entities to exploit the afore-mentioned statutory logjam between §29B &
§29C of the Representation of the People Act, 1951, the efficacy of such a
reform is also questionable. The assertion is that, in the absence of any
statute or provision to the contrary, political parties can evade the regulative
framework by simply falsifying their electoral income data as unaccounted
money acquired through multiple anonymous donations encashed below
Rs.2,000, which therefore do not legally warrant a full disclosure. This is
achievable owing to the provisions contained under §29B of the said Act
which offers no limitations on the number of donations or contributions
made to political organisations.
The only penalty stipulated for non-compliance under §29C of the Act is the
revocation of any income tax exemption,43 which, by consequence does not
offer significant deterrence to non-complying or potentially non-compliant
parties.
40
Economic Times, “Electoral Bonds and FCRA amendments pave the way for
unaccounted political funding”, 31st March, 2018, accessible at
https://economictimes.indiatimes.com/news/politics-and-nation/view-electoral-bonds-and-
fcra-amendments-pave-the-way-for-unaccounted-political-
funding/articleshow/63553978.cms (last accessed on 20th May, 2019); See also Association
for Democratic Reforms, Analysis of Donations Received by National Political Parties – FY
2016-17, 30th May, 2018, accessible at https://adrindia.org/download/file/fid/6022 (last
accessed on 20th of July, 2019).
41
Id.
42
Supra, note 38.
43
See Representation of the People Act, 1951, §29C(4).
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2.1.3. §77 of the Representation of the People Act, 1951
§77 of the Act deals with the accounting of election expenses. §77(1) states
that every candidate of an election shall, either by himself or by his election
agent keep a separate and correct account of all expenditure incurred in
connection with the election authorised by him or his election agent between
the date of his nomination and the date of declaration of the result thereof,
both dates being inclusive. Such an account should contain relevant
particulars such as the date of incurring or authorising of expenditure, the
nature and amount of the expenditure, the name and address of the payee
etc.44 A voucher is required to be maintained for each expenditure incurred
and subsequently to be filed along with the account.45 Furthermore, §77(3)
states that the total of the said expenditure shall not exceed such amount as
prescribed.46
Although §77 necessitates the accounting of election expenses, the
provisions of the same maybe evaded in various ways, as substantiated
below.
According to §77(1), the time period for accounting of expenses commences
from the date of nomination of a candidate and extends till the date of
publication of election results. Such provision is not fool-proof, as it allows
the said candidate, not to disclose any expense incurred or authorised by
himself or by his agent during the time elapsed between the date of
declaration of elections and the date of nomination. Furthermore, this section
does not provide for any legal measures that might be initiated against a
candidate who fails to maintain such account or expenses. It also states that
no expenditure incurred as a result of travel by air or any other means of
transport for programmes during election campaigning, shall be included in
the accounts of expenses.47 Such clause provides political parties with ample
latitude to not disclose even those expenses which have been incurred due to
reasons other than the ones specified under the said clause. Moreover, §77
offers no direct provisional limitations on the electoral expenditure of
political organisations, as well. Such statutory ambiguity has precipitated the
growing phenomena of third-party financing of elections, as in the act of
financing a candidate’s electoral expenditure by corporate sponsors,
44
See Conduct of Election Rules, Rule 86(1).
45
See Conduct of Election Rules, Rule 86(2).
46
Read along with Conduct of Election Rules, 1961, Rule 90; See also Election
Commission of India, Conduct of Elections (Amendment) Rules, 2014, accessible at
https://eci.gov.in/files/file/3010-conduct-of-elections-amendment-rules-2014-amendment-
of-rule-90-of-conduct-of-election-rules-1961-–increase-in-maximum-limit-of-election-
expenses-regarding/ (last accessed on 20th May, 2019).
47
See Representation of the People Act, 1951, §77(1), Explanation 1 Clause (a).
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politically affiliated parties and donations from miscellaneous benefactors.48

Furthermore, this section allows political parties to conceal any expenditure
beyond the prescribed statutory ceiling by falsifying or misrepresenting the
nature of the expenditure as being inclusive of travel expenses incurred in
performance of party programmes, thereby, also negating the efficacy of
§77(3). It also enables the said political entities from maintaining true and
current accounts of their income by simply disguising excess expenses as an
inclusive component of expenditure exempted from disclosure under §77(1).
In a landmark judgment, delivered in the case of Kanwar Lal Gupta v. Amar
Nath Chawla,49 the Supreme Court observed in favour of the inclusion of
electoral expenses disbursed on behalf of a candidate in the aggregate
election expenditure, with respect to the statutorily specified campaigning
expenditure ceiling. §77(1) of the Representation of the People Act, as
effective prior to the subsequently specified amendment read:
Every candidate at an election shall, either by himself or by
his election agent, keep a separate and correct account of all
expenditure in connection with the election incurred or
authorized by him or by his election agent between the date of
publication of the notification calling the election and the
date of declaration of the result thereof both dates inclusive.50
§77(3) of the said Act states that the total parliamentary or assembly election
expenditure shall not exceed the amount prescribed under Rule 90 of the
Conduct of Election Rules, 1961 as framed under the Act. The Conduct of
Elections (Amendment) Rules, 2014, notified on 28th of February, 2014
specified the campaign expenditure cap range for parliamentary
constituencies at Rs.54-70 lakhs, and Rs.20-28 lakhs for state assembly
constituencies.51
Pertaining to the facts of the aforementioned case, the question before the
Court was whether the successful candidate, Amar Nath Chawla had
incurred or authorised a campaign expenditure exceeding the prescribed
electoral expenditure limit of Rs.10,000, as applicable for a parliamentary
constituency in the Union Territory of Delhi.52. The Court viewed that:
48
See Law Commission of India, 255th Report on Electoral Reforms 12, March 2015.
49
AIR 1975 SC 308.
50
See Representation of the Peoples Act, 1951, §77(1).
51
Election Commission of India, Conduct of Election (Amendment) Rules 2014, No.
3/1/2014/SDR-Vol-III, 5th March 2014, accessible at https://eci.gov.in/files/file/3010-
conduct-of-elections-amendment-rules-2014-amendment-of-rule-90-of-conduct-of-election-
rules-1961-–increase-in-maximum-limit-of-election-expenses-regarding/ (Last accessed on
16th July, 2018)
52
Kanwar Lal Gupta v. Amar Nath Chawla, (1975) 3 SCC 646.
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“When a political party sponsoring a candidate incurs

expenditure specifically in connection with his election, as
distinguished from expenditure on general party propaganda,
and the candidate knowingly takes advantage of it or
participates in the programme or activity or fails to disavow
he expenditure or consents to it or acquiesces in it, it would
be reasonable to infer, save in special circumstances, that he
impliedly authorized he political party to incur such
expenditure; and he cannot escape the rigour of the ceiling by
saying that he has not incurred the expenditure, but his
political party has done so.”53
In an effort to negate the validity of the aforementioned judgment, the
Representation of the People Act was amended by way of Act 58 of 1974.54
Explanation 1 to §77 was appended with the view to ensure that the
amendment effectively re-stated the law as it pre-existed, in unambiguous
terms.
“Explanation 1. – Notwithstanding any judgement, order or
decision of any court to the contrary any expenditure
incurred or authorized in connection with the election of a
candidate by a political party or by any other association or
body of persons or by any individual (other than the
candidate or his election agent) shall not be deemed to be
and shall not ever be deemed to have been expenditure in
connection with the election incurred or authorized by the
candidate or by his election agent for the purpose of this sub-
section.”55
This amendment eliminated any restriction for unlimited and unauthorised
party or collaborative expenditure in favour of a contesting candidate,
therefore reducing the statutory ceiling prescriptions of electoral
expenditure, to a futile endeavour.
The aforementioned amendment was subsequently challenged and held ultra
vires in the case of Dr. P. Nalla Thampy Terah v. Union of India.56 However
the presiding Constitutional Bench of the Supreme Court dismissed the
challenging grounds of the amendment’s unconstitutionality, contended as
state sanctioned discrimination between candidates and parties based on
53
Id.
54
Doabia & Doabia, Law of Elections and Election Petitions 1376, LexisNexis (5th ed., Vol.
1, 2016).
55
Supra, note 50; See also Dr. P. Nalla Thampy Terah v. Union of India, 1987 SC1577 (21)
at 2, accessible at https://www.sci.gov.in/jonew/judis/9264.pdf (last accessed on 13th March
2019)
56
See AIR 1985 SC 1133: 1985 Supp. (1) SCC 189, at ^13-15.
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money power and therefore in contravention of Article 14, as unmeritorious,

citing the Court’s jurisdictional inability to frame electoral policy for the
State, while concurrently observing the petitioner’s justifications for
challenging the amendment. The Supreme Court held that:
“Election laws are not designed to produce economic equality
amongst citizens. They can, at best, provide an equal
opportunity to all sections of society to project their
respective points of view on the occasion of elections. The
method somewhat unfortunate, by which the law has achieved
that purpose, is by freeing all others except the candidate and
his election agent from the restriction on spending, so long as
the expenditure is incurred or authorized by those others.”57
The Supreme Court also provided fierce criticisms on the amendment in the
case of C. Narayanaswamy v. C. K. Jaffer Sharief, observing that the
position of law laid out in the 1974 amendment, rendered §123(6) of the Act
“nugatory and redundant”. 58 In Gajanan Bapat v. Dattaji Meghe, the
Supreme Court noted that the practice of parties in not maintaining accounts
of electoral donations and expenses, made it difficult to determine “whose
money was actually spent through the party”;59 while viewing in the case of
Gadakh Yashwantrao Kankarrao v. Balsaheb Vikhe Patil, that the spirit of
§77 suffers “violation through the escape route”60 of Explanation 1 of §77.
Eventually in the seminal case of Common Cause, a Registered Society v.
Union of India, 61 the Supreme Court reversed the burden of proof on the
candidate claiming the benefit of the exception established by the said
Explanation to §77, observing that even when the party has claimed the
expenditure, the (rebuttable) presumption would be that the candidate has
incurred or authorised such an expenditure. The Court observed that:
“The expenditure (including that for which the candidate is
seeking protection under Explanation I of Section 77 of the
R.P Act) in connection with the election of a candidate - to
the knowledge of the candidate or his election agent – shall
be presumed to have been authorized by the candidate or his
election agent. It shall, however, be open to the candidate to
rebut the presumption in accordance with law….”62
57
Chandrachud J. in P. Nalla Thampy Terah v. Union of India, AIR 1985 SC 1133.
58
C. Narayanaswamy v. C.K. Jaffer Sharief, 1994 Supp (3) SCC 170: 1994 (3) SCALE 674.
59
Gajanan Bapat v. Dattaji Meghe, (1995) 5 SCC 437.
60
Gadakh Yashwantrao Kankarrao v. Balsaheb Vikhe Patil, (1994) 1 SCC 682.
61
(1996) 2 SCC 752.
62
Id., at 764, ^23.
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Scathing public and judicial criticism of the appended Explanation to §77(1),

finally culminated in the rescission of the said Explanation by the Election
and Other Related Laws (Amendment) Act 2003, thereby replacing it with
the currently existent statutory Explanation.63 The said Explanation provides
for the non-inclusion of (a) travel expenditure incurred by leaders of political
parties in pursuance or propagation of party programme, 64 and (b)
expenditure incurred by political parties or its supporters in propagation of
the programme, in computing the aggregate electoral expenditure incurred or
authorised by the candidate of that political party.65
Concludingly, the Election Commission in its transparency guidelines issued
under Article 324 of the Constitution, dated 29th August 2014,66 stated that
despite the absence of any limitations on the expenditure incurred by
political entities in performance of their party programme; parties are,
however, required to adhere to the cap prescribed under §77(3), of the RPA
and Rule 90 of the Conduct of Election Rules, while providing “financial
assistance” to candidates in their election campaigns. The nature of the
aforementioned transaction is be preferably conducted through crosses
account payee cheque or draft or bank transfer, in lieu of cash.67
In its currently existing position, §77 therefore, allows political parties and
candidates to incur or authorise unlimited expenditure in propagation of
party programme, as long as no specific candidate is preferred.68

