CONCEPT - FCRA AMENDMENTS

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 CONCEPT - FCRA AMENDMENTS

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• BASIC FACT
• The Representation of the People Act (RPA) and the Foreign Contribution (Regulation) Act (FCRA) bar political parties from receiving foreign funds
• FCRA enacted in 1976 : FCRA was enacted in 1976 to handle the strong effort by foreign powers to influence the social fabric and polity of India through infusion of funds and intangible favours being extended to political parties, civil society orgns., and the media.  The Cold War was also on, where both the blocs were trying to influence a Non-Aligned India.
• Repealed and Re-enacted in 2010 : Given the political realities of the time, the legislators across party lines had united then to enact the Foreign Contribution (Regulation) Act, 1976. It was later repealed and re-enacted as the Foreign Contribution (Regulation) Act, 2010.
• What did the Law say : Section 29(b) of RPA, 1951 read with Section 4(1) (e) of the FCRA prohibited political parties from receiving any ‘foreign contribution’. 

1. The term ‘foreign contribution’ has been defined under Section 2(c) of the FCRA as the “donation, delivery or transfer made by any foreign source...” 
2. ‘Foreign Source’ has been defined under Section 2(e) (iii) of the FCRA as including a foreign company within the meaning of 
3. Section 591 of the Companies Act, 1956 and also includes a subsidiary of a foreign company, and a multinational corporation.

• Section 591 of the Companies Act, 1956 is divided into two sub-clauses.
• Sub-Clause (1) defines ‘Foreign Company’ as companies falling under the following two classes, namely: 

1. companies incorporated outside India which, after the commencement of the Act, establish a place of business within India; and 
2. companies incorporated outside India which have, before the commencement of the Act, established a place of business within India and continue to have an established place of business within India at the commencement of the Act.

• Sub-Clause (2) is a non-obstante clause which states that notwithstanding anything contained in sub-clause (1), a company incorporated outside India and having a place of business in India where more than 50% of the paid up share capital is held by a citizen of India or by one or more body corporate incorporated in India or held by the aforementioned groups in aggregate will have to comply with the provisions of the Companies Act, 1956 as if it was a company incorporated in India.
• Delhi H.C. decides against BJP & Congress : The Association of Democratic Reforms (ADR) filed a public interest challenging a violation of the restrictions on receiving donations from a ‘foreign source’ as mentioned in the FCRA by the Congress and the BJP. 

1. They produced the annual reports of Vedanta Resources Plc, a company incorporated in England and controlled by Anil Agarwal and two of its subsidiaries Sterlite Industries and Sesa Goa, to allege that both the BJP and the Congress had received donations from these ‘foreign sources’.
2. The interpretation of the term “Foreign Source” as defined under Section 2(e) of the FCRA lies at the heart of the present controversy. 

• Amendments brought in – 1 

1. The Delhi High Court in 2014 asked the Home Ministry to initiate action against the two political parties. The offence attracted imprisonment of five years or fine or both to persons who assisted political parties to receive funds. 
2. In 2016, the government amended the FCRA through Finance Bill 2016 route, allowing foreign-origin companies to finance non-governmental organisations and clearing the way for donations to political parties by changing the definition of “foreign companies”. 
3. The amendment, though done retrospectively, only made valid the foreign donations received after 2010, the year when the 1976 Act was amended.
4. The retrospective amendment did not apply to donations prior to 2010.

• The Supreme Court in November 2017 issued notice to the Centre on a plea by the ADR, that challenged the amendment through the Finance Bill route
• Amendments brought in – 2 : The 2018 amendment to the Finance Act, 2016 took it to 1976!

1. “Clause 217 of the Bill seeks to amend section 236 of the Finance Act, 2016 which relates to amendment to sub-clause (vi) of clause (j) of sub-section (1) of section 2 of the Foreign Contribution (Regulation) Act, 2010. It is proposed to bring the said amendment with effect from the 5th August, 1976 the date of commencement of the Foreign Contribution (Regulation) Act, 1976, which was repealed and re-enacted as the Foreign Contribution (Regulation) Act, 2010.”
2. The amendment provides a total exemption to the BJP and the Congress for having violated the laws of the land on receipt of foreign funding by political parties and legislatively overrules the Delhi High Court Judgement which found both the parties having received funds in violation of the FCRA in 2014.

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