Parties and funds

The latest expose highlights the need to clean up and make transparent the procedures followed by political parties in receiving donations from various sources.

THE Tehelka tapes showed Bangaru Laxman and Jaya Jaitley accepting from those who claimed were suppliers of defence equipment cash as contributions to their respective party funds. Laxman admitted that he accepted Rs.1 lakh in good faith, and claimed tha t he promptly deposited it with party treasurer Ved Prakash Goyal. Jaitley said that she did not actually take the Rs. 2 lakhs that was offered to her, but instead asked those who came with the money to make their donations through her party colleague an d Union Minister of State V. Sreenivasa Prasad. The Minister was at that point in time in Bangalore making arrangements for the national convention of the Samata Party to be held in Mysore. It is another matter, however, that Jaya Jaitley later said that the party did not receive the money at all.

The BJP and the Samata Party claimed for the record that there was nothing wrong in their party presidents accepting cash donations for the party fund. All political parties receive donations, and their leaders say that in a democracy parties do need don ations to run their affairs.

Political parties generally require large funds to fight elections. Between elections too, they require funds to run their organisations and carry out programmes. Political parties, therefore, draw funds from several sources. But there are legal requirem ents involved, as also norms that parties themselves have evolved to receive donations.

The simplest and the most transparent of these sources is membership subscriptions, but these may account for only a limited part of a party's needs. The BJP, for instance, invites its members, supporters and well-wishers to enrol themselves as Aajiwan S ahyogis (lifelong associates). The Aajiwan Sahyog Nidhi was launched at the party's Jaipur conclave in 1997, in the wake of the hawala scandal, which allegedly involved India's top political leaders, including those of the BJP. The party claimed that the Nidhi reaffirmed its commitment to the ideals of transparency, accountability and probity in public life. Annual contributions were invited for the Nidhi in three categories - of Rs.1,000, Rs.5,000 and Rs.10,000. The contributions could be sent to the c entral office in New Delhi or State offices. It was announced that the party would register the donor's name, address and contribution, and input this information in the computer at its headquarters. For some time, the party organ, BJP Today, publ ished the names of such donors State-wise, without their addresses, but discontinued the practice for unknown reasons. In the mid-1990s the party announced that all contributions to the party exceeding Rs.10,000 could be made only by cheque. But it soon discovered that this was not feasible. After the Tehelka expose, both Laxman and general secretary Narendra Modi admitted that the party had not succeeded in enforcing the "cheque only" norm and had begun to accept in cash donations exceeding Rs.10,000. Laxman argued that the party had to abandon the norm when it faced difficulty raising funds for the two or three elections it faced within a short span of time.

The BJP's admission of its failure to practise what it preached should be seen in the context of the legal requirement. Evidently, contributions by cheque makes for more transparency, which factor impedes the free flow of unaccounted money. But this does not mean that a party can accept cash contributions on the plea that not enough people are willing to pay be cheque. Under a Supreme Court order (Common Cause vs. Union of India, S.C.Cases, 1996, p.752), contributions and donations to a political party are admissible for exemption from income tax only if the party keeps and maintains books of accounts satisfactorily; it keeps and maintains records of such voluntary contributions in excess of Rs.10,000 and of the names and addresses of the person s who have made such contributions; and the accounts of the party are audited by a chartered accountant or an otherwise qualified accountant. Sub-section 4-B in Section 139 of the Income Tax Act makes it obligatory for all political parties to file incom e tax returns.

The Supreme Court had held that if a political party violated these provisions and utilised unaccounted money, it could not claim the benefit of Explanation 1 to Section 77 of the Representation of the People Act. Under this Explanation, any expenditure incurred by a political party in the constituency of a candidate would not be considered to have been incurred by the candidate in relation to the provision of the ceiling on the expenditure by a candidate.

Although all major political parties claim that they have been filing income tax returns regularly following the Supreme Court order, it is the extent of unaccounted money that some major parties seek to mobilise that should be a matter of concern. In or der to account a contribution exceeding Rs.10,000, every party should show the name and address of the donor in its account books and issue a receipt. In cases where the donors do not want to be identified, it is likely that their contributions would be unaccounted for in the party's accounts. There is at present no mechanism to establish that parties receive unaccounted donations, even though technically the parties might be fulfilling the legal requirement of maintaining books of account audited by a qualified accountant and filing income tax returns.

The Tehelka expose of Laxman receiving money across the table is a classic example of a party functionary receiving a donation that cannot possibly be accounted for in its accounts. The BJP, however, asserted that the gift received by Laxman from the Teh elka team had been duly accounted for in its accounts. Laxman claimed (see interview) that the team had left a visiting card, which carried only some phone numbers in London. In the absence of the address of the donor, the party could not have legally ac counted for the money. BJP treasurer Goyal told Frontline: "We give receipts only if the donors demand. In this case, everybody knows who was the donor, and as they did not want any receipt, the question of giving a receipt did not arise."

The new president of the party, Jana Krishnamurthy, also averred that the amount received by Laxman had been accounted for in the party, though he claimed that it would be shown only in the income tax returns that it would file.

There is also apparent confusion in the BJP with regard to who is authorised to receive donations on behalf of the party. Laxman claimed that the Tehelka team insisted that he personally receive the donation, though he told them to meet the party treasur er. Krishnamurthy said that the presidents of the party received donations "occasionally" and handed them over to the treasurer. A BJP insider, however, pointed out that only treasurers were supposed to receive donations, and that Laxman's predecessors h ad never personally received such huge donations for the party.

The Samata Party, on the other hand, authorises only the party's national and State presidents to receive donations, says its new president, V.V. Krishna Rao. According to him, the party treasurer only keeps track of the accounts of expenditure and incom e, and he is not competent to receive contributions.

IN the case of the Congress(I), it appears that only the treasurer receives donations. A former Congress(I) treasurer said that his party had introduced the system of issuing coupons in lieu of receipts to donors for cash contributions. These coupons do not carry the names and addresses of the donors, but only numbers, which are mentioned in the party's books of accounts. During elections, candidates are supplied campaign materials in order to take advantage of the provisions of the Election Commission order on election expenditure. Much of the cash donations come to the party during election time.

THE Left parties have a very transparent system of party funding. The Communist Party of India (Marxist) funds itself through a system of levies: if a member receives an income of Rs.10,000 a month, he or she should contribute Rs.250. If the member does not thus contribute for three consecutive months, it will lead to loss of membership. Members of Parliament and of the State Assemblies have to deposit their entire salaries with the party, and accept a fixed sum as monthly allowance. Besides the party g oes for collections from the public, but avoids donations from big industrialists as a matter of principle. The CPI has a similar system of fund collection.

Will state funding of elections, as proposed by the Indrajit Gupta Committee in 1998, help clean up the Augean stables? The Committee has recommended state funding of parties only in kind, and not in cash. It has also left the issue of banning donations to parties by the corporate sector to be decided by Parliament. Clearly, as frequent elections necessitate the thorough milking of sources of funding, many of the political parties seem to be in search of new methods, legitimate or otherwise, to raise fu nds.