§78 of the Act mandates the lodging of election expenditure accounts of
every contesting candidate in an election with the District Election Officer,
within 30 days from the date of election of the returned candidate. The
candidate is required under §77 of the Act, to ensure the lodged account is a
true copy of the account in his or his election agent’s possession. Rules 87,
88 and 89 of the Conduct of Election Rules, in correspondence with §78,
provide for : (a) the affixing of a notice on the notice board by the District
Election Officer, specifying the date of the lodging of account, the name of
63
See Representation of the People Act, 1951, §77(1) Explanation 1, inserted vide the
Election and Other Related Laws (Amendment) Act, 2003.
64
Id., sub-clause (a).
65
Id., sub-clause (b).
66
Election Commission of India, Guidelines in Transparency and Accountability in Party
Funds and Election Expenditure, No. 76/PPEMS/Transparency/2013, 29th August 2014,
accessible at https://eci.gov.in/files/file/5036-guidelines-on-transparency-and-
accountability-in-party-funds-and-election-expenditure-matter-regardingdated-29082014/
(last accessed on 20th May, 2019)
67
Id.
68
See M. V. Rajeev Gowda and E. Sridharan, Reforming India’s Party Financing and
Election Expenditure Laws, 11(2) ELECTION LAW JOURNAL, 226, 236 (2012), at 230.
282 Vol.8 No. 2 Jul 2019 ISSN (O): 2278-3156

the candidate and the time and place for the inspection of such an account;69
(b) the public inspection of the accounts filed by the candidates;70 and (c) a
reporting mechanism of the District Election Officer to the ECI informing
the latter of the lodged particulars of an eligible or defaulting candidate.71

The incurring or authorising of expenditure in contravention of §77 of RPA,
1951 is a corrupt practice, (as stated) under §123(6) of the said Act,72 and
can result in disqualification for a maximum period of six years, both as a
candidate and a voter under §§ 8A and 11A.
Therefore, the transgression of §77 with respect to the failure in maintaining
separate and current accounts of election expenses incurred or authorised73
and furnishing of relevant account particulars as prescribed,74 does not fall
within the ambit of §123(6) of the Representation of the People Act, 1951.75
In addition, failure to maintain true and current accounts of incurred
electoral campaigning expenditure does not constitute “corrupt practice”
under §123 and therefore no liability arises under the ramifications of the
Act.76
Pursuant to §77(1) and §78 of RPA, 1951 read along with Rule 86 of the
Conduct of Election Rules, 1961, all contesting candidates are required to
maintain bona fide accounts of their respective election expenditures and file
a legitimate copy of the same with the assigned district election officer
within thirty days from the date of election of the returning candidate.
Contravention of the aforementioned provisions can result in electoral
disqualification for upto a period of 3 years, under §10A of the said Act.
However, it is important to note the Supreme Court’s observation, which has
viewed that a mere failure to maintain correct accounts is not in and of itself
a corrupt practice under §123(6),77 contingent on the compliance of electoral
expenditure not exceeding the prescribed limit.
69
See Conduct of Election Rules, 1961, Rule 87.
70
See Conduct of Election Rules, 1961, Rule 88.
71
See Conduct of Election Rules, 1961, Rule(s) 89(1), (2).
72
Baburao Bagali Karemore v. Govind, AIR 1974 C 405 : (1974) 2 SCC 719 : (1974) 2
SCR 429.
73
Representation of the People Act, 1951, §77(1).
74
Representation of the People Act, 1951, §77(2).
75
Dal Chand Jain v. Narayan Shankar Trivedi, (1969) (3) SCC 685. See also Srikrishna v.
Sat Narain, C.A No. 1321 of 1967 dated 23.3.1968. See also Savitri Devi v. Prabhawati
Misra, 15 MLR 358; N. L. Verma v. Muni Lal, 15 E.L.R. 495; Narasimhan v. Natseo, AIR
1959 Mad. 514.
76
L.R. Shivaramgowda v. T.M. Chandrashekar, (1999) 1 SCC 666.
77
See L. R. Shivaramagowda, Etc. v. T. M. Chandrashekhar Etc., AIR 1999 SC 252: (1999)
1 SCC 666.
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While examining the relevance of the aforementioned provisions, the

Supreme Court in Ashok Shankarrao Chavan v. Dr. Madhavrao Kinhalkar78
observed as stated:
“….Even the explanation to Sub-section (1) to Section 123
makes it clear that incurring of election expenses and the
maintenance of account of those expenses are not an empty
formality but the very purpose of stipulating such restrictions
and directions under Section 77(1) and (3) read along with
Section 78 explains the mandate to maintain absolute purity
in elections by the contesting candidates. This is required in
order to ensure that the process of the election is not sullied
by resorting to unethical means while incurring election
expenses.”79
It is also important to note the exclusion of politically analogous
expenditure, incurred by candidates, political parties and sympathisers, from
the domain of §123(6) of the Act. Any presumption to the contrary, was
clarified by the Supreme Court in the case of Dhartipakar Magan Lal
Agarwal v. Rajiv Gandhi,80 where the Court was of the observation that, any
voluntary expense incurred by a political party, well-wisher, sympathiser or
associate, would not fall within the mischief of §123(6) of the said Act;
instead, only the expenditure which is incurred by the candidate himself or
authorised by him is material for the purpose of §77.81
2.2. The Companies Act, 2013

Within the purview of political financing, §182 82 of the Companies Act,
2013 is relevant in pertinence to the regulation of non-governmental or
corporate donations to registered political entities. The said Section shares
evolutionary correspondence with the repealed §293A of the (subsequently
amended) Companies Act of 1956.
2.2.1. §182 of the Companies Act, 2013

§182(1) of the Act explicitly permits corporate funding of elections, which
functions as a significant source of donations received by political entities. It
lays down provisions for expressly debarring a government company and a
company in existence for less than three financial years, from making
political contributions. Pertinent to sub-section (1) of §182, the contribution
78
AIR 2014 SC 3102 : JT 2014 (7) SC 77 : 2014 (6) SCALE 200 : (2014) 7 SCC 99.
79
Id.
80
AIR 1987 SC 1157 : 1987 Supp. (1) SCC 93 : (1987) 3 SCR 369.
81
Id; See also Doabia & Doabia, Law of Elections and Election Petitions 1443, LexisNexis
(5th ed., Vol. 1, 2016).
82
Enforced vide SO 2754(E) dated 12-09-203, w.e.f 12-09-2013 and corresponds to §293-A
of the Companies Act, 2013.
284 Vol.8 No. 2 Jul 2019 ISSN (O): 2278-3156

ceiling of 7.5% of the donor company’s average net profits is a significant

elevation of the anteceding profit percentage ceiling of 5% as stipulated
under §293A of the Companies Act, 1956. Furthermore, in accordance with
Rule 4(7) of the Companies (Corporate Social Responsibility Policy) Rules,
2014 notified on 27th of February, 2014, direct or indirect contribution to any
political organisation under § 182 of the said Act, shall not be considered as
a corporate social responsibility activity.83
§182(2) of the 2013 Act corresponds to §293A(3) of the 1956 Act. It
clarifies its statutory provisioning in regard to certain instances where the
transaction will be deemed as a contribution for a political purpose and
contribution to a political party. Any contribution for a political purpose may
be construed as contribution to a political party made indirectly.84
§182(3), corresponding to §293(4) of the 1956 Act, regulates the disclosure
of donations made by companies to political entities; necessitating the full
disclosure of donations made by companies and the identities of the recipient
parties, as a component of their annual fiscal profit and loss accounts.
Failing to comply with the provisions of the said section will result in the
imposition of penalties as specified under §182(4). In exercise of the plenary
powers conferred to the Election Commission of India under Article 324 of
the Constitution, the Commission issued a scheme pertaining to “Electoral
Trust Companies” on 10th of December 2013, with the objective of
regulating disclosure of contributions made by way of electoral trusts,
operative from 2014. Notwithstanding the fact that it is not statutorily
incumbent upon companies voluntarily contributing to Electoral Trust
Companies (for additional contributions made to political parties) to make
any disclosures in pursuance of §182(3) of the said Act, the companies
engaged in such contributions, however, are required to disclose the amount
released, to an Electoral Trust Company. The Electoral Trust Company,
therefore, is required to disclose all amounts received from companies or
other miscellaneous sources in its account books and the amount contributed
by the respective donors to a political entity, pursuant to §182(3). 85
Furthermore, the Electoral Trust Company is required to submit Annual
Reports of contributions to the Election Commission, containing particulars
of the name and the amount of donation given to each political party.86 The
83
Ministry of Corporate Affairs, Companies (Corporate Social Responsibility Policy) Rules,
2014, 27th February, 2014, accessible at http://www.mca.gov.in/Ministry/pdf/CompaniesAct
Notification2_2014.pdf (last accessed on 20th of May, 2019).
84
A. Ramaiya, Guide to the Companies Act 3263, LexisNexis (18th ed., Vol. 2, 2015).
85
Ministry of Corporate Affairs, Clarification with regard to Applicability of Section 128(3)
of the Companies Act, 2013, Circular No. 17/27/2013-CL-V, 10th of December, 2013,
accessible at http://www.mca.gov.in/Ministry/pdf/General_Circular_19_2013.pdf (last
accessed on 20th of May, 2019).
86
See Law Commission of India, 255th Report on Electoral Reforms 18, 19, March 2015,
^2.23.4; See generally Association for Democratic Reforms, Analysis of Contribution
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Election Commission has also released an index of approved Electoral

Trusts.
§182(4) of the Act, 2013 provides for the imposition of penalties for
corporate contributions made in contravention of the provisions of §182,
operative by way of levying fines amounting to five times the amount
contributed upon the non-complying company, or imprisonment for upto 6
months in addition to the imposition of an identical fine for any defaulting
company officer. As per §293A of the 1956 Act, fine payable by a company
for violation was three times the amount contributed and the tenure of
imprisonment for the defaulting company officer was upto three years.
Therefore, although the monetary fine for any statutory violations of §182 of
the 2013 Act has been enhanced, the tenure of imprisonment has been
reduced.
Although, prior to the promulgation of the Finance Act 2017, §182 provided
for a corporate contribution limit of 7.5% of the company’s three-year
average net profits and incentivised disclosure vide tax exemptions; neither
did the prescribed contribution limit place significant restriction on large
corporations, nor did it outweigh the disincentive created by the loss of
anonymity; especially for instances wherein large donors simultaneously
support multiple political parties and consequently do not seek information
disclosure, fearing reprisals.87
§154 of the Finance Act, 2017 has rescinded the above discussed corporate
limit of 7.5% of three-year average net profit, for political donations.
Therefore, companies are no longer required to disclose the names of the
parties to which political donations are made, which in turn, has resulted in
ensuring complete opacity to the detriment of various corporate
shareholders.88 The said amendment has been discussed in greater detail in
the Electoral Bond analysis section, below, and is reflected upon by
recommendations put forward in the second part of the paper.
Report of Electoral Trusts for FY 2017-18, 28th November 2018, accessible at

https://adrindia.org/content/analysis-contribution-report-electoral-trusts-fy-2017-18; See
also Bharti Jain, , EC issues guidelines for donations by electoral trusts, Times of India, 6th
June 2014, accessible at https://timesofindia.indiatimes.com/india/EC-issues-guidelines-
for-donations-by-electoral-trusts/articleshow/36163293.cms (last accessed on 20th May,
2019); Election Commission of India, Guidelines for Submission of Contribution Reports of
Electoral Trust, No. 56/ElectoralTrust/2014/PPEMS, 6th of June, 2014, accessible at
http://eci.nic.in/eci_main1/PolPar/ElectoralTrust_06062014.pdf (last accessed on 19th of
July, 2018).
87
Gowda, supra note 68, at 230, 236.
88
Citizen’s Whistleblower Forum, Ill-conceived legislations and poor implementation
which is encouraging Corruption, 30th July, 2018, accessible at
http://www.humanrightsinitiative.org/download/1533036322Justice%20Shah%20letter%20t
o%20PM%20acknowledged%20copy.pdf (last accessed on 4th September, 2018).
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2.3. The Income Tax Act, 1961

