How to curb ‘invisible money’

Reforms suggested by the Election and Law Commissions must be given a chance

Updated - August 03, 2017 12:34 am IST

Published - August 03, 2017 12:02 am IST

The statement by Union Finance Minister Arun Jaitley recently that the Election Commission has failed to curb ‘invisible money’ in polls is remarkable. It is unusual for a senior Minister to make adverse remarks against a constitutional body in public. However, there are factual problems with his statement.

The Election Commission (EC) works in accordance with Article 324 of the Constitution of India, the Representation of the People Act (RP Act), 1951 and the rules framed by the government thereunder, and various judgments of the Supreme Court and High Courts. The power to frame rules under the RP Act has not been given to the EC by successive governments, which includes the current one.

Action and reaction

Most of the reform proposals by the EC have not been acted upon. It sent 22 proposals in 2004. In December 2016, it sent 47 proposals including those for “Election expenses and election petitions”, “Election campaign and advertisements”, and “Reforms relating to political parties”. The government’s actions, if any, are not available in the public domain.

There are instances where the EC has recommended the same reform repeatedly only to have it rejected. There are also instances where the Supreme Court has directed reforms in its decisions, with the government and Parliament attempting to amend laws to prevent implementation of the judgments.

Now to the electoral bonds the Finance Minister was referring to. To what extent these bonds will make ‘invisible money’ visible was explained by him after he presented the Budget. In the media interaction, he said: “These bonds will be bearer in character to keep the donor anonymous.” Since the reference to electoral bonds in the Budget speech was under the heading “Transparency in Electoral Funding”, it led some commentators to ask whether ‘transparency’ and ‘anonymity’ are the same. Given his statement on the EC, it appears as if ‘anonymity’ is expected to increase ‘visibility’.

The other significant proposals that the Budget made were (a) to remove the limit of 7.5% on profits that a company can donate to a political party, and (b) to remove the requirement that the company making a donation to a political party disclose the name of the party and the amount donated. Whether these two proposals will reduce ‘invisibility’ or increase it is best left to a readers’ judgment.

The Minister also said, “I asked political parties, both orally in Parliament and in writing, to offer a better suggestion to me… not one has come forward to date because people are quite satisfied in the existing system.”

It should be obvious that political parties will have no objection to the electoral bonds system as it allows them to raise money with ‘anonymity’. But it is interesting that the Minister should ask this question to parties which stand to lose ‘invisible money’ if it is eliminated. So who else can or should the Minister ask? Logically, it is the Election Commission and the Law Commission of India which have both applied their minds to the issue repeatedly.

It must be noted that the outgoing Chief Election Commissioner had expressed misgivings about electoral bonds.

The Law Commission studied the issue in 1998-99 and presented its comprehensive assessment and proposals in its 170th report, titled ‘Reform of the Electoral Laws’. This paragraph captures the essence of its recommendations: “On the parity of the above reasoning, it must be said that if democracy and accountability constitute the core of our constitutional system, the same concepts must also apply to and bind the political parties which are integral to parliamentary democracy. It is the political parties that form the government, man the Parliament and run the governance of the country. It is therefore, necessary to introduce internal democracy, financial transparency and accountability in the working of the political parties.”

If that is considered outdated, the Law Commission issued another report in March 2015 (its 255th) wherein it devoted 64 pages to “Election finance reform”. This also contains valuable recommendations to reform the election finance system, but then there has to be a willingness to do so. The willingness seems to be to ensure anonymity. There are also other indicators of the will of the government.

The RTI way

A logical and simple way of introducing “financial transparency and accountability in the working of the political parties”, and recommended by the Law Commission, is to bring them under the Right to Information (RTI) Act, 2005. The Central Information Commission (CIC) had said in a full bench decision in June 2013 that six national political parties were indeed ‘public authorities’ under the RTI Act as they fulfilled all conditions specified in Section 2(h) of the RTI Act which defines ‘public authority’.

Despite the June 2013 decision, these parties, including the ruling party now, refused to accept RTI applications, blatantly defying the unanimous decision of a full bench of the highest statutory authority to implement a law passed unanimously by Parliament. They did not even deign to respond to notices by the CIC, of non-compliance. Another full bench of the CIC expressed its inability to get its own “legally correct” decision implemented. It also referred to it as “an unusual case of wilful non-compliance”.

When a petition was filed in the Supreme Court to get the decision of the CIC implemented, the government said in a sworn affidavit submitted to the Supreme Court that political parties should not be under the purview of the RTI Act. The petition is still pending in the Supreme Court.

The stand of the government in the Supreme Court is further evidence of what the government is not willing to do.


Jagdeep S. Chhokar is a former Professor, Dean, and Director in-charge of the Indian Institute of Management, Ahmedabad. The views expressed are personal

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