Money trail

Money power unplugged

Print edition : June 10, 2016

Cash seized in Tiruchi on March 11. Photo: A. Muralitharan

The Election Commission has put in place an elaborate mechanism, backed by law, to monitor and check the circulation of money to bribe voters, but it does not always work on the ground.

THE Election Commission’s (E.C.) decision to postpone the Assembly elections in just two constituencies in Tamil Nadu by one week after it found evidence of cash distribution to voters by agents of the two main political parties has led to considerable dismay among observers. The E.C. justified the move on the grounds that the vitiating effect of the cash distribution would weaken in a week. This bizarre explanation has led many to ask whether the E.C. has adequate powers to stem the alarming rise in the influence of the money power of recognised political parties on the electoral process. (It subsequently said in the Madras High Court, which was hearing a plea on the postponement issue, that it would put it off by a further three weeks, to June 13.)

The E.C. has expressed concern, from time to time, that money power is disturbing the level playing field and vitiating the integrity of the electoral process. On August 29, 2014, the E.C. announced guidelines to bring transparency and accountability in the funding of political parties. Ironically, it prepared these guidelines after inviting suggestions from the parties themselves. The guidelines appear to be nothing more than a tweaking of the existing requirements under the law.

Proviso (a) to Section 13A of the Income Tax Act, 1961, requires every political party to maintain books of accounts and other documents to enable proper deduction of its income. The Act requires that the treasurer of a political party or a person authorised by the party, besides ensuring maintenance of the accounts at all State and lower levels, maintain consolidated accounts at the central party headquarters. The Act also requires that the accounts so maintained by the party treasurer conform to the guidance note on the accounting and auditing of political parties issued by the Institute of Chartered Accountants of India and that the annual accounts are audited and certified by qualified practising chartered accountants.

According to the guidelines, all parties are required to submit a copy of the audited accounts, along with the auditor’s report, for each financial year to the E.C. before October 31.

Sections 80GGB and 80GGC of the IT Act, 1961, state that no deduction shall be allowed on the contributions made in cash by any person or company to a political party. Therefore, political parties are required to maintain the names and addresses of all individuals, companies or entities making donations to them, except petty sums donated by the public during their rallies. Further, any donation received in cash should be duly accounted in the relevant account books and deposited in the party’s bank account within a week of its receipt. However, a party is allowed to retain a reasonable amount required for its day-to-day functioning and for defraying cash expenses. Section 40 A (3) of the IT Act, 1961, stipulates that all payments exceeding Rs.20,000 made by a business entity to a person in a day are required to be made by account payee cheque/draft, except the exempted category as provided in Rule 6 DD of Income Tax Rules, 1962.

Similarly, if a party incurs an expenditure, it should ensure that no payment in excess of Rs.20,000 is made in a day to a person, company or entity in cash, except when the payment is made in a village or town which is not served by a bank or the payment is made to an employee or party functionary towards salary, or pension or for reimbursement of his expenses, or when cash payment is required under a statute.



In a subsequent clarification, the E.C. warned the parties that any violation of its lawful direction may entail action as envisaged under paragraph 16A of the Election Symbols (Reservation and Allotment) Order, 1968: suspension or withdrawal of recognition. The E.C. has so far not invoked its punitive powers under this provision although it has threatened to invoke it many times.

In May 2014, the Association for Democratic Reforms (ADR), a non-governmental organisation (NGO), filed a writ petition in the Delhi High Court seeking a direction to the E.C. to implement the recommendations of the 170th Law Commission and, further, to introduce a ceiling on the expenditure of political parties during elections. The petition also sought a direction to political parties to submit expenditure statements, beginning one year prior to elections.

The ADR has brought to the High Court’s attention lacunae in the guidelines issued by the E.C. in 2014. [The case was last listed for hearing on May 16 and the next hearing is scheduled on August 2.] Professor Jagdeep Chhokar of the ADR told Frontline that the guidelines were inadequate to address concerns arising from the distribution of cash to voters.

The Law Commission, in its 170th Report, submitted to the government in 1999, observed, after citing the Supreme Court’s ruling in a case: “If there were no limits on expenditure, political parties would resort to collection of contributions which would naturally come only from the rich and affluent sections of the society.”