Within the ambit of political financing, the Income Tax (hereinafter referred
to as “IT”) Act of 1961 primarily provides for the tax exemptions on the
sources of political funding, contingent on the parties’ compliance with
statutorily prescribed directions. This section contains the specifications and
statutory analyses (where necessary) of all pertinent provisions of the IT Act.
2.3.1. §13A of the Income Tax Act, 1961

§13A 89 of the IT Act contains provisions for exemption of taxes on the
income of registered political entities, contingent on the said political
entities’ compliance to maintain true and current records of their respective
sources of funding, i.e. names and addresses of donors contributing in excess
of Rs.20,000; 90 and to conduct auditing of their accounts by certified
accountants.91
The Election Commission in the transparency guidelines issued under
Article 324 of the Constitution dated 29th August 2014, required all parties to
maintain books of accounts (under §13A of the IT Act) in accordance with
the guidance note issued by the Institute of Chartered Accountants of India
to authorise the calculation of their party income. These books need to be
audited and certified by qualified, practicing Chartered Accountants, and are
to be submitted annually (as audited annual accounts) to the Election
Commission by 31st of October, in addition to a copy of the Auditor’s
Report.92
Provided that a political party complies with the prescribed guidelines
contained under §13A,93 the said party is entitled to tax exemption from any
income chargeable under “house property” 94 and “other sources”; 95 in
addition to any income acquired through voluntary contributions.96
89
Inserted by the Taxation Laws (Amendment) Act, 1978 (29 of 1978) w.e.f 1-4-1979.
90
In compliance of pre-amended provisioning of §29C, RPA, raised from Rs.10,000 w.e.f
11-9-2003; Amendments brought forth by the Finance Act 2017 reduced the donation cap to
Rs.2,000.
91
See The Income Tax Act, 1961, §288(2).
92
See Election Commission of India, Guidelines in Transparency and Accountability in
Party Funds and Election Expenditure, No. 76/PPEMS/Transparency/2013, 29th August
2014, ^3(ii) accessible at https://eci.gov.in/files/file/5036-guidelines-on-transparency-and-
(last accessed on 27th July, 2018).
93
See Income Tax Act, 1961, §13A(a)-(c).
94
See Income Tax Act, 1961, §§ 22-27.
95
See Income Tax Act, 1961, §§ 56-59.
96
Chaturvedi & Pithisaria’s, Income Tax Law 1132, LexisNexis (5th ed. reprint, Vol. 1,
2009); See also Income Tax Department, Circular No. 412, 2nd March 1985, accessible at
https://www.incometaxindia.gov.in/Communications/Circular/910110000000000789.htm
(last accessed on 5th September 2018).
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Such income is not included, even for rate purposes, in the total income of
the eligible political party on fulfillment of requisite conditions.97
§11 of the Finance Act, 2017 amended the provisions of clause (b) of §13A
of the I.T. Act. The said amendment exempts any donations received by a
political party through electoral bonds, from being treated as a part of the
total income of the party.98 This paper discusses electoral bonds in its second
part.
2.3.2. §§ 80GGB & 80GGC of the Income Tax Act, 1961

§§ 80GGB99 and 80GGC100 lay down provisions for deductions in respect of
contributions given by companies101 and individuals102 to political parties. It
provides that all corporate103 and individual104 donations to political parties
and 105[electoral trusts] are entitled to income tax deductions.
To offer a concise understanding of the effectiveness of the aforementioned
statutory regulations in ensuring transparency in an otherwise opaque
political financing framework, the Association for Democratic Reforms
(ADR) in their analysis on the miscellaneous sources of political financing,
offered conclusive statistical evidence indicating that an overwhelming 75%
of party financing sources remain unknown, while only a meagre estimate of
9% of party funding came from contributions donated in excess of
Rs.20,000, thereby warranting disclosure under §13A of the IT Act.106
In an effort to remedy the situation, the Election Commission in its
transparency guidelines (effective from 1st October 2014) stated that no
income tax deductions are permissible for cash donations made by
individuals and/or companies to political entities under §80GGB and
§80GGC. Furthermore, parties are required to furnish details maintaining
names and accounts of donors specifically contributing through public rallies
(the exceptions being insignificant amounts and bucket collections).107
97
Id.
98
Supra, note 38.
99
Inserted by the Election and Other Related Laws (Amendment) Act, 2003, w.e.f 11-9-
2003.
100
Inserted by the Finance (No. 2) Act, 2009, w.e.f 1-4-2010
101
See Income Tax Act, 1961, §80GGB.
102
See Income Tax Act, 1961, §80GGC.
103
Supra, note 101.
104
Supra, note 102.
105
Inserted by the Finance (No. 2) Act, 2009, w.e.f 1-4-2010
106
Association for Democratic Reforms, Electoral and Political Reforms, accessible at
http://adrindia.org/sites/default/files/Electoral,%20Political%20Reforms%20and%20ADR.p
df (Last accessed on 20th May, 2019)
107
Election Commission of India, Guidelines in Transparency and Accountability in Party
Funds and Election Expenditure, No. 76/PPEMS/Transparency/2013, 29th August 2014,
accessible at https://eci.gov.in/files/file/5036-guidelines-on-transparency-and-
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However, with respect to political parties, such a remedial measure offers

minimal deterrence to potential violations as the penalty stipulations put
forth by the Election Commission’s guidelines only provide for the non-
deductibility of cash contributions made by an individual or a company
under §80GGB and §80GGC.
2.3.3. §276CC of the Income Tax Act, 1961

§276CC of the IT Act, read in consonance with §13A of the Act, requires
political parties to file returns of income for every assessment year from
1979-80 onwards. Failure to furnish a return of income constitutes a criminal
offence punishable under §276CC of the IT Act. It leaves no leeway.108
The Supreme Court in the case of Common Cause, A Registered Society v.
Union of India 109 observed that “political parties are under a statutory
obligation to file a return of income in respect of each assessment year in
accordance with the provisions of the Income-tax Act”.110 In addition, the
said judgement subsequently observed that the Secretary of the Department
of Revenue, Ministry of Finance, shall have the authority to conduct an
investigation or enquiry against each defaulting political party and to initiate
necessary penal action in accordance with §276CC of the IT Act.111
2.3.4. Other Relevant Provisions:
2.3.4.1. §37(2B) provides for the disallowance of expenditure incurred by
a businessman on advertising in souvenirs, etc., published by
political parties;112 and
2.3.4.2. §139 (4B) states that every political party is obliged to annually
file a return of total income voluntarily. The total income for this
purpose is to be computed without giving effect to the provisions
of §13A. If such total income exceeds the maximum tax
exempted amount, the liability of the party to file the return of
income voluntarily arises.113
(last accessed on 24th August, 2018); See also Election Commission of India, Clarification
of Transparency Guidelines for the Political Parties issued by the ECI, No.
76/PPEMS/Transparency/2013, 19th November, 2014, accessible at
https://eci.gov.in/files/file/5038-clarification-of-transparency-guidelines-for-the-political-
parties-issued-by-election-commission-of-india-on-19112014-–matter-reg/ (last accessed on
20th May, 2019).
108
Common Cause, A Registered Society v. Union of India, (1996) 222 ITR 260, 267, 270
(SC)].
109
Id.
110
Id., ^278, ^279.
111
Id.
112
Chaturvedi & Pithisaria’s, Income Tax Law 1124, LexisNexis (5th ed. reprint, Vol. 1,
2009).
113
Supra note 96.
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2.4. The Foreign Contribution (Regulation) Act, 2010

Apart from the foregoing statutory provisions, the Foreign Contribution
(Regulation) Act (hereinafter referred to as “FCRA”) 2010, as brought into
effect on 26th September 2010, also performs a critical role in regulating
campaign financing. Fundamentally, this act offers regulatory oversight over
any foreign source(s) of domestic political financing, by prohibiting the
receipt of funds from said foreign source(s) by domestic political entities and
election candidates. However, subsequent amendments to the Act,
introduced through the Finance Act(s) 2016 and 2018, have considerably
incapacitated its regulatory efficacy.
2.4.1. §§ 2 & 3 of the Foreign Contribution (Regulation) Act, 2010

§3(1)(a) of the FCRA, 2010 prohibits the receipt of funds from “foreign
sources” [as defined under §2(j)(6)] by a candidate for election while
§3(1)(e) prohibits the receipt of funds from foreign sources by a political
party, provided that such party is registered under the ECI. Additionally,
§3(2)(c)(i) prohibits the receipt of political funding from foreign sources
through non-residential Indian intermediaries.
Although the act of 1976 and the current FCRA, 2010 provided substantial
limitations on the influx of foreign funding, subsequent amendments
introduced through the Finance Acts of 2016 and 2018 have incapacitated
such regulations. Unfortunately, the reason behind the said amendments can
be traced back to the decision of the Delhi High Court in the case of
Association for Democratic Reforms & anr. V. Union of India.114 In the said
case, the Delhi High Court found the BJP and the INC culpable of
unlawfully accepting funds from foreign sources, namely the London based
Multi-National Corporation (hereinafter referred to as “MNC”) Vedanta up
until 2009, in violation of FCRA 1976. Accordingly, the Court directed the
Centre to initiate an investigation in this regard and prepare a report of the
same for submission within six weeks. Subsequent to the said judgment, a
new proviso was inserted in §2(1)(j)(6) of FCRA, 2010 vide §236 of the
Finance Act, 2016. Although the previous definition of “foreign source”
under §2(1)(j)(6) prevented the siphoning of funds from foreign sources, the
subsequent amendment allowed all Foreign Exchange Management Act
(hereinafter referred to as “FEMA”) 1999 compliant companies, that are
partially or fully controlled by foreign juridical persons, to fund domestic
political parties and candidates.115
§233 of the Finance Act, 2016, therefore allows foreign companies with
domestic subsidiaries to fund political entities in India, thereby effectively
114
2014 SCC Online Del 1321: (2014) 209 DLT 609: (2014) 121 CLA 407.
115
See Finance Act, 2016, §236.
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exposing Indian democracy and electoral politics to international lobbyists

and foreign agendas.116
The above-mentioned proviso, as inserted by the Finance Act, 2016, was
arguably, an attempt to evade the consequences of the aforesaid judgment
delivered by the Delhi High Court. Such purpose however, remained
unfulfilled, as provisions of FCRA 2010 did not apply to the validity of the
said judgment.117 On the contrary, any violation of FCRA 2010 prior to the
2016 amendment, on and from 26th September 2010, would be ignored. An
additional amendment was enacted vide the Finance Act 2018, which
provided retrospective effect to the proviso added by the Finance Act, 2016;
from 1976.118
Upon enactment of the Finance Bill, 2018, any violation of §3 of FCRA,
2010 by any political party will bear no consequence, if the receipt of funds
is sourced from a FEMA compliant foreign company. Numerous illegal
donations from foreign sources, ranging between five lakh to five crore
rupees, acquired by the BJP and INC, will no longer be considered as
violative of FCRA, 2010.119
The following tabulation is excerpted from a table compiled by ADR,
providing numerous instances wherein funds have been acquired by the
aforementioned political parties from FEMA compliant “foreign sources”.120
Company Amount Year of Political Parent

