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Report No. 255

B. Need for Election Finance Reform

2.4. It is now well established that money plays a big role in politics, whether in the conduct, or campaigning, for elections. The Election Commission of India (hereinafter "ECI"), in its guidelines issued on 29th August 2014, recognised that "concerns have been expressed in various quarters that money power is disturbing the level playing field and vitiating the purity of elections."6 What gives rise to these concerns about the role of big money in politics?

These are not mere theoretical debates but are actual problems afflicting the electoral process in India. Money, often from illegitimate sources, results in "undisguised bullying" when it is used (both authorised and unauthorised) to buy muscle power, weapons, or to unduly influence voters through liquor, cash, gifts. Currency notes come first in containers, then in truckloads, moving to wholesale/small retail forms, and finally to suitcases and in people's pockets.

Mr. Qureshi, in his book, documents instances of Returning Officers and Chief Electoral Officers in Tamil Nadu seizing crores of rupees in cash, bundles of saris and dhotis and hundreds of gas stoves.7 It is evident that money is used in myriad of forms in today's election process, but what are its consequences? Why is there a need for election finance reform? The answers to these questions are articulated below.

6. ECI, Guidelines on Transparency and Accountability in Party Funds and Election Expenditure, No. 76/PPEMS/Transparency/2013, 29th August 2014, at
<http://eci.nic.in/eci_main1/PolPar/Transparency/Guidelines_29082014.pdf>

7. Qureshi, supra note 1, at x, xii, 259.

2.5. First, is the undeniable fact that financial superiority translates into electoral advantage, and so richer candidates and parties have a greater chance of winning elections. This is best articulated by the Supreme Court in Kanwar Lal Gupta v. Amar Nath Chawla (hereinafter "Kanwar Lal Gupta, (1975) 3 SCC 646"), when it explained the influence of money as follows:

"money is bound to play an important part in the successful prosecution of an election campaign. Money supplies "assets for advertising and other forms of political solicitation that increases the candidate's exposure to the public."

Not only can money buy advertising and canvassing facilities such as hoardings, posters, handbills, brochures etc. and all the other paraphernalia of an election campaign, but it can also provide the means for quick and speedy communications and movements and sophisticated campaign techniques and is also "a substitute for energy" in that paid workers can be employed where volunteers are found to be insufficient.

The availability of large funds does ordinarily tend to increase the number of votes a candidate will receive. If, therefore, one political party or individual has larger resources available to it than another individual or political party, the former would certainly, under the present system of conducting elections, have an advantage over the latter in the electoral process". [Emphasis supplied]

2.6. The Supreme Court, in its 2014 decision in Ashok Shankarrao Chavan v. Madhavrao Kinhalkar (hereinafter "Ashok Shankarrao Chavan, (2014) 7 SCC 99"), repeated this line of reasoning, where it highlighted how money was used to buy votes:

"55. In recent times, when elections are being held it is widely reported in the Press and Media that money power plays a very vital role. Going by such reports and if it is true then it is highly unfortunate that many of the voters are prepared to sell their votes for a few hundred rupees.

This view of ours is more so apt in the present day context, wherein money power virtually controls the whole field of election and that people are taken for a ride by such unscrupulous elements who want to gain the status of a Member of Parliament or the State Legislature by hook or crook." [Emphasis supplied]

2.7. Second, and connected to the above point is the issue of equality and equal footing between richer and poorer candidates. This can be explained with the help of the Court's observations in Kanwar Lal Gupta on the rationale behind expenditure limits:

"it should be open to individual or any political party, howsoever small, to be able to contest an election on a footing of equality with any other individual or political party, howsoever rich and well financed it may be, and no individual or political party should be able to secure an advantage over others by reason of its superior financial strength."10

10. (1975) 3 SCC 646

2.8. Similarly, in Ashok Shankarrao Chavan, (2014) 7 SCC 99 the Supreme Court noted that:

"it is a hard reality that if one is prepared to expend money to unimaginable limits only then can he be preferred to be nominated as a candidate for such membership, as against the credentials of genuine and deserving candidates."

2.9. The Court's observations are not made in vacuum. A simple perusal of the Lok Sabha 2014 candidates reveals that 27% (or 2208 candidates) of all the candidates were "crorepati candidates," and the average asset of each of the 8163 candidates was Rs. 3.16 crores. The percentage of crorepati candidates increased from 16% in 2009 Lok Sabha elections.12

12. Association of Democratic Reforms, Lok Sabha Elections 2014: Analysis of Criminal Background, Financial, Education, Gender and Other Details of Candidates, 9th May 2014.

2.10. Third, in complete contravention to the various laws and ECI notifications, there is widespread prevalence of black money, bribery, and quid pro quo corruption; this helps candidates fund their campaigns. The Supreme Court, affirming the conclusions of the 2002 report of the National Commission to Review the Working of the Constitution (hereinafter "NCRWC,"),13 recognized this reality in PUCL v. Union of India, (2003) 4 SCC 399 and stated:

13. See Chapter 4, Electoral Processes and Political Parties, para 4.14 on "High Cost of Elections and Abuse of Money Power" in Ministry of Law and Justice, Report of the National Commission to Review the Working of the Constitution (hereinafter "NCRWC Report") at
<http://lawmin.nic.in/ncrwc/finalreport/v1ch4.htm>

"One of the most critical problems in the matter of electoral reforms is the hard reality that for contesting an election one needs large amounts of money. The limits of expenditure prescribed are meaningless and almost never adhered to. As a result, it becomes difficult for the good and the honest to enter legislatures. It also creates a high degree of compulsion for corruption in the political arena.

