SC admits plea challenging foreign funding to parties, issues notice

The Supreme Court issued a notice to the government on Monday to respond to a petition that challenges a change in law giving political parties immunity from being prosecuted for accepting foreign funding.

The Foreign Contributions Regulation Act (FCRA) had prohibited Indian political parties from receiving funds from sponsors based abroad till the government dropped the restriction in 2016 using the finance bill that year. This year, the government made the change retrospective — making legal any foreign funds that political parties illegally received before 2016.

A bench led by Chief Justice Dipak Misra asked the Centre to file its response to the plea filed by Association for Democratic Reforms and former secretary to the Government of India, EAS Sarma, who demanded that the 2018 amendments be struck down as being “void”, “illegal” and “unconstitutional”.

Advocate Prashant Bhushan, appearing for the petitioners, said the amendments were introduced to overturn a March 2014 order by the Delhi High Court, which indicted the Bharatiya Janata Party (BJP) and the Congress for having illegally taken foreign donations in violation of the old FCRA law.

The BJP refused to comment on Monday’s notices.

The Congress said the top court was “well within its right to review any law”. “The primary objective of FCRA laws vis-a-vis political parties is to ensure transparency in funding. As far as the source of funding should is not dubious and unexplainable, the location of remittance should not matter. Money Laundering Laws & IT Laws along with FCRA ensure that illegal money does not seep into political parties’ treasury,” a Congress spokesperson said.

The now-scrapped FCRA clause originally disallowed parties from accepting foreign donations. It even defined a “foreign source” as a company that has “more than one-half of the nominal value of its share capital held” by “corporations incorporated in a foreign country or territory.”

The 2016 amendment allowed foreign-origin companies to fund non-government organisations. It redefined foreign companies as “Indian” if their ownership in an Indian entity was within the foreign investment limits prescribed by the government and paved the way for donations to political parties.

The way amendments were brought in also violates the doctrine of separation of powers, the petitioners alleged. They were introduced through the new Finance Act, 2018, which was passed as a Money Bill, bypassing the Rajya Sabha.

Petitioners said the amendment does not qualify as Money Bill.

They also said the amendments would lead to creation of shell companies and give rise to benami transactions. By extending the applicability of a retrospective amendment from 1976, the legislature has tried to breach the basic structure of Constitution, the petitioners said.