FCRA rules amendments to help political parties

4 Apr 2016 | Written by Achin Garg; Edited by Gaurav
Political parties and the FCRA

The Centre's decision to amend the Foreign Contribution Regulation Act (FCRA) has invited allegations of helping political parties- both BJP and Congress- to escape scrutiny over accepting foreign funds.

The finance minister, during the budget 2016-17, had announced an amendment to the FCRA rules allowing political parties to receive foreign funds.

The amendment will be effective in retrospective effect i.e. from 26th Sept'10.

In context: Political parties and the FCRA

What is the Foreign Contributions Regulation Act (FCRA)?

The FCRA seeks to regulate foreign funding received by individuals and organizations in India. The rules require any such individuals/organizations to declare the quantum and the channels of utilization of these funds.

Sep 2010Parliament passes FCRA

The Foreign Contribution Regulation Act was passed by the parliament in 2010.

The Act prohibits political parties from accepting contributions from foreign sources.

It also restrained them from accepting donations from companies that are registered in India but have majority ownership with foreigners.

Further, any company with a Foreign Direct Investment (FDI) of more than 50% was deemed to be a foreign source.

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Congress and BJP allegedly violated FCRA

2013Congress and BJP allegedly violated FCRA

Charges had been levelled against both Congress and Bhartiya Janta Party (BJP) for violating the FCRA and illegally accepting foreign funds for political activities.

The two parties had accepted donations from Sterlite Industries India Ltd. and Sesa Goa Ltd. between 2004-2012.

Both the companies are subsidiaries of UK-based Vedanta Resources Plc which is owned by Indian billionaire Anil Agarwal.

Mar 2014ADR files petition against Congress and BJP

The Association for Democratic Rights (ADR) filed a petition in the Delhi High Court against the Congress and the BJP for violating FCRA norms.

The court held that donations received by these 2 parties were illegal and violated the FCRA.

The court directed the government and the Election Commission to take action against them.

However, the parties challenged the order in the Supreme Court.

SC refuses to stay Delhi HC order

The Supreme Court had declined to stay the Delhi HC order in Aug'15 and had asked the government to respond at the earliest. Now, the case is likely to be heard in the Supreme Court on 12 Jul'16.

Sep 2015The need for amendment

The amendment to FCRA was initiated in Sept'15.

22 companies including Infosys, Axis bank, etc. had then submitted to the finance ministry that FCRA rules prevent them from spending the mandated 2% of the company's profits on Corporate Social Responsibility.

The FCRA classifies these funds as coming from a foreign source as these companies have a majority of stakes owned by foreign entities.

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4 Apr 2016FCRA rules amendments to help political parties

Criticism Amendment faces severe criticism

The petitioners feel that the proposed amendment in the FCRA may nullify the Supreme Court case and allow both the parties to escape unhurt.

Meanwhile, the Aam Aadmi Party demanded the immediate withdrawal of the amendment and termed it as an "attempt to subvert justice".

AAP also called the amendment a "bailout" for BJP and Congress and asked other parties to oppose the move.

5 Apr 2016Take action against Cong, BJP: Delhi HC

The Delhi High Court has asked the Centre and the Election Commission to take appropriate action against the Congress and the BJP for violating FCRA guidelines.

The court ordered the Home Ministry to reappraise the receipts of the political parties to identify foreign donations and take action within six months.

The court was responding to a PIL filed by the Association for Democratic Reforms.

16 May 2016FCRA amended, political parties can receive foreign funds

The parliament voted to amend the Foreign Contribution Regulation Act 2010.

As per the new amendment, "donations made by foreign companies to political parties will not attract provisions of the FCRA, 2010."

Minister of State for Home Kiren Rijiju said different definitions for foreign companies existed under the Companies Act, FCRA and India's FDI policy, which has now been rectified with this amendment.

01 Dec 2016SC: BJP, Congress withdraw challenge to Delhi HC

The Congress and the BJP withdrew their petitions challenging the validity of a Delhi HC verdict that held them guilty of violating FCRA norms.

The SC contended that if the parties wanted to challenge the Delhi HC, the SC would have to ask the Election Commission to look into the matter.

Following this, both parties withdrew their petitions.