(in Rs.) Donation Party Company
Hyatt Regency 5,00,000 FY 04-05 INC American
Origin
Company
Sterlite Industries Ltd. 1,00,00,000 FY 04-05 INC Vedanta
Sterlite Industries 5,00,00,000 FY 09-10 INC Vedanta
(India) Ltd.
116
o%20PM%20acknowledged%20copy.pdf (last accessed on 4th September, 2018).
117
Supra, note 114 at ^2.
118
Finance Act, 2018, §220.
119
Anuj Srivas, Finance Bill Amends FCRA Again to Condone Illegal Donations to BJP,
Congress from Foreign Companies, The Wire, 1st February, 2018, accessible at
https://thewire.in/business/finance-bill-seeks-amend-fcra-condone-illegal-donations-bjp-
congress-received-foreign-companies (last accessed on 20th , 2018).
120
Association for Democratic Reforms, Finance Bill Amends FCRA Again to Condone
Illegal Donations to BJP, Congress from Foreign Companies, 2nd February 2018, accessible
at https://adrindia.org/content/finance-bill-amends-fcra-again-condone-illegal-donations-
bjp-congress-foreign-companies (last accessed on 4th September, 2018)
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Vedanta The Madras 3,00,00,000 FY 09-10 BJP Vedanta

Aluminium Ltd.
Sesa Goa Ltd. 50,00,000 FY 09-10 BJP Vedanta
In the observations of Justice A. P. Shah, “These amendments pose a serious

danger to the autonomy of the country and are bound to adversely affect
national security, electoral transparency, encourage corrupt practices in
politics and have made the unholy nexus between politics and corporate
houses more opaque and treacherous”.121 Concludingly, it is axiomatic to
state that such amendments are contrarian to the purpose behind the
promulgation of FCRA 1976, as envisaged by former Parliamentarian Shri
Khurshed Alam; in viewing that “….The new era leads us from darkness to
light, from uncertainty to stability and from lack of coincidence to self-
reliance….Therefore, all loopholes, wastages and interference, whether
political or through the power of money, should be stopped and done away
with as early and as effectively as possible”.122
2.5. The Electoral Bond Scheme

The Finance Ministry notified the Electoral Bond Scheme 2018 vide Gazette
Notification No. 20, dated 2nd January 2018. Under the scheme, an
“electoral bond” is issued in the nature of a promissory note, as a bearer
banking instrument without carrying the name of the buyer or payee.123 It
can only be issued and encashed in the authorised branches of the State Bank
of India (hereinafter referred to as “SBI”).124
As specified in the scheme , an electoral bond can be purchased either
singularly or jointly125 by a person, who is an Indian citizen or incorporated
or established in India.126 Herein, the term “person” means and includes (a)
an individual; (b) a Hindu undivided family; (c) a company; (d) a firm; (e)
an association of persons whether incorporated or not, (f) every juridical
person not falling within any of the preceeding categories; and (g) any
agency, office or branch owned or controlled by such person. 127 Only
political parties that are registered under the RPA, 1951 and have secured a
minimum 1% of the votes polled in the last general or assembly election, as
121
Supra, note 116.
122
Supra, note 114 at ^19.
123
Ministry of Finance, Electoral Bond Scheme, §2(a), 2nd January 2018, accessible at
https://www.incometaxindia.gov.in/communications/notification/notificationso29_2018.pdf
(last accessed on 4th September, 2018).
124
See Electoral Bond Scheme, §2(b).
125
See Electoral Bond Scheme, §3(2).
126
See Electoral Bond Scheme, §3(1),
127
See Electoral Bond Scheme, §2(d).
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the case may be, are permitted to receive128 and encash such bonds through
branches of the “authorised bank”.129
Under this scheme, electoral bonds shall be available for purchase during the
months of January, April, July and October, as and when notified by the
Central Government. 130 An additional period of thirty days for purchase,
may be specified by authorities in the year of Lok Sabha elections.131 The
bonds are available in the denominations of Rs.1000; 10,000; 1,00,000;
10,00,000; 1,00,00,000,132 with a validity period of 15 days from the date of
issuance. No payment is subject to receipt by any payee after the expiry of
the said time-period. 133 However, if such bonds are encashed within the
validity period, the same shall be credited on the day of deposition itself.134
The scheme also provides for the exemption of electoral bonds from income
tax deductions.135
As contended in the earlier parts of this paper, it can be conclusively
established that there is a severe dearth of effective legislation towards
establishing a transparent mechanism of political financing. In recognition of
the need for legislating the said, the Union Finance Minister, Shri Arun
Jaitley, upon introduction of the Electoral Bonds Scheme, pointed out the
necessity of introducing the said scheme by stating that it “was announced to
enable clean and substantial transparency being brought into the system of
political funding.....the entire transactions would be through banking
instruments.....how much each donor has distributed to a political party
would be known only to the donor. This is necessary because once this
disclosure is made…donors would not find the scheme attractive and would
go back to the less desirable option of donation by cash”.136 The efficacy of
this Scheme, as evident from its entailing provisions, however serve a
contrarian purpose.
The introduction of electoral bonds and its allied amendments of various
electoral regulation statutes have been subjected to severe criticisms. In
order to determine the true effects of such amendments, this section
discusses them under the following heads:
128
129
130
131
132
See Electoral Bond Scheme, §5.
133
134
135
See Electoral Bond Scheme, §13.
136
Press Information Bureau, Why Electoral Bonds are Necessary, 7th January, 2018,
accessible at http://pib.nic.in/newsite/PrintRelease.aspx?relid=175452 (last accessed on 4th
September, 2018).
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2.5.1. §29C of the RPA, 1951: §29C(1)(b) was amended by §136 of the
Finance Act 2017. Subsequent to the addition of the proviso to the
said section under the said sub-section, any financial contribution
received by political parties through electoral bonds shall be
excluded from incorporation in the annual financial report as
mandated under the said sub-section.137 This negates the applicability
of §29C(4) with regard to political donations received through
electoral bonds.
2.5.2. §13A of the IT Act, 1961: Although §13A(a) was left unamended,
the provisioning of § 11(I)(i)(A) of the Finance Act 2017 resulted in
the non-applicability of §13A(b) of the IT Act, in respect of any
contribution received by way of electoral bonds. Even though §11(d)
of the Finance Act reduced the cap of undisclosed donations, it
exempted any and all donations above Rs.2,000, received through the
instrument of electoral bonds, from income tax deductions.
Commenting on the anonymity of political donations, the Secretary
General of the Lok Sabha, viewed that “taxing is a sovereign
function”; and “Any legislative exclusion of public scrutiny of
financial transactions having a bearing on public revenue is against
constitutional policy”.138
2.5.3. §182 of the Companies Act, 2013: Due to the amendments
introduced by §154 of the Finance Act, 2017, the cap on political
contributions by a company has been removed. As an added result of
the amendment, companies are no longer required to disclose the
name of the parties to which political donations are being made.
Justice A.P. Shah (Retd.) in his letter to the Prime Minister opined
that “Removal of the company’s limit of 7.5% of the average net
profit of the last three financial years not only heightens the odds of
conflict of interest but will also drastically increase black money and
corruption….”139
Although the Scheme ensures digital trace of donors, it fails to concurrently
empower any electoral regulatory agency, such as the Election
137
See Finance Act, 2017, §136.
138
Secretary General of Lok Sabha, Electoral Bonds: Secretive and Opaque, The Hindu
BusinessLine, 22nd March 2018, accessible at https://www.thehindubusinessline.com/
opinion/electoral-bonds-secretive-and-opaque/article23323002.ece (last accessed on 20th
May, 2019).
139
Supra, note 116; See also Apoorva Madhani, New Amendments Severely Weaken the
Legislations Intended to Bring in More Transparency, LiveLaw, July 31st 2018, accessible
at https://www.livelaw.in/rti-lokpal-new-amendments-severely-weaken-the-legislations-
intended-to-bring-in-more-transparency-justice-ap-shah-writes-to-pm-modi/
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Commission.140 It serves a contrarian purpose to the legislative mandates of

transparency and accountability, which have empowered election and anti-
corruption watchdogs to pursue investigations after political parties and
candidates in parallel western democracies.141
To conclude, in the words of Justice Shah, “…With electoral bonds, the
public will have no clue from where the money came and how much went to
each political party”.142 Therefore, even though the introduction of electoral
bonds and its allied amendments were billed as an affirmation of electoral
transparency, it might potentially serve an antithetical purpose.
3. Reforming the Electoral Financing Framework

The essence of electoral financing reformation in India can be categorised
into four distinct classifications: (a) electoral contribution limits on
individuals and organisations; (b) electoral expenditure limits, conditional
on the nature and magnitude of expenses incurred or authorised; (c)
complete or partial state or public financing of campaigns, and (d) reporting
and disclosure requirements of electoral finances by parties and
candidates. 143 This segment of the paper proposes reformative
recommendations, in comparative context of equivalent legislations in
common law jurisdictions and in consideration of domestic institutional
observations.
3.1. Campaign Contribution Caps

As per the existing financing framework, individuals can contribute to
political entities and candidates without any limits. While the RPA entitles
political parties to receive any contribution voluntarily offered to it by any
person, 144 it contains no provisions for any monetary ceiling on an
individual’s electoral contributions. Imposition of an electoral contribution
ceiling is strictly in regard to private entities or companies, which fall under
the domain of the Companies Act. 145 In addition, the Income Tax Act
provides for the full tax deductibility of electoral contributions made by
companies and individuals, 146 whereas the FCRA regulates foreign
140
Observer Research Foundation, With Electoral Bonds on Table, Take the Full Steps, 4th
January 2018, accessible at https://www.orfonline.org/research/electoral-bonds-table-take-
full-steps/ (last accessed on 20th May, 2019).
141
Id.
142
Supra, note 139.
143
M. V. Rajeev Gowda and E. Sridharan, Reforming India’s Party Financing and Election
Expenditure Laws, 11(2) ELECTION LAW JOURNAL, 226, 236 (2012).
144
See Representation of the People Act, 1951, §29B.
145
See Companies Act, 2013, §182(1).
146
See The Income Tax Act, 1961, §§ 80GGB, 80GGC.
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contributions made by individuals and companies to any domestic political

entity or candidate.147
3.1.1. Campaign Contribution Regulations in the U.S.

