Delhi HC issues show cause notice to Centre over FCRA violations by BJP & Congress

The Court’s position

Earlier in 2014, the Delhi High Court in a landmark judgment held the two national parties guilty of taking foreign funds and asked the central government and Election Commission to take action against them within six months. 

The judgment was announced on a petition filed by ADR and Sarma in 2013. In their petition, the petitioners had claimed that the two parties violated FCRA and Representation of People's Act, 1951 (RPA) since they received donations from Vedanta's subsidiaries - Sterlite and Sesa – which are registered in England and Wales.

The petitioners argued that Congress and BJP violated Section 29 B of the RPA, which prohibits political parties from taking donations from government companies and foreign source. Moreover, the donations also violated the FCR Act of 2010.

The court in its judgment gave two directions to the central government and said: “The second direction would concern the donations made to political parties by not only Sterlite and Sesa but other similarly situated companies/corporations. Respondents No.1 and 2 would relook and reappraise the receipts of the political parties and would identify foreign contributions received by foreign sources as per law declared by us here in above and would take action as contemplated by law.”

After the court pronounced its order, Congress and BJP filed separately Special Leave Petitions in the Supreme Court on 26 June and 26 August 2014, respectively, and consequently the matter became sub judice.

Failure to take action

Thereafter, the apex court dismissed the SLPs on 29 November 2016, turning the judgment of the High Court as final and binding. Despite the dismissal of the SLPs, the central government failed to take any action against the two political parties.

Thereafter, ADR wrote letters to the Home Ministry and Election Commission urging them to implement and comply with the order of the High Court as contemplated by the law. Subsequently, the petitioners filed the contempt petition arguing that the central government has failed to take action against the offenders even after three years of the judgment being passed.

Earlier, in order to avoid any action against the two parties, the central government, ruled by the BJP, made an amendment to the Foreign Contribution (Regulation) Act (FCRA), 2010 through the Finance Act, 2016 (Act No. 28 of 2016) changing the definition of the “foreign source”.

In 2016, the government added a provision in the FCRA Act, 2010, which read: "Provided that where the nominal value of share capital is within the limits specified for foreign investment under the Foreign Exchange Management Act, 1999, or the rules or regulations made thereunder, then, notwithstanding the nominal value of share capital of a company being more than one-half of such value at the time of making the contribution, such company shall not be a foreign source.”

Deliberate inaction

In response, the petitioners argued: “Since the writ petition drew attention mainly to donations made to political parties for the period up to the year 2009, this Hon’ble Court recorded that its concern is not with the Foreign Contribution (Regulation) Act, 2010 which has come into force on September 26, 2010 and the discussion of the legal position would be with respect to the Foreign Contribution (Regulation) Act, 1976.”

Further they claim that in the light of Section 6 of the General Clauses Act, 1897, the two parties cannot claim relief in view of the repeal of the FCRA of 1976. They maintain that according to Section 2 (e) (iii) of the FCRA 1976, the donations made by Sterlite and Sesa fall within the definition of “foreign source” since these companies are subsidiaries of Vedanta which is registered in the United Kingdom.

“It is submitted that donations made by both Sterlite and Sesa would come under the definition of 'Foreign Sources' as both these companies have more than one half of their nominal value of its share capital held by a corporation i.e. Vedanta, incorporated in a foreign country i.e. The United Kingdom,” read the contempt petition.

The petitioners claimed that the central government willfully disobeyed the court’s order and is liable for contempt of the court for “willfully and deliberately disobeying” the judgment. They sought contempt proceedings be initiated against the government and the court should “pass any other or further orders” as deemed fit.