A danger to democracy
Corporate funding of elections should be banned
Rajindar Sachar
In a democracy holding regular and free
elections to the state legislatures and Parliament is the minimum condition.
But more important is to devise laws and policies so that representatives are
elected in a transparent manner uninfluenced by undesirable elements,
especially money power of the corporate sector.
These observations are not unnecessarily
panicky or woolly. They arise from the reality of the present situation as
reflected in the last parliamentary election. No doubt, the BJP represents the
majority on its own in the Lok Sabha. But with only 31% of the votes it cannot
claim that it thereby represents the majority in the country. Thus the present
system of "first past the post" may technically result in a majority
in Parliament; in reality it may be a minority view in the country. This danger
was flagged as far back as 1789 by French philosopher Mirabeau. That is why we
have the "list system of voting" in many parts of world, including
Germany, and it fairly represents the voter's preferences proportionately in
legislatures. It is heartening to note that the Socialist Party (India) in a memorandum
to the Lok Sabha Speaker has recommended a change to the list system under
which, depending on the proportion of votes obtained, each party gets
proportionate seats, thus reflecting correctly the sentiments in the country.
Another gravely urgent reform needed is with
respect to the part played by big money in elections - an undesirable
consequence. As it is, available information indicates that 90% of political
funding in 2013-2014 came from big corporates in the country. Under the present
law a big loophole is there: only contributions above Rs 20,000 are required to
be shown by the parties in their returns. This is a sure invitation to black
money and is a big help to the Congress and the BJP. Though Rs 991 crore was
donated to political parties, they disclosed the names of 10% donors only,
taking cover under the law that requires naming only those who pay above Rs.
20,000. Obviously black money plays an important part in election funding of
the major political parties.
That election funding by the corporate sector
muddles the election process cannot be denied. As far back as 1960 MC Chagla,
Chief Justice of the Bombay High Court, warned that "It is a danger which
may grow apace and which may ultimately overwhelm and even throttle democracy
in this country." Similarly, the Calcutta High Court has warned: "It
will mark the advent and entry of the voice of the big business in politics and
in the political life of the country". Regrettably, Parliament ignored the
warning and rather added in 1960 Section 293A to the Companies Act, 1956,
permitting the corporate sector to contribute to political parties 5% of their
average profits. The danger signs were visible immediately and the Santhanan
Committee Report, 1962, recommended a total ban on all corporate donations to
political parties. But it went unheeded.
However, in 1969, pressed by Socialist leader
Madhu Limaye, MP, the Congress government was forced to admit that corporate
contributions had a tendency to corrupt political life, and therefore passed a
law banning corporate contributions. To review the Companies Act and the
Monopolies Act, the Government of India in 1978 constituted a high-powered
expert committee headed by a high court judge. Amongst its members were some of
the top lawyers, industrialists, trade union leaders and accountants. It
unanimously recommended that the ban on donations by companies to political
parties should continue: "The Report was apprehensive that if corporate
donations were permitted, the danger to democracy can be well visualised".
Notwithstanding the warning, Section 293A was amended in 1985 and the Boards of
Directors were authorised to make contributions to political parties. Rather
the law has been made easier now. Section 182 of the Companies Act 2013
authorises only the Board of Directors (without the approval of the general
body) to make political contributions of up to 7.5% of its average net profits
during the three immediately preceding financial years.
In the USA up to 2010 the Supreme Court had
banned corporate expenditure on candidates' elections (Austin case). But then
in "Citizen United" the U.S. Supreme Court (2014) differed with the
earlier view by a narrow margin (5-4) verdict. It held that corporations have
the same political speech rights as individuals under the First Amendment
(similar to Article 19(1) (a) of our Constitution) and thus struck down a
Federal law and also a law in 24 States banning the corporate sector from
funding elections.
This decision has been widely criticised in the
USA. The critics have favoured the earlier judgment in the Austin case which
had had justified the ban on corporate funding by saying "that large
aggregations of wealth, accumulated with the help of the corporate firm, may
have corrosive or distorting effects, thus justifying a ban on corporate
independent expenditures". Predictably the decision in the Citizen United
case has led to strong criticism in US. Critics have commented that "the
court's decision was a foolish misstep which threatens the fabric of our nation.
The ruling will bring a future in which the government is no longer of the
people, for the people, and by the people, but rather "of the people, by
the corporations, [and] for the corporations"(emphasis added). Thus the
danger of a government working as the executive committee of big corporates in
our country is already intrudingly manifest.
There is, however, no
possibility in India of a ban on corporate funding being held illegal on the
ground adopted by the US courts that the corporations' right to speech is
curtailed. This is because our Supreme Court in a series of decisions from 1963
has categorically held that Article 19 applies only to citizens and not to
corporations (as they are not citizens) and therefore the corporate sector
cannot invoke Article 19 of the Constitution. Will the Opposition show its
concern by moving for such a ban? Or will they also, like the BJP, want to keep
intact their links with corporates?
