For clean campaigns

The Election Commission directs political parties to submit specific details of election expenditure so as to place them in the public domain.

IN a significant intervention aimed to ensure that candidates contesting elections to the Lok Sabha and the State Assemblies spend within the limits set by the law, the Election Commission (E.C.) on December 27 last year, issued a directive to all recognised political parties to submit for scrutiny specific details of expenditure incurred by them during elections. The decision, if implemented in letter and spirit, can limit the undue influence of money power in elections.

The E.C.'s move stems from the Supreme Court judgment on April 4, 1996, in Common Cause vs Union of India & Others. This case arose when Common Cause, a non-governmental organisation (NGO) filed a public interest petition seeking the Supreme Court's intervention to curb expenditure incurred by the candidates during elections in excess of the prescribed limit. Though the limits were raised substantially by Parliament through legislation recently, they are still considerably lower than the actual expenditure incurred.

The court was called upon to interpret Explanation 1 to Section 77(1) of the Representation of the People Act, 1951. (RPA). Under Section 77(1) of the Act, every candidate at any election shall, either by himself or by his election agent, keep a separate and correct account of all expenditure incurred or authorised by him or by his agent between the date on which he has been nominated and the date of declaration of the result. Explanation 1, which provides an exception to this requirement, was inserted into the Act during the tenure of Prime Minister Indira Gandhi in October 1974 following the disqualification of a Congress Member of Parliament on the grounds of exceeding the ceiling of expenditure. It meant that any expenditure incurred or authorised 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) would not be deemed to be election expenditure incurred or authorised by the candidate or by his agent. Since 1974, candidates, who were otherwise guilty of exceeding the prescribed limit, have taken recourse to this Explanation.

In their judgment in the Common Cause case, Justices Kuldip Singh and Faizan Uddin held that any expenditure incurred in an election campaign would be presumed to have been incurred by the candidate. However, they said, an "entry in the books of account of a political party, maintained in accordance with Section 13A of the Income Tax Act, showing that the party has incurred expenditure in connection with the election of a candidate may by itself be sufficient to rebut the presumption".

It was no longer sufficient for a candidate merely to proffer the plea that whatever expenditure may have been in excess of the ceiling was incurred by the party. The candidate had to provide substantiation - through an explicit supportive entry in the book of accounts of the party. The court made it clear that if the parties' expenditure was incurred from funds provided by the candidate or his or her election agent, Section 77(1) and not Explanation 1, would apply. Expenditure in respect of general propaganda or that incurred and authorised by a political party for the propagation of its manifesto, the judgment held, was not to be considered an expenditure incurred in connection with the election of a candidate belonging to the said party. However, only when the candidate discharges the burden and rebuts the presumption, would he be entitled to the benefit of Explanation 1, the judgment pointed out.

The judgment added an important caveat: superintendence and control over the conduct of elections by the Election Commission envisaged under Article 324 includes scrutiny of all expenses incurred by a political party, a candidate or any other association or body of persons or by any individual in the course of the elections. The expression "conduct of election" in Article 324 is wide enough to include in its sweep, the power of the E.C. to issue - in the process of the conduct of the elections - directions to the effect that the political parties shall submit to the Commission for its scrutiny, details of expenditure incurred or authorised by political parties in connection with the election of their respective candidates, the judgment held.

It has taken more than five years for the E.C. to implement this judgment, albeit partly. In its December 27, 2001, directive, the E.C. sought details of expenses incurred by the State, district and constituency-level units of political parties also, apart from a statement of expenditure from the parties' national headquarters. The E.C. had found that expenses incurred by the State or district units of parties were not reflected in the statements filed before it by political parties. It, therefore, prescribed a format that parties had to follow while filing their statements.

The format provides for details regarding the opening balance of party funds as on the date of announcement of elections, donations in cash and by cheques, drafts and so on, and item-wise expenditure incurred on publicity, travel, administration, meetings, processions and the like. More important, expenditure incurred by a party on individual candidates is required to be shown. This should be furnished in respect of each candidate, on whom the party or any of its units at any level incurs any expenditure, to facilitate cross-checking and scrutiny vis-a-vis returns of expenses maintained and filed by individual candidates under Sections 77 and 78 of the RPA. Information regarding lump-sum amount, if any, given to an individual candidate is required to be given - separately for each candidate.

