Stop Big Business From Funding Political Parties in India

by Rajindar Sachar,
Recently there has been heated public debate on T.V. about donations being made by corporate sector to various political parties for elections, mainly to congress and B.J.P. and to some others – depending on which area particular company has more stake. Previously there used to be somewhat hesitancy in admitting corporate – political monetary axis. But no longer, one industrialist unashamedly boasting that he gave donations to both the parties but of equal amount. Another donor was more cautions but complained that it should not be disclosed publically - clever thinking because of the uncertainty of which party may come to power. Such cynicism of money power playing a dominant role in the elections and the people accepting it as a normal feature is a matter of grave concern for clean politics.

It is unfortunate that there is almost no public debate on corporate money power muddying the political process in the country. In Companies Act 1913, there was no statutory provision banning donation being made by political parties. The High Courts thus had no option but to hold that donations to political parties could be made, it felt uncomfortable and warned of the of the dangers involved, Chagla C.J. of Bombay High Court warned “It is our duty to draw the attention of Parliament to the great danger inherent in permitting companies to make contribution to the funds of political parties. It is a danger which may grow apace and which may ultimately overwhelm and even throttle democracy in this country.”

Similarly Calcutta High Court warned “Its dangers are manifold. In the bid for political favouritism by the bait of money the company which will be the highest bidder may secure the most unfair advantage over the rival trader companies. Thirdly it will mark the advent and entry of the voice of the big business in politics and in the political life of the country.”

Regrettably Parliament ignored this warning and added in 1960 Sec. 293A to the Companies Act permitting them to contribute to political parties 5% of net profits. The danger signs were visible immediately and Santhanan Committee Report 1962 recommended a total ban on all donations by companies to political parties because of the public belief in the prevalence of corruption at high political levels has been strengthened by the manner in which funds are collected by political parties, especially at the time of elections.

However no action was taken till the Parliament became a more diverse body till 1969 and then Parliament was forced to imposed a total ban on contribution by companies to political parties – Madhu Limaye the Socialist M.P. was the dominant voice for banning corporate funding statement and objects of this amendment were given as follows;

A view has been expressed that such contributions have a tendency to corrupt political life and to adversely affect healthy growth of democracy in the country, and it has been gaining ground with the passage of time. It is, therefore, proposed to ban such contributions.” An attempt made in 1976 to modify the law but failed.

In 1978 the Govt. of India constituted a High Powered Expert Committee to review Companies Act 1956 and Monopolies Act. It was presided over by a judge of Delhi High Court. Amongst its members were some of the top lawyers, Industrials Houses trade Union leaders, and accountants. It unanimously recommended that the ban on donations by companies to political parties should continue. – “The Report worked once this is permitted, the danger the democracy can be well visualized; namely, politics being dictated by the interests of large companies which by the very nature of it, would be able to contribute more funds as compared to the smaller companies.”

Notwithstanding the warning Section 293A was amended in 1985 and Board of Directors was authorized to make donation to political parties. That law still continues. It is unfortunate that while other democracies recognize the danger of money power playing an unhealthy part in Elections, we are still continuing with it. Thus in U.S.A. under the Federal Election Campaign Act 1971 it is unlawful for any corporation to make or for any candidate for president, Vice President, Senate, Congress to receive any contribution is prohibited and it is unlawful for any company to make any contribution to political parties.

It is beyond doubt that contribution by companies is given not because of any ideological reason but really as a device to be in the good books of the ruling party. Thus; between 1966 to 1969, 75 companies paid down Rs. 1.87 crore out of which Rs. 144 lakhs were given to the ruling party, the ruling Congress Party in 1967 alone received Rs. 87 Lakhs.

Perception and reality has not changed – thus we find that in 2003 –n 2004 B.J.P. got 90 crores as against Congress at 65 crores. The peak of BJP was 155 crores in 2004 –05 down to 137 crores in 2007 –08. The rise in the share of the Congress Party during this period was phenomenal uprise starting from 2002 – 03 at 53 crores, upswinging to Rs. 265 crores in 2007 – 08. More significant of Corporate political nexus is illustrated by corporate donation to BSP of Mayawati rising in 2002 – 03 from 10,9 crores to Rs. 55.6 crores in 2007 –08. Does one need more proof of invidious entry of corporate sector in our body politic and of the dangerous consequences.

Another infirmity is the vesting in Board of Directors the power to choose a political party, for giving contribution. Why it is legitimately asked, the decision to utilize corporate funds be determined by a coterie of 10 or 15 Directors rather than that of thousands of shareholders who are the real owners of the company.

A further question relates to the legitimate demands of the workers in the company to have a say for distribution of corporate funds - in (the Supreme Court has recognized their right in funds of the company).

All these problems are bound to become more controversial as actual working of utilization of these funds becomes public. A straightforward, honest, equitable solution is to ban the corporate funding of political parties, as in USA and UK. Clean politics mandates this as a minimum prerequisite by all political parties. Let electorate demand that manifestos of the parties include such a provision - let them give straight answer immediately.
(Published earlier in The Tribune on 11 April 2009)