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Report No. 170

4.1.3.1. By a subsequent Amendment Act, (Act 40 of 1975), the words "the date of publication of the notification calling the election" in section 77(1) were substituted by the words "the date on which he has been nominated". Explanation III was also inserted in sub-section (1) of section 77.

4.1.3.2. The aforesaid amendments have the effect of nullifying the object and purpose underlying section 77(1) read with section 123(6) of the Act. The amendments create an escape clause and have provided an easy way of circumventing the legal requirement. Not only the political party which has sponsored the candidate, but the friends, relatives and supporters of a candidate can spend any amount on the election of the candidate and yet all the amount would not fall within the expenditure incurred by the candidate or his agent.

The validity of Explanation I was challenged before the Supreme Court in P. Nallappa Thampy v. Union of India (AIR 1985 SC 1133) but the challenge failed. It may perhaps be appropriate to point out that upholding the constitutional validity means affirmation of the legislative power and of the provision not being violative of the constitutional limitations. It in no way amounts to a pronouncements upon the desirability or necessity of such a provision.

4.1.4. More than one decision of the Supreme Court has pointed out the undesirability of the said Explanation, the mischief inherent in it and stressed the need to delete the same. It would be sufficient to cite two decisions of the Supreme Court, namely C. Narayanaswamy v. C.K. Jaffer Sharief (1994 (Supp) 3 SCC 170) and Gadakh Yashwantrao Kankarrao v. Balasaheb Vikhe Patil (1994(1) SCC 682. The observations in the first mentioned decisions are to the following effect.

"As the law stands in India today anybody including a smuggler, criminal or any other anti-social element may spend any amount over the election of any candidate in whom such person is interested, for which no account is to be maintained or to be furnished and any such expenditure shall not be deemed to have been expenditure in connection with the election, incurred or authorised by the candidate or by his election agent for the purpose of sub-section (1) of Section 77, so as to amount to a corrupt practice within the meaning of sub-section (1) of section 77, so as to amount to a corrupt practice within the meaning of sub-section (6) of section 123.

It is true that with the rise in the costs of the mode of publicity for support of the candidate concerned, the individual candidates cannot fight the election without proper funds. At the same time it cannot be accepted that such funds should come form hidden sources which are not available for public scrutiny. According to us, sub-section (6) of section 123 declaring "incurring of authorising of expenditure in contravention of section 77" a corrupt practice has lost its significance and utility with the introduction of the Explanation1aforesaid which encourages corruption by underhand methods.

If the call for "purity of elections" is not be reduced to a lip service or a slogan, then the persons investing funds, in furtherance of the prospect of the election of a candidate must be identified and located. The candidate should not be allowed to plead ignorance about the persons who have made contributions and investments for the success of the candidate concerned at the election. But this has to be taken care of by Parliament.

4.1.4.1. Similarly, in the latter decision, it was observed:

"The existing law does not measure up to the existing realities. The ceiling on expenditure is fixed only in respect of the expenditure incurred or authorised by the candidate himself but the expenditure incurred by the party or anyone else in his election campaign is safely outside the net of legal sanction. The spirit of the provision suffers violation through the escape route. The prescription of ceiling on expenditure by a candidate is a mere eye-wash and no practical check on election expenses for which it was enacted to attain a meaningful democracy.

This lacuna in the law is, however, for the Parliament to fill lest the impression is reinforced that its retention is deliberate for the convenience of everyone. If this be not feasible, it may be advisable to omit the provision to prevent the resort to indirect methods for its circumvention and subvervision of the law, accepting without any qualm the role of money power in the elections. This provision has ceased to be even a fig leaf to hide the reality."

4.1.5. It is a matter of regret that so far no action has been taken by the Parliament in the light of the observations of the Supreme Court.

4.1.6. In the year 1990, the then Law Minister, late Shri Dinesh Goswami, had prepared a draft amendment Bill, based upon the consensus of all the political parties. The said bill provided inter alia for deletion of the Explanation I to section 77(1). Though provisions in the said bill have been given statutory shape by the Parliament by enacting Act 21 of 1976, the particular provision in the bill providing for deletion of Explanation I to section 77 was not enacted.

Shri Som Nath Chatterjee, M.P., presided over the session devoted to Election Expenses and State Funding at the National Seminar held on 24th January, 1999.He stressed the necessity of free and fair elections for a successful democracy but regretted that over the last few decades money power, muscle power and black money had been troubling this nation.

There is a feeling among the people that some political parties are getting unfair advantage in the elections because of their having larger financial sources. For this reason, good persons were not able to contest, he said, Shri K.K. Venugopal, Senior Advocate, Supreme Court, and an expert on constitutional law, who was the keynote speaker at the said seminar put forward certain very pertinent ideas which may be referred to hereinbelow.

4.1.6.1. In the very scheme of things and as pointed out by the Supreme Court in its various decisions, the bulk of the funds contributed to political parties would come only from business houses, corporate groups and companies. Such a situation sends a clear message from the political parties to big business houses and to powerful corporations that their future financial well being will depend upon the extent to which they extend financial support to the political party. Indeed most business houses already know where their interest lies and they make their contributions accordingly to that political party which is likely to advance their interest more.