Current mechanisms

Election expenditure is divided into two categories. The first type is the expenditure allowed under the law for electioneering, subject to it being within the permissible limit. This would include expenditure connected with campaigning, such as public meetings, rallies, posters, banners, vehicles, and advertisements in print or electronic media. The second type covers expenditure which is not permitted under the law. For example, distribution of money, liquor, or any other item to the electors with intent to influence them comes under the definition of bribery and is an offence under the Indian Penal Code and a corrupt practice under the Representation of the People Act, 1951.

For monitoring day-to-day election expenditure incurred by a candidate, an election expenditure mechanism is put in place in each constituency. Maintenance of the day-to-day account of election expenditure by a candidate is mandatory. Though an account of election expenditure is required to be submitted within 30 days from the date of the declaration of the result, the monitoring has to be done on a regular basis during the campaign period for it to be of any use.

Since the District Election Officer (DEO) is required under the law to scrutinise candidates’ expenditure and submit a report to the E.C. after the election, it is primarily the duty of the officers to collect proper evidence during the election campaign, based on which it will be decided whether any expenditure was left out in the statements of accounts submitted by the candidates.

Expenditure Observers (E.O.s) are appointed by the E.C. for specified constituencies. There is at least one E.O. for each district, but each E.O. ordinarily does not have more than five Assembly constituencies under his observation. Assistant Expenditure Observers (AEOs) are appointed for each constituency on the date of notification of election by the DEO, and if any changes are suggested by the E.O., the same should be carried out, says the E.C.’s Instructions on Election Expenditure Monitoring (April 2016).

On paper, there are three or more dedicated flying squads in each constituency/segment to track illegal cash transactions or distribution of liquor or any other items suspected of being used to bribe voters. The squad has one Senior Executive Magistrate as its head, one senior police officer, one videographer and three or four armed police personnel. They are to be provided with a dedicated vehicle, a mobile phone, a video camera and the necessary Panchnama documents required for the seizure of cash and goods.

Again, on paper, there are three or more surveillance teams in each constituency, consisting of one Magistrate and three or four police personnel. This team is required to put up check-posts and keep a watch on the movement of large quantities of cash, illegal liquor, or other suspicious item or arms being transported in their area. The entire process of checking should be videographed, says the E.C.’s compendium.

Based on past history, the profile of a constituency and other developments, the Chief Electoral Officer (CEO) should identify constituencies which are prone to high expenditure and corrupt practices by candidates. Such constituencies are to be termed “Expenditure Sensitive Constituency”. For such constituencies, there should be two AEOs, an additional number of flying squads, static surveillance teams and video surveillance teams as required, over and above those deployed in the remaining constituencies.

Expenditure-sensitive pockets are to be identified in consultation with the E.O. on the basis of the literacy levels or economic development or the number of complaints lodged during the previous election. Such pockets are to be kept under close vigil by the surveillance teams during the last three days before elections.

The Law Commission observed in its 170th Report that the objective of limiting the expenditure was to ensure a level playing field for small and big political parties with financial clout. “No individual or political party should be able to secure an advantage over others by reason of its superior financial strength,” it noted.

Direct action

Concerned over the distribution of cash to voters on the eve of elections, the E.C., on the eve of the 2012 Assembly election in Gujarat, announced that its teams would indiscriminately intercept and search vehicles or individuals at any time. If cash more than Rs.2.5 lakh, or any other articles, such as gold, diamonds, etc., were found in the possession of a person, then the members of the team were empowered to interrogate the person. If cash without proper documents was found in the possession of a person and it was suspected of being used for bribing voters, it would be seized and action would be taken under provisions of the law.

The E.C.’s actions were challenged in the Gujarat High Court on the grounds that small businessmen, farmers, etc. had to carry cash for their day-to-day business transactions and that they were being harassed and humiliated by E.C.’s surveillance teams.

The High Court held the E.C.’s restrictions violative of Article 21 of the Constitution and beyond the powers conferred on the E.C. The E.C. appealed against this judgment in the Supreme Court and offered to amend its restriction as follows:

“During such checking, if any cash exceeding Rs.50,000 is found in a vehicle carrying a candidate, or his agent or party worker or carrying posters or election materials or any drugs, liquor, arms or gift items (valued at more than Rs.10,000) which are likely to be used for inducement of electors or any other illicit articles are found in a vehicle, the same shall be subject to seizure. The whole event of checking and seizure is to be videographed by a video team which will submit the copy of the video CD to the Returning Officer.” While the E.C.’s appeal in the Supreme Court against the Gujarat High Court verdict is pending, its amendment of the restriction as above appears reasonable, although its effectiveness in curbing money power in the just-concluded Assembly elections is debatable.

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