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Report No. 255

(c) On Penalties

2.28.17. Currently, penal provisions for candidates are governed by section 10A, RPA which provides for disqualification, up to a period of three years, for failure to lodge accounts of election expenses. The period of disqualification should be increased up to five years, and should apply to contribution reports under section 77A as well, so that a defaulting candidate may be ineligible to contest at least the next general elections normally held after five years.

2.28.18. With respect to political parties, the ECI's transparency guidelines only stipulate that the penalty for cash contributions to political parties by an individual or a company is that such contribution will not be deductible under section 80GGB and 80GGC, IT Act. Given the prevalence of black money, this does not serve as a true deterrent and the penalty needs to include more than just non-deductibility of tax.

2.28.19. Similarly, the penalty of non-deductibility of tax under section 29C of the RPA r/w section 13A of the IT Act for parties which do not maintain the names and addresses of all donors (donating above Rs. 20,000) as per Form 24A of the Election Rules is not stringent enough and may be flouted. While Section 10A of the RPA disqualifies candidates for a failure to lodge an account of election expenses, similar strict provisions are not applicable to parties. The Law Commission had recommended the insertion of a new Section 78A(2) in its 170th Report on penalties for non-compliance:

"(2) A political party which does not comply with any of the requirements of sub-section (1) shall be liable to pay a penalty of Rs.10,000/- for each day of non-compliance and so long as the noncompliance continues.

If such default continues beyond the period of 60 days, the Election Commission may de-recognise the political party after affording a reasonable opportunity to show cause.

(3) If the Election Commission finds on verification, undertaken whether suo motu or on information received, that the statement of accounts filed under sub-section (1) is false in any particular, the Election Commission shall levy such penalty upon the political party, as it may deem appropriate besides initiating criminal prosecution as provided under law."

2.28.20. The Commission endorses these proposed sub-sections with certain modifications: first, the penalty for non-compliance should be increased from Rs. 10,000 daily to Rs. 25,000 daily; secondly, the default period before the ECI may de-recognise the party be extended to 90 days; third, the penalty for filing false information should be stipulated up to a maximum of fifty-lakh rupees. This can be inserted vide a new section 29G to the RPA.

2.28.21. Section 29B of the RPA and section 182 of the Companies Act prohibits political parties from receiving funds from foreign sources, government companies and loss making companies, but there is no penalty against the parties which contravene the above provisions. The law may be amended to provide for suitable remedy. A new section 29H should be inserted levying a penalty of five times the amount of such contribution accepted.

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