The United States has instituted several campaign financing laws at the
federal, state and local levels. The Federal Election Campaign Act
(hereinafter referred to as “FECA”), 1971 governs campaign financing
regulations of federal candidates, national parties and Political Action
Committees (hereinafter referred to as “PACs”). The post-Watergate Federal
Election Campaign (Amendment) Act, 1974 established the Federal Election
Commission (hereinafter referred to as “FEC”) as an independent federal
regulatory agency tasked with enforcing federal campaign financing laws.148
Although the U.S. Bipartisan Campaign Reform Act of 2002 proscribes
direct corporate contributions to candidates and electoral entities, the U.S.
Supreme Court in the case of Citizen’s United v. FEC,149 reiterated the First
Amendment reasoning as offered in Buckley v. Valeo, 150 citing the free
speech clause behind its decision to strike down limits on independent
expenditures incurred or authorised by corporations, labour unions and
associations.
However, in Buckley,151 the distinction between campaign contribution and
expenditure limits was noted, as it would invoke variable degrees of First
Amendment protection. In the said case, the U.S. Supreme Court explained
that with the imposition of limits on campaign contributions, the resultant
financial resource variations would merely indicate differences in the
support and electoral intensity of candidates, and noting that there is
“nothing invidious, improper or unhealthy” in that.152 It also observed that
“actuality and appearance of corruption resulting from large financial
contributions was a sufficient compelling interest to warrant infringements
on First Amendment liberties”.153
The U.S. Supreme Court revisited the dilemma on the expanding nexus of
corruption and unregulated electoral contributions in the case of Nixon v.
Shrink Missouri Government PAC, 154 where in defence of a Missouri
regulation limiting electoral contributions ranging from $275 to $1075, the
respondent asserted that contribution limits assist governmental interests in
147
See Foreign Contribution (Regulation) Act, 2010, §3.
148
52 U.S. Code §30106.
149
53 U.S. 310 (2010).
150
424 U.S. 1 (1976).
151
Id.
152
Richard Briffault, The Return of Spending Limits: Campaign Finance after Landell v.
Sorrell, 32 FORDHAM URB. L.J. 399 (2005).
153
Supra, note 150.
154
528 U.S. 2000 377.
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avoiding “real and perceived corruption of the electoral process”. The

Court, upholding the contested contribution limits, held that the risk of
corruption is amplified if monetary support flows into political party coffers,
while dismissing the contributor’s free speech argument as “contributions
merely index for candidate support and not the contributor’s independent
political view”.155
Pre-existent aggregate contribution limits were overturned by the Supreme
Court in its 2014 decision in McCutcheon v. FEC, 156 blurring the afore-
mentioned distinction between electoral expenditure and contribution, by
opining that aggregate limits restrict the amount of money a donor may
contribute to federal candidates and political parties, while simultaneously
restricting democratic participation; and viewing that PACs (Political Action
Committees) do not further the government’s interest in preventing quid pro
quo elections. The Supreme Court subsequently proceeded to strike down
biennial upper contribution limits to federal candidates and national parties,
on the ground of violating the First Amendment, noting that “any regulation
must instead target what we have called ‘quid pro quo’ corruption or its
appearance”.157
Therefore, although presently there are no overall aggregate contribution
limits by an individual to candidates and political parties; prohibitions on
direct corporate, foreign or unionised contributions; and limits on individual
contributions to a single candidate or PACs, continue to be in-effect.
3.1.2. Campaign Contribution Regulations in the U.K.

In the United Kingdom, the Political Parties, Elections and Referendum Act,
2000 (hereinafter referred to as “PPERA”) established an Electoral
Commission and introduced restrictions on donations which can be imposed
on registered political parties.158
§52(2) of the PPERA prohibits all anonymous donations made to parties
under £ 500, while schedule 2A of the Representation of the People Act,
1983 disregards all donations below £ 50.
§54 of the PPERA allows the receipt of donations in excess of £ 200 by
political parties from permissible donors. §54(1) of PPERA provides for
non-acceptance of donations from impermissible donors, with §54(2)
identifying permissible donors as (i) individuals registered in an election
register, and (ii) companies registered under the Companies Act, 2006,
155
Id.
156
134 S. Ct. 1434 (2014).
157
Id.
158
R (on the application of the Electoral Commission) v. City of Westminster Magistrate’s
Court, [2011] 1 All ER 1.
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incorporated within the United Kingdom or another member state of the

European Union, and carrying on business with the United Kingdom.159
Although there are no limitations on individuals or corporate contributions to
parties or candidates, 160 foreign donations are disallowed. There is no
specific provisional prohibition on contributions by corporations with partial
governmental ownership or government contracts. 161 However, British
companies require prior shareholder approval for authorising political
contributions or incurring electoral expenditure.162
§56 of the said Act requires political parties, in receipt of a donation, to take
all reasonable steps in verifying or ascertaining the identity and
permissibility of the donor. § 58 establishes forfeiture of donations from
impermissible or unidentifiable donations, its primary objective being the
direct prevention of foreign funding.163
3.1.3. Domestic Initiatives: Proposed Reforms and Institutional

Observations
1. Contrary to popular belief, despite the relative absence of any
domestic initiatives for the determination of contribution limits, the
Central Vigilance Commission in 2010, had recommended the
establishment of the same in its National Anti-Corruption Strategy.164
The draft recommended the abolishment of campaign expenditure
limits in favour of “an overall cap encompassing all such sources of
funds”.165
2. The Law Commission in its 255th Report proposed the insertion of a
separate clause under §182(1) of the Companies Act, 2013; requiring
the passing of a resolution at the Board of Directors meeting, for the
authorisation of corporate contribution. The object of the amendment
under the said section would be to facilitate a wider shareholding
159
Id.
160
See Political Parties, Elections and Referendum Act, 2000, § 54(2)(b); Read along with
Representation of the People Act, 1983, Schedule 2A.
161
IDEA, Political Finance Data for the United Kingdom, accessible at
https://www.idea.int/data-tools/country-view/137/55 (last accessed on 20th May, 2019).
162
See Companies Act, 2006, Part XIV; See also ICSA, Political Donations, accessible at
https://www.icsa.org.uk/knowledge/resources/political-donations (last accessed on 20th
May, 2019).
163
Supra, note 158.
164
Central Vigilance Commission, Draft National Anti-Corruption Strategy, accessible at
https://www.dtf.in/wp-content/files/Draft_National_Anti-Corruption_Strategy.pdf (last
accessed on 20th May, 2019).
165
Id., at 17, 18.
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opinion on political action. 166 The said proposition has been

influenced from contemporary U.K. regulations.167
3. Prior to the enactment of the Finance Act 2017, the Law
Commission, in its aforementioned report, called for a re-
examination on the uniform 7.5% profit based corporate contribution
limit as prescribed under §182 of the Companies Act, 2013 as it
failed to substantially restrict large corporations.168 By rescinding the
above-specified corporate contribution limit, the Finance Act 2017
has precipitated the creation of shell companies and the cause of
benami transactions in funnelling undocumented money into
electoral politics. 169 We believe that corporate contribution limits
should be restored and preferably, lowered to the originally stipulated
limit of 5%,170 to prevent the vesting of corporate interests within
elected officials.
4. To protect and preserve electoral integrity and the sovereign self-
determination rights of Indian citizens, we propose the immediate
reinstitution of the blanket ban on foreign contributions/donations to
candidates and political parties, as effective prior to the enactment of
the Finance Act, 2016;171 analogous to the U.K.’s PPERA, whereby
any foreign donor to a domestically registered political entity is
considered “impermissible” and consequently warrants forfeiture.172
5. The elimination of any statutorily allowed anonymity of contributors
vide §29C of the RPA, 1951, §182 of the Companies Act, 2013;
further augmented by the legislative amendments enacted through the
Electoral Bond Scheme, is an immediate and instrumental step
towards reforming electoral financing. For preserving “purity of
elections”, it is imperative to identify the electoral contributor.173
6. On a clarificatory note, the implementation of campaign contribution
limits in India is not subject to free speech impediments as
encountered in the United States, evident from the seminal cases of
166
See Law Commission of India, 255th Report on Electoral Reforms 41, March 2015,
^2.28.6.
167
Supra, note 162; See also Samya Chatterjee and Niranjan Sahoo, Corporate Funding of
Elections: Strengths and Flaws, OBSERVER RESEARCH FOUNDATION ISSUE BRIEF
NO. 69, February 2014, accessible at https://www.orfonline.org/wp-content/uploads
/2014/03/IssueBrief_69.pdf (last accessed on 20th May, 2019).
168
See Law Commission of India, 255th Report on Electoral Reforms 40, 41, ^2.28.5.
169
Supra, note 116.
170
See Companies Act, 1956, §293A.
171
See note 115.
172
See Political Parties, Elections and Referendum Act, 2000, §§ 54(2), 58.
173
C. Narayanaswamy v. C.K. Jaffer Sharief, (1994) Supp 3 SCC 170.
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Citizens United174 and McCutcheon.175 The Supreme Court of India,

in its interpretation of Article 19(1) of the Indian Constitution has
observed that the said fundamental right only extends to citizens and
natural persons; and corporations have not been legally recognised as
citizens with free speech rights, 176 which are only exercisable by
shareholders.177 Therefore, need for electoral transparency, political
accountability and anti-corruption endeavours, may provide a
constitutional foundation for campaign contribution limits.
3.2. Electoral Expenditure Limits

Contemporary Indian electoral regulations prohibit the incurring or
authorising of campaign expenditure in excess of each parliamentary and
assembly constituency amounts specified under Rule 90 of the Conduct of
Election Rules, 1961, with the maximum authorised limit being Rs.70 Lakhs
for parliamentary constituencies and Rs.28 Lakhs for state assembly
constituencies.178 As discussed in the earlier part of the paper, §123(6) of the
Representation of the People Act, 1951 considers the “incurring or
authorising of expenditure” in excess of §77 of the said Act, as a corrupt
practice and provides for a disqualification period of six years as a stipulated
civil penalty.
3.2.1. Electoral Expenditure Regulations in the U.S.

There are no prescribed electoral expenditure limits for political parties or
candidates in the U.S. In the landmark case of Buckley v. Valeo,179 the U.S.
Supreme Court struck down individual expenditure limits as contained under
FECA 1971, on the ground of infringing the free speech clause enshrined in
the First Amendment; noting that democratic equality is primarily
challenged when the candidate uses his wealth, which reflects neither the
size nor popular support to become a serious contender.180 The Court also
observed that restrictions on campaign expenditure “reduces the quantity of
174
Citizen’s United v. FEC, 53 U.S. 310 (2010).
175
McCutcheon v. FEC, 134 S. Ct. 1434 (2014).
176
State Trading Corporation v. CTO, AIR 1983 SC 1811; See also Barium Chemicals v.
Company Law Board, AIR 1967 SC 295; See also Municipality v. State of Punjab, AIR
1969 SC 1100; See also TELCO v. State of Bihar, (1964) 6 SCR 885.
177
Divisional Forest Officer v. Biswanath Tea Company, AIR 1981 SC 1368; See also
Bennett Coleman v. Union of India, AIR 1973 SC 106.
178
Election Commission of India, Amendment of Rule 90 of Conduct of Election Rules,
1961, accessible at https://eci.gov.in/files/file/2170-conduct-of-elections-amendment-rules-
2014-amendment-of-rule-90-of-conduct-of-election-rules-1961-–increase-in-maximum-
limit-of-election-expenses-regarding/ (last accessed on 20th May, 2019).
179
Supra, note 150.
180
Id.
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expression” by restricting the size of audience and number of issues

discussed.181
In First National Bank v. Bellotti,182 the U.S. Supreme Court, in determining
the constitutionality of a criminal statute that prohibited corporate
expenditure intended to influence the outcome of a referendum, viewed that
the statute “unduly infringed upon the corporations’ protected free speech in
expressing its political point of view” and struck down the said statute on the
grounds of its unconstitutionality.
More recently in 2006, in the case of Randall v. Sorell,183 the U.S. Supreme
Court reiterated the unconstitutionality of campaign expenditure limits on
the basis of preserving the “structural integrity of the democratic process”,
as a foundational argument of its interpretation of First Amendment rights.
The Supreme Court in the said case, while revisiting Buckley, distinctly
viewed Act 64, a 1997 Vermont legislation that imposed one of the lowest
primary and general electoral expenditure limits in the contiguous U.S. for
two years, as “too restrictive”; 184 observing that the said act impeded
“challengers to run competitive elections and threatened individual rights of
association”.185
Independent third-party expenditures, incurred by corporations and unions;
communicating or advocating the winning or defeat of any party; without
being requested or suggested to do so by any party, agent or political
committee, are not subject to any limit. 186 However, in case of publicly
funded Presidential candidates, upper limits of electoral expenditures for
both primaries and the general election, are deemed to be constitutional.
3.2.2. Electoral Expenditure Regulations in the U.K.

