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Report No. 255

Chapter XVIII

Summary of Conclusions and Recommendations

Below is a summary of conclusions and recommendations of the Commission on various issues discussed in the report. The amendments to the Constitution, RPA, Election Rules and any other laws have been made in track changes in the Annexure appended to this Report.

18.1. Election Finance The Law Commission has proposed wide ranging reforms on the issue of candidate expenditure limits; disclosure obligations of individual candidates and political parties; and penalties imposable on political parties; as well as examining the issue of state funding of elections.

a. Section 77 of the RPA, regulating the election expenses incurred or authorized by candidates or their election agents, currently extends from the date of nomination to the date of declaration of results. This period should be extended by amending section 77(1) to apply from the date of notification of the elections to the date of declaration of results.

[Para 2.31(a)1]

b. Section 182(1) of the Companies Act, 2013 should be amended to require the passing of the resolution authorising the contribution from the company's funds to a political party at the company's Annual General Meeting (AGM) instead of its Board of Directors.

[Para 2.31(a)2]

c. The existing disclosure obligations of individual candidates are limited to maintaining an account of electoral expenses under sections 77 and 78, RPA. This is sought to be amended by inserting a new section 77A to require candidates or their election agents to maintain an account and disclose the particulars (names, addresses and PAN card numbers of donors and amounts contributed) of

i. any individual contribution received by them from any person or company, not being a Government company and

ii. any contribution by the political party from the date of notification of elections, which have to be made by the party by a crossed account payee cheque or draft or bank transfer.

[Para 2.31(b)3]

d. Section 78 should be amended in light of the proposed amendment to section 77A above, and the reference to more than one returned candidate should be removed.

[Para 2.31(b)4]

e. A new section 78A should be inserted requiring the district election officer to make publicly available, on his website or on file for public inspection on payment of prescribed fee, the expenditure reports submitted by every contesting candidate under section 78.

[Para 2.31(b)5]

f. Political parties should be required to maintain and submit annual accounts, duly audited by a qualified and practicing chartered accountant from a panel of such accountants maintained for the purpose by the Comptroller and Auditor General, to the ECI every financial year. These accounts will fully and clearly disclose all the amounts received by the party and the expenditure incurred by it. The ECI will then upload these accounts online or keep them on file for public inspection on payment of fee.

[Para 2.31(b)6]

g. Disclosure provisions governing political parties has been substantially recast, with the existing 29C being deleted and replaced by a new section 29D requiring all parties to:

i. mandatorily disclose all contributions in excess of Rs. 20,000;

ii. include aggregate contributions from a single donor amounting to Rs. 20,000 within its scope;

iii. disclose the names, addresses and PAN card numbers (if applicable) of these donors along with the amount of each donation above Rs. 20,000;

iv. disclose such particulars even for contributions less than Rs. 20,000 if such contributions exceed Rs. 20 crore or 20 % of the party's total contributions, whichever is less. Consequential amendments will need to be made to the Election Rules and the IT Act.

[Para 2.31(b)7]

h. A new section 29E to be inserted in the RPA requiring the ECI to make publicly available, on its website or on file for public inspection on payment of prescribed fee, all the contribution reports submitted by all political parties under section 29D.

[Para 2.31(b)8]

i. ECI's transparency guidelines prescribing, first, a "statement of election expenditure" to be filed with it, by every party contesting an election within 75 days of the Assembly elections and 90 days of the General elections election; and second, expenses incurred by political parties to be usually in the form of cheque or draft, unless banking facilities are not easily available or the payment is made to a party functionary in lieu of salary or reimbursement, should be given a statutory basis vide a newly inserted section 29F.

[Para 2.31(b)9]

j. The disqualification of a candidate for a failure to lodge an account of election expenses and contributions reports under section 77 and proposed 77A should be extended from the current three period up to a five year period, so that a defaulting candidate may be ineligible to contest at least the next elections.

[Para 2.31(c)10]

k. Express penalties, apart from losing tax benefits, should be imposed on political parties vide section 29G for the non-compliance with the disclosure provisions of proposed section 29D of the RPA. This should include a daily fine of Rs. 25,000 for each day of non-compliance, with the possibility of de-registration if the default continues beyond 90 days. Further, ECI may levy a fine of up to Rs. 50 lakhs if its finds any particulars in the party's statements as having been falsified.

[Para 2.31(c)11]

l. A new section 29H should be inserting penalising parties that contravene the stipulations of section 29B, RPA and section 182 of the Companies Act in terms of accepting contributions from impermissible donors, by levying a penalty of five times the amount so accepted.

[Para 2.31(c)12]

m. A new Part IVB, section 29I should be inserted to the RPA dealing with the "Regulation of Electoral Trusts", and detailing provisions pertaining to their entitlement to accept contributions, disclosure obligations, and penal provisions (apart from losing income tax exemptions) so that the RPA can be amended in line with the changes already made to the IT Act and the ECI guidelines on "Electoral Trust Companies" of 2013.

[Para 2.31(c)13]

n. The Commission does not consider a system of complete state funding of elections or matching grants to be feasible, given the current conditions of the country. Instead, it supports the existing system of indirect in-kind subsidies, with section 78B of the RPA being possibly amended in the future to expand these subsidies.

[Para 2.31(d)1-4]



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