This has progressively polluted the entire system. Corruption, because it erodes performance, becomes one of the leading reasons for non-performance and compromised governance in the country. The sources of some of the election funds are believed to be unaccounted criminal money in return for protection, unaccounted funds from business groups who expect a high return on this investment, kickbacks or commissions on contracts etc."

[Emphasis supplied]

2.11. Likewise, in Ashok Shankarrao Chavan, (2014) 7 SCC 99 the Court observed:

"48. It is common knowledge as is widely published in the Press and Media that nowadays in public elections payment of cash to the electorate is rampant and the Election Commission finds it extremely difficult to control such a menace. There is no truthfulness in the attitude and actions of the contesting candidates in sticking to the requirement of law, in particular to Section 77 and there is every attempt being made to violate the restrictions imposed in the matter of incurring election expenses with a view to woo the electorate concerned and thereby, gaining their votes in their favour by corrupt means viz by purchasing the votes.....

56. It is unfortunate that those who are really interested in the welfare of society and who are incapable of indulging in any such corrupt practices are virtually sidelined and are treated as totally ineligible for contesting the elections." [Emphasis supplied]

2.12. Candidates and political parties have devised ingenious ways to disguise the illegitimate sources and expenditure of money by holding community feasts, organising birthday parties and marriages, giving costly gifts, or topping up mobile phones. Money is sometimes transferred through cash packets slipped in newspapers, through rural moneylenders and pawnbrokers or by organising 'fake aartis'.16

In fact, Tamil Nadu gained notoriety for the "Thirumangalam formula", when Rs. 5000 was paid per voter in Thirumangalam in Madurai in the 2009 bye-elections and other methods were used to distribute money and earn votes.17

16. Qureshi, supra note 1, at 263-267

17. K. Raju, Dravidian Parties Trying to Thirumangalam Formula, The Hindu, 25th January 2015; L. Srikrishna, AIDMK, DMK Retry Thirumangalam Formula, The Hindu, 19th April 2014; Sarah Hiddleston, Cash for Votes, a Way of Political Life in South India, The Hindu, 16th March 2011; Qureshi, supra note 1, at 245-267

2.13. Fourth, the current system tolerates, or at least does not prevent, lobbying and capture, where a sort of quid pro quo transpires between big donors and political parties/candidates. While the problem of bribery, corrupt practices and black money are important, to some extent, they have distracted from the larger problem of election finance and the capture of government by private individuals and interest groups. The Supreme Court, citing a note from Harvard Law Review on campaign finance regulation, articulated this concern in Kanwar Lal Gupta observing:

"A less debatable objective of regulating campaign funds is the elimination of dangerous financial pressures on elected officials. Even if contributions are not motivated by an expected return in political favours, the legislator cannot overlook the effects of his decisions on the sources of campaign funds." Note, Statutory Regulation of Political Campaign Funds, 66 HARV L. REV. 1259, 1260 (1953).

2.14. Similarly, Justice Kennedy in McConnell v. Federal Election Commission very well, when recognising the problem of solicitation as a corruption, said:

"The making of a solicited gift is a quid both to the recipient of the money and to the one who solicits the payment (by granting his request). Rules governing candidates' or officeholders' solicitation of contributions are, therefore, regulations governing their receipt of quids."19

19. 540 US 93, 124 S. Ct. 619, 157 L. Ed. 2d 491 (2003)

2.15. Unregulated, or under-regulated, election financing leads to two types of capture: the first involves cases where the industry/private entities use money to ensure less stringent regulation, and the money used to finance elections eventually leads to favourable policies.20 The second involves cases of "deeper capture", where through their disproportionate and self-serving influence, corporations capture not just regulators, but also the views of ordinary citizens and what they think of as "public interest."21

20. Teigler, Theory of Economic Regulation, 2(1) The Bell J. of Econ. & Management SC. 3, 11 (1971)

21. Jon Hanson and David Yosifon, The Situation: An Introduction to the Situational Character, Critical Realism, Power Economics, and Deep Capture, 152 U. PA. L. REV. 129, 202-206 (2003)

2.16. Thus, lobbying and capture give undue importance to big donors and certain interest groups, at the expense of the ordinary citizen and violates what the Indian Supreme Court terms, "the right of equal participation [of each citizen in the polity]." R.C. Poudyal v. Union of India, (1994) Supp 1 SCC 1267. In Kanwar Lal Gupta, the Supreme Court expressed its views on this issue when it stated:

"The other objective of limiting expenditure is to eliminate, as far as possible, the influence of big money in electoral process. If there were no limit on expenditure political parties would go all out for collecting contributions and obviously the largest contributions would be from the rich and the affluent who constitute but a fraction of the electorate.

It is likely that some elected representatives would tend to share the views of the wealthy supporters of their political party, either because of shared background and association, increased access or subtle influences which condition their thinking." Kanwar Lal Gupta v. Amar Nath Chawla, (1975) 3 SCC 646

2.17. Finally, the argument for election finance reform is premised on a more philosophical argument that large campaign donations, even when legal, amount to what Lessig terms "institutional corruption",24 which compromise the political morality norms of a republican democracy. Here, instead of direct exchange of money or favours, candidates alter their views and convictions in a way that attracts the most funding. This change of perception leads to an erosion of public trust, which in turn affects the quality of democratic engagement.25

24. Lawrence Lessig, Republic Lost 16, 107-114 (2011)

25. Ibid., at 28, 36

2.18. Having touched upon the need for election finance reform, it is useful to examine the laws regulating election expenditure, disclosure and contribution next.



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