U.K. electoral regulations provide variable limits on candidate and party
expenditure for parliamentary and local elections. In regulating “election
expenditure” by candidates, §76(2)(a)(i) of the Representation of the People
Act, 1983, read along with Representation of the People (Variation of Limits
of Candidates’ Election Expenses) Order 2014 establishes a limit of £8,700
for county and borough constituencies in parliamentary general elections;
with an additional 9p and 6p for every entry in the register of electors in the
respectively mentioned constituencies. 187 Notwithstanding a candidate’s
181
Id.
182
435 U.S. 765 (1978).
183
548 U.S. 230 (2006).
184
Id.
185
Id.
186
Federal Election Commission, How General Election Funding Works, accessible at
https://transition.fec.gov/info/chtwo.htm (last accessed on 20th May, 2019).
187
Electoral Commission, UK Parliamentary Guidance for Candidates and agents:
Parliamentary Elections 2017 7, accessible at http://www.electoralcommission.org.uk/
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personal expenses, the aforementioned amount is enlarged if the Parliament

has not dissolved within 55 months (or in term for more than 55 months) and
covers pre-candidacy election expenses. 188 Candidate costs include
advertisements, unsolicited materials for voters, transport costs, public
meetings, staff costs, accommodation and administrative costs. 189
Schedule 9 of the PPERA, 2000 ascertains the limits on “campaign
expenditure” by political parties, contingent on the number of its contested
constituencies. For the Parliamentary General Election of 2017, the
campaign expenditure limit for parties was £30,000 per constituency or
cumulatively £810,000 for England; £120,000 for Scotland and £60,000 for
Wales.190 Campaign expenditure includes items or services purchased prior
to the commencement of the regulatory period but used during it; and items
or services given to the party free of charge or at a non-commercial discount
of more than 10%.191
§85 of the PPERA, 2000 provides for limited notional or “controlled
expenses incurred by or on behalf of the third party in connection with the
production or publication of election material which is made available to the
public at large or any section of the public (in whatever form and by
whatever means),”192 The said expenditure can be incurred upto an upper
limit of £500 in a general election to promote or disparage a particular
candidate’s electoral prospects, independently and without the candidate’s
prior knowledge; by convening meetings, public displays or by issuing
circulars, publications or advertisements.193 Such third-parties or “non-party
campaigners” are required to be registered with the Electoral Commission to
become “recognised third parties”.194

Observations
__data/assets/pdf_file/0019/214516/UKPGE-Part-3-Spending-and-donations.pdf (last
accessed on 4th September, 2018).
188
See Representation of the People Act, 1983, §74ZA.
189
Supra, note 187, at 8.
190
Electoral Commission, UK Parliamentary General Election 2017: Political Parties (GB
& NI) 7, accessible at https://www.electoralcommission.org.uk/__data/assets/pdf _file/0017/
224810/UKPGE-2017-Political-Parties-guidance.pdf (last accessed on 20th May, 2019).
191
Id., at 10.
192
Library of Congress, Regulation of Campaign Finance and Free Advertising: United
Kingdom, accessible at https://www.loc.gov/law/help/campaign-finance-regulation/united
kingdom.php#_ftn23 (last accessed on 20th May 2019).
193
See Political Parties, Elections and Referendums Act 2000, §94.
194
Electoral Commission, Non-Party Campaigners, accessible at https://www.electoral
commission.org.uk/i-am-a/party-or-campaigner/non-party-campaigners (last accessed on
20th May, 2019).
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1. In reflection of mounting election costs, the National Commission to

Review the Working of the Constitution (NCRWC), 2001
recommended the determination of electorally periodical expenditure
ceilings by the Election Commission; inclusive of all expenses
incurred by the candidate, the affiliated party, benefactors, well-
wishers and any political activity financed by corporate entities or
individuals; on the said candidate’s behalf.195
2. A consultation paper to the NCRWC, 2001; while concurring with
the aforementioned recommendation, proposed a few constitutive
measures by way of repealing the existing statutory expenditure limit
in favour of ban on selective categories of expenditure; raising the
current expenditure ceiling; regularly revising the ceiling before
general elections; incorporating all sources of electoral expenditure
within statutory purview; institutionalising mechanisms for routine
verification and auditing of filed expenditure; and publishing
expenditure returns to local media.196
3. The Law Commission, in its 255th Report, proposed an amendment
to § 77 of the RPA, 1951, recommending the extension of the ceiling
regulatory time-period from the date of notification of elections to
the date of declaration of results, with the objective of bringing pre-
nomination electoral expenditure within its regulatory ambit.197
4. Rule 90 of the Conduct of Election Rules, 1961, read along with
Explanation 1 of §77(1) of the RPA, 1951 requires immediate
substantive amendment for the stipulation of electoral expenditure
limits for all national political parties; in addition to the
incorporation of expenditure incurred by political parties in
performance of logistical obligations and authorised in propagation
of party programmes by either the said party or its supporters; in
computing the aggregate expenditure limit for candidates.
Consequently, §123(6) of the RPA, 1951, in giving effect to the
195
Ministry of Law and Justice, Background Paper on Electoral Reforms 11, 12, December
2001, accessible at https://adrindia.org/sites/default/files/BACKGROUND%20PAPER%20
ON%20ELECTORAL%20REFORMS.pdf (last accessed on 20th May 2019); See also M.N
Venkatachaliah, Report of the National Commission to Review the Working of the
Constitution, 31st March 2002, accessible at http://legalaffairs.gov.in/ncrwc-report (last
196
Ministry of Law and Justice, Review of the Working of Political Parties Specifically in
Relation to Elections and Reform Options, 8th January, 2001, accessible at
http://legalaffairs.gov.in/sites/default/files/%28VI%29Review%20of%20the%20Working%
20of%20Political%20Parties%20specially%20in%20relation%20to%20Elections%20and%
20Reform%20Options.pdf (last accessed on 20th May, 2019).
197
See Law Commission of India, 255th Report on Electoral Reforms 39, 40, March 2015,
^2.28.1., accessible at http://lawcommissionofindia.nic.in/reports/report255.pdf (last
accessed on 20th May, 2019)
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aforesaid amendment under §77, also requires to be amended, for the

purpose of including analogous electoral expenditure in ascertaining
the parameters for constituting “corrupt practice”.
3.3. State or Public Financing of Campaigns

The role of money power in elections, has emerged as a standard concern in
discourses involving electoral reforms in India. 198 To contain political
dependence on unauthorised sources of electoral contributions, indirect
public funding of elections in India was introduced through the addition of
§§ 39A, 78A and 78B vide the Representation of the People (Second
Amendment) Act of 2003, providing for partial in-kind subsidy in the
allocating equitable airtime on cable television; and the free supply of
electoral rolls and certain other commodities, respectively. Several domestic
organisations and government constituted committees have provided
pertinent recommendations regarding the viability of and need for state
funded elections in India.
3.3.1. Presidential Elections in the U.S.

Post-Watergate U.S. election campaign legislations 199 neither provide for
direct or indirect public funding of political parties; nor do they offer public
subsidies for Congressional elections. However, the Federal Election
Campaigning (Amendment) Act, 1974200 instituted partial public financing
for Presidential primary candidates in the form of primary matching grants
amounting to an individual maximum contributable limit of $250 within the
state-based $5000 threshold. Although public grants for Presidential general
election candidates are devoid of individual contribution limitations, it is
counterbalanced by a ceiling on the aggregate expenditure of presidential
candidates. 201 The Presidential nominee of each major party is eligible to
receive a public grant of $20 million (in addition to a Cost-Of-Living-
Adjustment) for campaigning in the general election. 202 The eligibility of
minor party candidates, for obtaining public funding depends on the ratio of
the popular party’s votes, to the average popular vote of the two major party
candidates; in the preceding Presidential elections. For a new party candidate
198
B. Venkatesh Kumar, Funding of Elections – Case for Institutionalised Financing,
ECONOMIC & POLITICAL WEEKLY 1884 (1999).
199
See Federal Election Campaign Act of 1971, 2. U.S.C. §§ 431-455 (Public Law 92-225);
Presidential Election Campaign Fund, 26 U.S.C. §§ 9001-9012 (Public Law 92-178);
Presidential Primary Matching Account Act, 2 U.S.C. §§ 9031-9042.
200
See Public Law 93-433.
201
Federal Election Commission, Public Funding of Presidential Elections, August 1996, at
2, accessible at https://transition.fec.gov/pages/brochures/public_funding_brochure.pdf (last
202
Id, at 3.
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to be eligible for public funding after the election, the said candidate has to
receive 5% of the votes registered in the election. 203
Public Law No. 113-94, signed into effect by the-then President Barack
Obama on 3rd April 2014, ended public financing of national nomination
conventions to eliminate indirect taxpayer funding of political parties.204
3.3.2. Public Funding of Political Parties in the U.K.

