Sunday, August 14, 2022

The Rs20,000 Loophole

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Making political parties transparent about funding has not been easy. As they don’t need to reveal the source of contributions which are Rs20,000 or less, they often get away. Can this loophole be plugged?

By Bhavdeep Kang

The world’s largest democracy reveals a vulgarly feudal character when political parties are faced with the demand for transparency and accountabi-lity. Voters, these parties maintain, are not entitled to ask how political organizations mobilize resources and what they do with them. Ours but to vote sans reason why; theirs not to make reply (apologies to Alfred Lord Tennyson).

The BJP government, in what amounted to an inexplicable U-turn, told the Supreme Court last month that political parties did not fall within the ambit of the Right to Information (RTI) Act, 2005, because they were not “public authorities”. The affidavit also underlined a crying need for amendment to the Income Tax 1961 and Rep-resentation of People (RPA) 1951 Acts, in order to ensure accountability and transparency in the funding of political parties.

What the 98-page (including annexures) affidavit to the SC did not explain is why, for two years, political parties defied an explicit order of the Central Information Commission (CIC), a judicial body, to respond to RTI queries. They did not appeal against the CIC order in any court of law; they simply ignored it. Unlike any other citizen or organization in the country, they flouted a judicial order without fear of prosecution. The CIC then came up with the stunning observation that it lacked the power to enforce compliance by the political parties.
The UPA government’s only response to the CIC order was to move a Bill aimed at amending the RTI Act in order to—effectively—grant immunity from public scrutiny to political parties. The Bill lapsed after the BJP took a nuanced stand saying it was not opposed to greater transparency.


However, after coming to power, it appears to have undergone a change of heart. Forced to respond when the SC issued a notice to the political parties and the Union of India on a petition by the Association for Democratic Reforms (ADR) and Delhi resident Subhash Chandra Aggarwal for enforcement of the CIC order, it reiterated the UPA’s stand.

The government claimed in its affidavit that political parties were established under the RPA and not under the Constitution or any other law. Hence, they could not be treated as public authorities, despite getting huge financial support from governments.

Even if that argument is accepted, political parties still have to submit their accounts to the Election Commission and file their income tax returns. The catch here is that they do not need to reveal the source of contributions amounting to `20,000 or less. Under Section 29C of the RPA, the treasurer of a political party must declare “contribution in excess of twenty thousand rupees received by such political party from any person in that financial year”.
This provision is in consonance with the Section 13A of the IT Act, which states: “In respect of each such voluntary contribution in excess of twenty thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution”.

Studies by the ADR, co-petitioner in the matter, have revealed that a substantial portion of funds raised by political parties comes from the sale of coupons, printed and sold by them in question and hence, not open to public scrutiny. The EC and IT authorities can only accept the party’s claims on funds generated through coupon sales—provided, of course, that each individual contribution is Rs20,000 or less.

By the same token, if a political leader is garlanded with currency notes, he need not declare it—provided the garland costs `20,000 or less. And even if it’s worth much more, who is to know? The money may go into the private coffers of the neta or the party tijori.
Bahujan Samaj Party chief Mayawati, known for her flashy jewelry and vast properties, has used this loophole to excellent effect. She informed the authorities that her party mobilized resources through “small gifts and contributions” from its vast base of poor supporters, which formed the source of her immense income.
Chartered accountant Amod Agarwal supports the government stand. “In the light of existing laws, the affidavit is quite correct. Political parties submit their accounts to the EC and file IT returns. Either of these two authorities is free to question them, as per the law”.

BJP’s Sudhanshu Mittal, who was regarded as a fund manager par excellence in NDA I, agrees. “The Rs20,000 question is a different issue. If you want to address that, you will have to take another approach,” he says.

Eminent lawyer and anti-corruption crusader Prashant Bhushan, who represents the petitioners, agrees that plugging the `20,000 loophole would go a long way in facilitating transparency in the funding of political parties. Aggarwal believes a far better idea would be at least partial state funding of elections, as suggested by the Inderjit Gupta and Dinesh Goswami committees. It would also go a long way in eliminating the deployment of black money, largely raised through real estate and narcotics (earlier through excise).
The ADR found that even with the protection of the `20,000 clause, parties were unable to submit proper accounts. In many cases, the PAN numbers of contributors were not furnished, money received through cheque was not accounted for and the party claimed to have given money to candidates who denied having received it. Adequate grounds, one would have thought, for pena-lizing them.
Political parties have opposed accountability under RTI by diverting the debate to a question on their functioning rather than financing. They claim that malicious RTI queries by rivals will affect their ability to conduct business freely.

As for revealing sources of funds, they say the anonymity of contributors must be maintained in order to protect that privacy. Those who contribute to a particular political party may fear reprisal from rival parties if their identities are made known.

Contrast this with the methods adopted by the Aam Aadmi Party. A journalist colleague describes his experience: “A bunch of young IT professionals were on a fund-raising mission in Bangalore. I offered a small contribution—`500—in cash, on condition that I would not have to give them my name or phone number. They refused. Finally, I gave them a friend’s name and number, which they duly noted. Within hours, he received a text thanking him for his contribution.”
The AAP has called for a review of the center’s stand, pointing out that it had not bothered to call an all-party meeting before filing its affidavit before the apex court.

The nod-and-wink attitude to fund-raising by political parties was exemplified by an incident at the BJP’s headquarters—11, Ashok Road—in December 2008. An estimated `2 crore went missing from the party’s vault. Party officials raised an outcry, but no police complaint was filed.

Questions raised at the party’s media briefing were brushed aside with a brief statement to the effect that the matter was being investigated internally. Clearly, it was a case of easy come, easy go.

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