The statement of expenditure with regard to all future elections should be submitted within 45 days of the date fixed for the completion of the electoral process. More significant, in order to ensure transparency, the E.C. has decided to place in the public domain the statement of accounts of political parties in connection with general elections. A proposal to post these accounts on the Internet was being considered, an E.C. spokesperson said.

While the E.C.'s decision is welcome, it needs to take more steps to give effect to the Supreme Court's judgment in the Common Cause case. The E.C. appears to have no remedy if a candidate attributes his expenditure incurred in excess of the ceiling to any individual or association of individuals under Explanation 1. Although the principle laid down in the Common Cause case applies equally to this category, the E.C. is yet to evolve a suitable methodology or format to check the veracity of such claims.

On another front, a day before the winter session of Parliament concluded on December 19, the Union Cabinet approved the Election and Other Related Laws (Amendment) Bill, which sought to amend the RPA to allow companies other than government companies to make donations to political parties subject to provisions of the Companies Act, 1956. Parties can also receive donations from individuals and other juridical persons, but not from foreign sources as defined in the Foreign Contribution Regulation Act, 1976. Public sector undertakings and other such bodies, including local bodies, funded wholly or partly by the government will not be eligible to make political donations.

Under Section 293 A of the Companies Act a company (excluding government companies and those less than three years old) can donate funds to any political party or for any political purpose to any person in any financial year, any amount not exceeding 5 per cent of its average net profit during the three immediately preceding financial years. However, such contribution can be made only after a resolution authorising it is passed at a meeting of the company's board of directors. The Companies Act also requires the disclosure of the details of such contributions in the company's profit and loss accounts. Any contravention of these requirements would, under the Act, attract stringent punishment, which includes fine, extending up to three times the amount contributed, and three years' imprisonment of the officer responsible for the default.

HOWEVER, these provisions in the Companies Act have failed to ensure transparency of the funding process. The prospect of shareholders opposing it at the annual general meeting and getting the company bad publicity has dissuaded the corporate sector from making legal contributions to political parties. Besides, there was the threat of victimisation by the winning party once it knew that it received lesser funds than its rival.

It is not clear how changes in the RPA will make corporate donations any more transparent than they are now. The RPA only deals with spending limits of candidates in an election, and the Bill does not appear to be in favour of allowing corporate and individual donations to candidates through political parties. Indeed, the Bill seeks to delete Explanations 1 and 3 of Section 77 of the RPA, which have been found to be the root cause of much of the electoral corruption. Explanation 3 lays down that expenditure incurred in respect of any arrangements made or facilities provided by any government servant, would not be part of a candidate's expenditure within the ceiling imposed by the law.

The Bill seeks to substitute these Explanations with an explanation indicating that the expenditure incurred on general party campaign by leaders of political parties on account of travel by air or otherwise shall not be deemed to be expenditure incurred or authorised by a candidate of that party or his election agent.

The Bill proposes that while computing the amount of income tax on the total income of an Indian company, the amount contributed directly or indirectly to a political party or for any political purpose may be allowed as deduction from the amount of income tax. The Bill extends a similar tax relief to individuals, Hindu Undivided Families (HUFs) and other entities or juridical persons. The corporate sector will, doubtless, welcome this provision, but it is unlikely to be an incentive for corporates to make their contributions public.

The Bill also raises the limit of income of a political party from voluntary contributions in cash from Rs.10,000 to Rs.20,000 under Proviso (b) of Section 13 A of the Income Tax Act, 1961. The treasurer of the political party will have to prepare a report of donations and submit it to the E.C. If he fails to do so the political party shall not be entitled to tax relief allowed under the Income Tax Act, 1961. More important, the accounts in respect of donations, together with the audited report, shall be laid on the table of both Houses of Parliament. This is expected to help greater public scrutiny.

State funding of elections and strict enforcement of the ceiling on expenditure are measures aimed to ensure a level playing field among political parties and candidates. The Bill, based on the decision of the Group of Ministers constituted to examine the Inderjit Gupta Committee report on State Funding of elections (1998), does not address any of the Committee's recommendations. The Committee had recommended state funding of elections in kind.

The Bill, no doubt, makes a small beginning in making electoral funding of political parties a little more transparent, but it is not a decisive step in enforcing clean politics.