A danger to democracy Corporate funding of elections should be banned

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?