As prescribed under the PPERA, 2001 a cumulative £2 million worth of
policy development grants are directly awarded to political parties for the
development and publication of policies in election manifestos; for general
parliamentary and regional assembly elections.205 To be eligible for the said
grant, a party must have two sitting Members of the House of Commons and
have taken an Oath of Allegiance under the Parliamentary Oaths Act
1886.206 While the first £1 million is equitably distributed amongst eligible
parties, the remaining £1 million is distributed in proportion to the parties’
current legislative representation.207
U.K. election laws also allow for public funding of political parties through
the Short Money and Cranborne Money, which is provided to opposition
parties to assist with the performance of their respective parliamentary
duties. Introduced in 1975, the amount of Short Money paid to opposition
parties in the House of Commons is in relevance to the number of seats and
votes it obtained in the previous general elections.208 It funds the running
costs of the Opposition Leader; and travel expenditure for opposition front-
benchers, in relation to the conduct of parliamentary business. 209 Short
Money is largely spent on research support for front-bench spokesmen,
assistance in the Whips’ offices and staff for the Leader of the Opposition.210
203
Id, at 4.
204
Government Publishing Office, Gabriella Miller Kids First Research Act, April 3rd 2014,
accessible at https://www.gpo.gov/fdsys/pkg/PLAW-113publ94/pdf/PLAW-113publ94.pdf
(last accessed on 20th May, 2019).
205
Electoral Commission, Public Funding for Parties, accessible at
https://www.electoralcommission.org.uk/find-information-by-subject/political-parties-
campaigning-and-donations/public-funding-for-parties#other (last accessed on 20th May,
2019).
206
Id.; See also Elections (Policy Development Grants) Order 2002, SI 2002/224.
207
Id.
208
See Electoral Commission, The Funding of Political Parties 90, December 2004, at ^6.5,
accessible at https://www.electoralcommission.org.uk/__data/assets/pdf_file/0005/163238/
The-funding-of-political-parties-report-and-recommendations-December-2004.pdf (last
accessed on 20th May 2019).
209
Id.
210
House of Commons Library Research Paper, Parliamentary Pay and Allowance: Current
Rates, January 1987.
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In 1996, the equivalent model for public funding of opposition parties in the
House of Lords, was introduced through the Cranborne Money.211
Additionally, U.K. electoral regulations provide substantial indirect public
funding to political parties, effectuated through the free airing of qualifying
party broadcasts;212 free postage and distribution of election expenditure;213
and the free usage of public buildings for public meetings during by, local,
parliamentary, and European parliamentary elections.214

Observations
1. One of the earliest propositions of state funding of elections in India,
as a reformative solution, was tabled by the Wanchoo Committee in
1973, in reference to the observations made by the 1964 Santhanam
Committee in the fueling of political corruption through unaccounted
black funding. The Wanchoo Committee insisted for, among others,
government funding of individual electoral candidates; 215 and the
West German model for state financing of political parties in
accordance with respective shares of votes polled in the preceding
general elections. It also noted the benefit of adopting the Japanese
model of electoral financing, which distributed funding proportional
to the size of constituencies and provided financial resources for
electoral research and publicity; in preventing political parties from
being susceptible to black funding and corrupt dealings.216
2. Prior to the Wanchoo Committee’s indirect recommendations for
state funding of elections in 1973, as discussed above, the Joint
Committee of Parliament on Amendments to Election Law expressed
that the problem of election expenses borne by candidates and
political parties can be addressed if it was progressively shifted to the
state, if accepted in principle.217
3. Subsequently, in 1978, the Committee on Electoral Reforms,
expressed itself in favour of providing indirect public funding of
elections by provisioning electoral infrastructure, to supplement
expenditures undertaken by candidates or parties. The Committee
only recommended the provisioning of certain facilities to candidates
211
Supra, note 208, at 91, ^6.8.
212
Id., at 92, 93, ^6.17.
213
Id., at 93, ^6.18.
214
See Representation of the People Act, 1983, §95(1).
215
Supra note 198, at 1884.
216
Id.
217
Report of Lok Sabha Joint Committee on Amendments to Election Law 64 (January
1972); See also Subhash C. Jain, State Funding of Elections and Political Parties in India,
43(4) JOURNAL OF THE INDIAN LAW INSTITUTE, 500, 511 (2001).
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and provided no distinction on whether the candidate affiliations with

a registered party or not.218
4. In 1993, a Confederation of Indian Industries constituted taskforce
recommended the funding of elections through an industry tax,
necessitating the generation of funds through a cess on excise duty,
or through corporate contributions to a State-run election fund pool,
ensuing distribution through a pre-decided formula on vote and seat-
share.219
5. The Indrajit Gupta Committee on State Funding of Elections, 1998,
in endorsing state funding of elections, observed “full justification
constitutional, legal as well as grounds of public interest, for grant of
State subvention to political parties, so as to establish such
conditions where even parties with modest financial resources may
be able to compete with those who have superior financial
resources.” However, it specified two limitations, namely (i)
disallowing funds to be apportioned to independent candidates and
permitting the same for national and state parties who have proven
their electoral popularity and been granted symbols; and (ii) short-
term subsidised state funding by provisioning certain facilities to
recognised political parties and their candidates. It must also be noted
that the Committee recommended partial state funding of elections in
the short-term.220
6. The fourth report of the Administrative Reforms Commission 2007,
titled “Ethics in Governance”, recommended the introduction of a
“system for partial state funding” for “reducing the scope of
illegitimate and unnecessary funding of expenditure election”.221
7. Recommendations suggested by the Law Commission, in its 255th
Report, with regard to state funding of elections, include the
continuation of in-kind subsidies through the National Election Fund,
in light of the non-feasibility of public resources to replace private
funding of parties; and the expansion of in-kind subsidies to include
public meeting rooms, printing and postage costs, by altering the
218
Id; See also Report of the Committee on Election Expenses (March, 1978). This
committee was appointed by Shri Jayaprakash Narayan, on behalf of ‘Citizens of
Democracy’,
219
Samya Chatterjee and Niranjan Sahoo, Corporate Funding of Elections: Strengths and
Flaws, OBSERVER RESEARCH FOUNDATION ISSUE BRIEF NO. 69, February 2014,
accessible at https://www.orfonline.org/wp-content/uploads/2014/03/IssueBrief_ 69.pdf
(last accessed on 20th May, 2019).
220
Ministry of Law, Justice and Company Affairs, Committee on the State Funding of
Elections 11-45, 55-56, December 1998.
221
Second Administrative Reforms Commission, 4th Report on Ethics in Governance,
January 2007.
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wording of § 78B of the RPA, 1951, thereby permitting the Central

Government to consult with the ECI in supplying subsidised items to
electors or candidates.222
8. Prior to the 2014 general elections, the ECI issued an order to extend
the scheme of equitable time sharing through the Prasar Bharati
Corporation, namely Doordarshan and All India Radio, to the
recognised six national parties and forty-seven state parties. 223
However, it is relevant to note that no rules for operationalising the
sharing of airtime on private media has been finalised under §39(A)
of the RP Act.224
3.4. Reporting and Disclosure of Income and Expenditure:

As per the existing regulations governing the reporting and disclosure of
electoral expenditure of candidates, all contesting candidates must maintain
a true account of their election expenses225 and submit a copy of the same to
the District Election Officer, within thirty days from the date of election of
the returning candidate.226 Failure to comply with the said instructions, will
form the basis of disqualification as per §10A of the RPA, 1951. Laws
regarding the reporting and disclosure of sources of income for political
parties are contained under §29C of the RPA, 1951, read along with §13A of
the IT Act, 1961.
3.4.1. Reporting and Disclosure Norms in the U.S.

The FECA, 1971 mandates the disclosure of all sources of funding for
candidates, party committees and PACs; and §30102(b) of the said Act
requires the appointment of a treasurer in a political committee, who is
required to maintain records of all contributions received by or on behalf of
such political committee. If any contribution is in excess of $50, the
particulars of every such contributor, including the contributor’s name and
address must be recorded. The said provisions are also applicable to any
222
Supra note 28, at 59, ^2.30.10.
223
Doordarshan, General Elections to Lok Sabha and certain State Legislative Assemblies
2014: Allotment of Broadcast/Telecast Time to recognized Political Parties – matter
thereof, 18th March 2014, accessible at http://ddindia.gov.in/Information/Documents
/What's%20New/LokSabha%20Elec2014.pdf (last accessed on 20th May, 2019); See also
ECI, Telecast/Broadcast Facility to Political Parties During Elections, No.
437/TVs/2014(LS), 14th March 2014, accessible at https://www.eci.nic.in/eci_main1/
current/PN14_14032014.pdf (last accessed on 8th September, 2018).
224
Gowda, supra note 68, at 230.
225
See Representation of the People Act, 1951, §77; See also Conduct of Election Rules,
1961, Rule 86.
226
See Representation of the People Act, 1951, §78.
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disbursements made to any individual by the political committee. 227

§30102(d) requires the records to be preserved by the treasurer for a period
of three years, starting from the date of filing of such report. The
aforementioned report also requires to be filed with the FEC, under the
provisions of the said Act.228
Disclosure norms for independent expenditures are also in place. Every
person who makes an aggregate amount of or in excess of $250 of
independent expenditure, must file a statement quarterly, containing the
particulars listed under sub-section (b)(3)(A) of §30104. 48-hour reports
must be filed between the beginning of the year and 20 days prior to the
election, for aggregate expenditures in excess of or equal to $10,000. Within
20 days before the election, 24-hour reports must be given when the
aggregate is greater than or equal to $1000.229
The reports, as mentioned above, when filed with the FEC, must contain the
details as specified under §30104 of the FECA, 1971. 230 Further, regular
reports submitted to the FEC by all candidates and PACs, are concurrently
stored in public databases maintained by the FEC within 48 hours of the
receipt of such report.231
Non-compliance of the aforementioned disclosure norms under the FECA,
1971 may lead to an FEC enforcement case, or a Matter Under Review
(MUR). The MURs are dealt through the FEC’s enforcement program based
on procedures as detailed in the Act, by the office of Complaints
Examination and Legal Administration and the Enforcement Division of the
Office of the General Counsel.232
§30111(b) of the FECA, 1971 provides for the auditing and field
investigation of any political committee required to file a report under
§30104 of the said Act. Before conducting any such audit, an internal review
of reports must be conducted by the Commission to determine whether or
not such reports filed by the selected committee, conforms to the threshold
requirements. Failure to meet the prescribed threshold requirements will
result in the commencement of an audit or field investigation within 30 days
of an affirmative vote of 4 members of the Commission.233
227
See Federal Election Campaign Act, §30102(c); See also Federal Election Commission,
Federal Election Campaign Laws, March 2015, accessible at https://www.fec.gov/resour
ces/cms-content/documents/feca.pdf (last accessed on 20th May, 2019).
228
See Federal Election Campaign Act, §30112(b).
229
11 CFR §109.10 (b), (c).
230
52 U.S. Code §30104.
231
52 U.S.C. §30111.
232
See Federal Election Commission, FY 2014-19 Strategic Plan 11, accessible at
https://www.fec.gov/resources/about-fec/reports/FECStrategicPlan2014-2019.pdf (last
233
52 U.S.C. §30111(b).
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3.4.2. Reporting and Disclosure Norms in the U.K.

In the U.K., accounting records must be maintained by all registered parties,
indicating all the money received and expended by them. These records
should be inclusive of an annual statement of accounts; quarterly donations
vide §62 of the PPERA, 2001; and weekly reports for the general election
period vide §63 of the said Act. For donations received over £7,500, both the
quarterly and weekly reports must contain the list of names and addresses of
donors, along with the specification of other relevant transactions such as
loans and sponsorships.234
§41 of the PPERA, 2000, requires the treasurer of a registered party to
mandatorily maintain accounting records sufficiently disclosing all
transactions of the party. Sub-section (3) of the said section, also requires the
accounting records to particularly contain entries specifying day to day
receipt of funds along with a detailed record of the assets and liabilities. §46
of the said Act, provides for the publishing of a copy of the statement
provided for under §45 of the Act, on its website as soon as the Commission
receives such report.
The candidates, in accordance with §81 of the RPA, 1983 and Schedule 2A,
are obliged to submit a return consisting of the details of expenses incurred
by or on behalf of the candidate, or by their agents during the campaigning
process, to the Electoral Commission, within 35 days of the declaration of
election results.
The stipulation of various penalties, in relation to the contravention of
disclosure norms is contained under Schedule 20 of the PPERA, 2001.
Under the said norms, the defaulter might be subjected to a fine or a one-
year imprisonment if indicted on providing falsified statements to the
auditor. The Electoral Commission’s Enforcement Policy, prescribes a
varying nature of penalties, ranging from fines of £250 to £20,000 235 for
certain offences triable by a Magistrate or in a Crown’s Court.236
The PPERA vests the Electoral Commission with the authority to ascertain
the permissibility of funding sources and to issue notices to
persons/organisations to furnish relevant books, documents or records for
inspection. 237 Furthermore, on application by the Commission, the Courts
can order forfeiture, in a civil process wherein a regulated organisation or
234
See Political Parties, Elections and Referendums Act, 2000, §§ 62, 63, 71M, 71Q; See
also Political Parties and Election Act, 2009, §20.
235
See Electoral Commission, Enforcement Policy 20, 5th April 2016, at ^8.9, accessible at
https://www.electoralcommission.org.uk/__data/assets/pdf_file/0011/199703/April-2016-
Enforcement-Policy.pdf (last accessed on 20th May, 2019).
236
Id., at 16, ^7.2.
237
Id., at 6-7, ^3.6-3.8.
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individual has accepted donations from an impermissible or unidentifiable

source, or has sought to conceal the existence or true amount of a donation
in a statutory report; and/or the Commission has failed to agree on a
voluntary settlement and seeks forfeiture in public interest.238
3.4.3. Domestic Regulations: Proposed Reforms and Institutional

