Finance Minister Arun Jaitley at Parliament on Friday. (Express photo by Prem Nath Pandey) Finance Minister Arun Jaitley at Parliament on Friday. (Express photo by Prem Nath Pandey)

The government has for the second time introduced amendment to the Foreign Contribution Regulation Act (FCRA) in the finance Bill, paving the way for both the BJP and Congress to escape legal scrutiny for receiving foreign contribution since 1976, the year FCRA regulations were introduced.

In Part XIX of the list of amendments in the 2018 finance Bill, the “Amendment to the Finance Act, 2016”, entry number 217, reads: “In Finance Act, 2016, in section 236, in the opening paragraph, for the words, figures and letter ‘the 26th September, 2010’, the words, figures and letter ‘the 5th August, 1976’ shall be substituted”. The FCRA Act, 1976, commenced on August 5, 1976. This was later repealed and replaced with FCRA, 2010.

In 2016, the government for the first time used the finance Bill to bring amendments to the FCRA, 2010 to change the definition of what constitutes a foreign company in such a way that key beneficiaries of UK-based Vedanta group — the BJP and Congress — would not face legal scrutiny for donations received from 2010 onward. However, both the political parties were allegedly receiving foreign funds for political activities from Vedanta from 2004 to 2012.

“The retrospective amendment in 2016 did not apply to donations prior to 2010 and the Association for Democratic Reforms (ADR) moved a contempt petition against the Ministry of Home Affairs (MHA) pointing out that the directives of the High Court against the two political parties which received foreign funds were not complied with,” an official said on condition of anonymity.

“After Foreign Direct Investment (FDI) norms were relaxed, there were anomalies regarding the definition of foreign companies under the FCRA which were not amended. After seeking legal opinion, it was decided to amend the 1976 Act in the 2018 finance Bill,” the official explained.

The FCRA of 1976 defined a foreign company as one with over 50 per cent foreign ownership, thereby disallowing the companies owned by foreign nationals or Indian-origin people based abroad and with foreign citizenship to fund and influence political parties in India.

As per Section 29 B of Representation of the People Act 1951, any political party is prohibited from accepting donation from foreign sources. It states, “Provided that no political party shall be eligible to accept any contribution from any foreign source defined under clause (e) of section 2 of the Foreign Contribution (Regulation) Act, 1976 (49 of 1976).”

However the RP Act carries no penal provision in case a party is found guilty of accepting foreign funding. According to EC sources, action against a political party can only be taken by the Home Ministry under FCRA or by CBDT by not giving them any tax exemption on the money received. The EC has no role in this as the law only states what is a violation and the Commission has no powers to act in case of violation. The government is expected to act under other laws.

As a Finance Bill is a money Bill, it will not be difficult for the ruling BJP to get it passed in Parliament. Once passed by the Lok Sabha, a money Bill is sent to the Rajya Sabha for its recommendations along with the Speaker’s certificate that it is a money Bill. The Rajya Sabha can neither reject nor amend the Bill, and must return it within 14 days, after which the Lok Sabha may choose to accept or reject all or any of its recommendations. In either case, the Bill is deemed to have been passed by both Houses.

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