Indeed ensure of knowing which party will come to power, they very often contribute to all the major political parties. Very often these payments are made in black money. Section 293A of the Companies Act, 1965, as inserted in 1969, imposed a ban on the companies making contributions to any political party or for any political person or for any political purpose. Unfortunately, this ban was lifted in 1985 by amending the Act. Under the present provision, a company is permitted to contribute amounts to a political party or for a political purpose to any person provided that the amount does not exceed five per cent of its average net profits.

In the case of an Indian company of a multinational stature or in the case of any big business group, five per cent would mean a mind-boggling figure. As far back as 1957, Chagla C.J. pointed out the danger inherent in permitting the companies to make contributions to political parties (Koticha's case(1957) 27 Company Cases 604). He warned that "it is a danger which may grow apace and which may ultimately overwhelm and even throttle democracy in the country". As a matter of fact, an attempt made in 1976 to remove the ban imposed by Section 293A (as initially enacted) failed.

It is amusing to note the 'Statement of Objects and Reasons' appended to the bill prepared in 1976. It stated that the ban was proposed to be lifted "with a view to permit the corporate sector to play a legitimate role within the defined norms in the functioning of our democracy!" Mr. Venugopal raised an interesting question of law in this behalf.

He said that according to section 7 of the Prevention of Corruption Act 1988, "whoever, being, or expecting to be a public servant, accepts or obtains or agrees to accept or attempts to obtain for any person, for himself or for any other person, any gratification whatever, other than the legal remuneration, as a motive or reward for doing or forbearing to do any official act or for showing or forbearing to show, in exercise of his official functions, favour or disfavour to any person or for render or attempting to render any service or disservice to any person, with the Central Government or any State Government or Parliament or the Legislature of any State or with any local authority, corporation or Government company referred to in clause (c) of section 2, or with any public servant, whether named or otherwise, shall, be punishable.".

A Member of Parliament or a Member of Legislature is a public servant. A candidate contesting an election to Parliament or Legislative Assembly is a person who is expecting to be a public servant. If he becomes a public servant and then a minister, or even otherwise if it is found at any time in future that he has returned the favour of being funded by a business house or a company, directly through himself or any other person for rendering any service with the Central Government or any State Government etc., he would be guilty of the aforesaid offence of corruption for which a mandatory imprisonment of not less than 6 months is provided which may extend to 5 years. After the decision of the Supreme Court in the case of A.R. Antulayl(AIR 1984 SC 718), he said, it is open today even for a private individual to file a criminal complaint under the Prevention of Corruption Act.

4.1.6.2. We endorse the views of Shri K.K. Venugopal in their entirety.

4.1.7. Shri Shiv Raj Patil, M.P., and a former Speaker, Lok Sabha, also stressed the necessity of curbing the influence of money power in elections.

4.1.8. It must be mentioned at this stage that the above proposal was opposed by Shri Kapil Sibal, M.P. Indeed he was the only dissenting voice. The reason given by him was that the suggested removal of ban on donations by companies would encourage the parties and persons to act behind the curtain and that influence of black money would be more whereas under the existing system the funding of political parties by companies is open. We are of the opinion that the reason given is hardly acceptable and runs against the uniform authority of the Supreme Court and the unanimous opinion of all other participants including Shri Ram Jethmalani, Union Minister, Shri P.P. Rao, Senior Advocate, Shri C.R. Irani (Editor, The Statesman) and several other intellectuals.

4.1.9. It is in the above circumstances that the Law Commission of India had suggested in its working paper that the said Explanation be deleted. In the seminars held and in the responses received by the Commission, unanimous support has been given to the proposal of the law Commission. There has been no dissenting voice, except of Shri Kapil Sibal, as mentioned hereinabove.Accordingly, we reiterate our proposals along with the substitution of definition of "original political party" by the new definition of "political party".

4.1.10. In this connection, it is necessary to refer to the Report of the Indrajit Gupta Committee appointed by the Government of India to go into the question of State Funding and Election Expenses. So far as deletion of Explanation I in section 77(1) is concerned, the committee has not made any specific recommendation (vide para 10 of Chapter VI). The Report says that though some parties were in favour of deletion of the Explanation, certain other parties did not agree to it.

It is not clear in what circumstances and for what reasons the political parties, which had supported the said deletion in 1989-90 (on the basis of which the 1990 Bill aforementioned provided for such deletion) have now turned round and are opposing the deletion. It is difficult to perceive any justifiable reason behind the said opposition when everyone is agreed that the objective of electoral process is to obtain a free and fair ascertainment of the will of the people. The Law Commission hopes and trusts that in the interest of a healthy parliamentary democracy, those political parties, which are now opposed to the said deletion, will reconsider and revise their opinion and support the said deletion as indeed they had done in the years 1989-1990.



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