Observations
1. Annual income reports submitted by political parties to the ECI, must
be made accessible for public scrutiny by publishing the said reports
on its official website. This recommendation is in consonance with
the 2004 report of the Election Commission, which particularly
emphasizes upon the published report’s accuracy and auditing of the
same by approved auditors of the Comptroller and Auditor
General.239
2. The NCRWC, 2001 recommended the auditing of political party
accounts “like the accounts of a public limited company” and the
publishing of the audited accounts with “full disclosures under
predetermined account heads”.240
3. The Law Commission, in its 1999 report, recommended the insertion
of a §78A which requires the maintenance, audit and publication of
accounts by political parties. 241 In reference to the Commission’s
recommended penalties for ensuring compliance, we recommend the
(i) fining of the defaulting parties, amounting to Rs.50,000 for each
day of non-compliance; (ii) de-registration of the defaulting party
and a simultaneous bar from applying for a fresh registration, for a
minimum stipulated time period of one year, in case of default upto
60 days, and a maximum period of two years, upon exceeding the
aforementioned default period; (iii) initiation of criminal prosecution
or imposition of penalties upon the transgressing party, contingent on
the ECI ascertaining the fraudulent or indeliberate intent to file
falsified accounts respectively.
4. The Law Commission, in its 255th Report, recommended the
introduction of a new section in the RPA, 1951, which would
statutorily require the District Election Officer to publish the details
of all expenditure and contribution reports submitted by every
238
Id., at 16, ^7.1-7.2.
239
Election Commission of India, Background Paper on Electoral Reforms 29, December
2001.
240
M.N Venkatachaliah, Report of the National Commission to Review the Working of the
Constitution, 31st March 2002.
241
See Law Commission of India, 170th Report on Reform of the Electoral Laws, May 1999,
at Ch. 2, ^4.2.1.
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contesting candidate under §78, on official websites for public

scrutiny.242
5. The exemption from reporting income, received through electoral
bonds, within the annual financial reports submitted by political
parties, should be revisited by the appropriate authorities. In order to
eliminate such exemption, the proviso added under §29C of the RPA,
by the Finance Act 2017 requires exhaustive reconsideration.
6. Article 324 of the Indian Constitution, as a “reservoir of power” for
the Election Commission, authorises the same to enquire of the
candidate regarding expenditure incurred by political parties. It
provides the Commission with the jurisdictional capacity to fill the
vacuum until a legislation has been promulgated on the subject to
address the particular situation or contingency.243
7. While dealing with the powers of the Election Commission under
Article 324 of the Constitution of India, the Supreme Court held that
superintendence and control over the conduct of election by the
Election Commission envisaged under Article 324, includes the
scrutiny of all expenses incurred either by a political party or a
candidate or any other association or body of persons or by an
individual in the course of the election. The expression “Conduct of
Election” in Article 324 of the Constitution was held to be wide
enough to include in its sweep, the power of the Election
Commission to issue in the process of the conduct of election,
directions to the effect that the political parties shall submit the
details of the expenditure incurred or authorised by the political
parties in connection with the election of their respective candidates,
to the Commission for its scrutiny.244
8. In the landmark case of Association for Democratic Reforms,245 the
Supreme Court opined that a citizen’s right to be aware of the
contesting candidate’s assets, liabilities and antecedents, constitutes
an integral part under Article 19(1)(a) of the Constitution. To this
regard, under the said Article, the fundamental right of free speech
and expression is manifested through the casting of votes in an
election, and therefore it can only be qualitatively exercised if the
242
See Law Commission of India, 255th Report on Electoral Reforms 61, March 2015, ^5.
243
Union of India v. Association for Democratic Reforms, (2002) 5 SCC 294. This view has
been diluted in Kuldip Nayar v. Union of India, (2006) 7 SCC 1.
244
People’s Union for Civil Liberties v. Union of India, 2009 (3) SCALE 22: (2009) 3 SCC
200.
245
Supra, note 243.
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said fundamental right is realised through the disclosure of relevant

candidature information.246
4. Conclusion
Standardly, there are two circumstantially corroborative outcomes of
unregulated or under-regulated electoral campaign financing: (i) industries
or private entities fund political administrations into power and fulfill their
respective electoral mandates, by securing favourable policies and pliant
legislative regulations;247 and (ii) corporations “deep capture” public opinion
and alter the popular perception of “public interest”, through free market
consumer disposition and the exercise of disproportionately autocratic
influence. 248 Although the constitutionality and practicality of legislating
campaign funding regulations remain highly contentious both at home and
abroad, a relatively less arguable objective of campaign finance regulations
would be the elimination of severe financial pressure on elected officials.
Even if contributors remain unconcerned with the reciprocation of
beneficence through the extension of political favours, the legislator cannot
ignore the consequences of his decisions on the sources of campaign
funding.249
The argument for electoral campaign finance reform may also be postulated
upon a theoretical assertion that despite the legality of large campaign
contributions, such contributions amount to, what Lessig denominated as,
“institutional corruption”,250 which compromises the political morality of a
republican democracy. Due to the absence of direct transactions involving
money and political favours, the subtle intangibility is manifested through
the tailor-made alteration of political conviction and ideology, for
specifically accessing greater funding. This change of political perception
erodes public trust and hinders qualitative democratic engagement. 251
Another detrimental outcome of unregulated electoral financing is that,
continuous substantially volumetric injection of money into the electoral
process disengages the candidate from the electorate, in pursuance of greater
campaign budgets. It underwrites negative political advertising at odds with
the ideals of deliberative democracy, allows independent organisations to
dominate the political debate to the detriment of candidates and political
246
Supra, note 244.
247
See Stigler, Theory of Economic Regulation, 2(1) THE BELL J. OF ECON. AND
MANAGEMENT SC, 3, 21 (1971), at 13, 14.
248
See John Hanson and David Yosifon, The Situation: An Introduction to the Situational
Character, Critical Realism, Power Economics and Deep Capture, 152 U. PA. L. REV.
129, 346 (2003), at 202-206.
249
Statutory Regulation of Political Campaign Funds, 66(7) HARVARD L. R. 1259, 1260
(1953).
250
Lawrence Lessig, Republic Lost 16-17, 107-114, Twelve (2011).
251
Id., at 9, 28, 36, 41-42, 166-70.
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parties, and enables candidates to escape accountability for the tone and
message of their campaigns.252
From an evidentially substantiative standpoint, another notable merit of
campaign financing regulations, particularly campaign contribution limits, is
that it enhances electoral competition by significantly reducing the
incumbent’s financial fundraising advantage.253 This assertion is verifiable
from a research study conducted by the Brennan Centre for Justice, which
presented evidence indicating the positive role of contribution limits in
enhancing electoral competition in 42 U.S. States.254 The authors of the said
study concluded that lower the contribution limit, the more competitive the
election. 255 Therefore, contribution limits can advance the compelling
interest of the state in preventing corruption and its appearance thereof.256
In conclusion, after carefully studying the various laws governing electoral
campaign financing, we felt it to be incumbent upon us to comment that
although several existing rules and regulations provide for sporadic
protection against corruption, unaccountability and directly precipitating the
rise of a parallel shadow government, there exists ample scope for the
promulgation of reformative legislations in instituting a highly transparent
and democratic framework of political financing. In the words of Justice
Shah, “any campaign, against corruption can become effective only when
there is a basic change in the mindset of the government in favour of greater
transparency and accountability....”.257 This paper, endeavours to facilitate
the ushering of such a transformation in administrative mindset, for ensuring
a country devoid of malice, maladministration and corporate puppeteering.
252
See Robert Bauer, The Varities of Corruption and the Problem of Appearance, 125(1)
HARVARD L. R. 91, 96 (2012), at 94.
253
Brenan Centre for Justice, Electoral Contribution and Low Contribution Limits, 4th May
2009, accessible at https://www.brennancenter.org/publication/electoral-competition-and-
low-contribution-limits (last accessed on 10th September, 2018).
254
Id., at 2, 5, 6.
255
Id., at 3.
256
Richard Briffault, The Return of Spending Limits: Campaign Finance after Landell v.
Sorrell, 32 FORDHAM URB. L.J. 399 (2005).
257
o%20PM%20acknowledged%20copy.pdf (last accessed on 20th May, 2019).
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Sen et al / Understanding Money-Power In Indian Politics: A Comparative Regulatory Perspective On

The Case Study Of Electoral Campaign Finance Reforms

UNDERSTANDING MONEY-POWER IN INDIAN POLITICS: A

Keywords: Campaign Finance, Campaign Contributions, Election Laws, Electoral

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Well-conditioned political competition is considered an inherent element of

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conventional opinion, however, does not withstand the attenuating factors

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regulatory frameworks. 18 It has been observed that defective election

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institutionalises the assurances of anonymity of any of the aforesaid sources

2. Critical Analysis of Existing Electoral Funding Regulatory

2.1. The Representation of the People Act, 1951

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2.1.1. §10A of the Representation of the People Act, 1951

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source listed under §2(e) of the Foreign Contribution (Regulation) Act,

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Rs.20,000. As a result of such a provision, as brought to attention by the

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2.1.3. §77 of the Representation of the People Act, 1951

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politically affiliated parties and donations from miscellaneous benefactors.48

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“When a political party sponsoring a candidate incurs

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money power and therefore in contravention of Article 14, as unmeritorious,

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Scathing public and judicial criticism of the appended Explanation to §77(1),

2.1.4. §78 of the Representation of the People Act, 1951

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2.1.5. §123 of the Representation of the People Act, 1951

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While examining the relevance of the aforementioned provisions, the

2.2. The Companies Act, 2013

2.2.1. §182 of the Companies Act, 2013

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ceiling of 7.5% of the donor company’s average net profits is a significant

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Election Commission has also released an index of approved Electoral

Report of Electoral Trusts for FY 2017-18, 28th November 2018, accessible at

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2.3. The Income Tax Act, 1961

2.3.1. §13A of the Income Tax Act, 1961

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2.3.2. §§ 80GGB & 80GGC of the Income Tax Act, 1961

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However, with respect to political parties, such a remedial measure offers

2.3.3. §276CC of the Income Tax Act, 1961

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2.4. The Foreign Contribution (Regulation) Act, 2010

2.4.1. §§ 2 & 3 of the Foreign Contribution (Regulation) Act, 2010

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exposing Indian democracy and electoral politics to international lobbyists

Company Amount Year of Political Parent

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Vedanta The Madras 3,00,00,000 FY 09-10 BJP Vedanta

In the observations of Justice A. P. Shah, “These amendments pose a serious

2.5. The Electoral Bond Scheme

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