A Case for Regulation of Political Parties in India through Statute-Part-II

For Part-I of the Article, Click Here.

It is now clear that the political parties in India easily get away with political corruption because they have no public accountability regarding their financial dealings. They have no obligation to inform the nation about their incomes, expenditures, sources of income, major donors etc. They are under no legal responsibility to get their books of account audited by certified chartered accountants and public disclosure. And yet these secret & out-of-bounds organisations are allowed to control the destiny of 120 Crore people!

Major democracies, particularly western democracies, also faced the problem of political corruption in the later part of the last century. The corruption was more on account of large multinational corporations, rich people and lobbyists making political contributions to get political favors. But a lot of public protest and media intervention led to passing of many legislations controlling the functions of political parties and public disclosure of their financial statements. The summary of major enactments passed in western democracies are listed below :-

Federal Republic of Germany

FRG has a bicameral legislature -- Bundestag and Bundesrat. The Bundestag consists of popularly elected representatives whereas the Bundesrat consists of members representing the federal states.  The Head of the State is Federal President(not directly elected by the people) and the Head of the Government is Federal Chancellor who is elected by the members of Bundestag. The political parties in FRG derive their existence through Grundgesetz or the Basic Law of Federal Republic of Germany(BL). The Federal Constitutional Court has the exclusive responsibility to interpret the BL and decide on the matter of constitutional law. Artlce 21 of BL provide the people of FRG to form political parties to participate in the formation of free will of the people.The political parties shall function on the basis of democratic principles and publicly account for their assets and sources and use of their funds.

A comprehensive legialation called the Law on Political Parties(LPP)-1967 and amended in 1994 governs the structure, constitution and other matters including financial matters of the political parties, The salient features of LPP are as follows:-

i. The political parties are defined as associations of citizens which exert influence permanently or for longer duration of time on the formation of of the political will at the federal or Landtag(regional) level.(Article 2(1)).

ii. An organisation loses its legal status as a political party if it does not participate in either a Federal election of Landstag election for a period of Six years.

iii. The political parties must have written statutes and programs containing details like organisation of the party, executive committee, regional committees, admission and resignation of members etc.(Article 6)

iv. The political parties have to clearly define their organisation at federal and regional levels.(Article 7)

v. The party has to set out it details and composition etc of Executive Committee and Regional Committees.(Article 11,12)

vi. The nomination of candidates for contesting elections must be through a secret ballot.(Article 17)

vii. The political parties are entitled for State Funding to the tune of 0.70 Euros for each vote cast in the preceding Bundestag election subjected to an annual limit of 133 Million Euros for all the parties taken together.(Article 18)

viii. The political parties have to submit an annual account to the President of Bundestag giving details of the income, expenditure, assets and liabilities. The Annual accounts are to be audited and certified by a registered Chartered Accountant(Article 23)

ix. If the President is not satisfied by the accounts submitted by a political party, he can get the accounts audited by an auditor  nominated by him.(Article 23(a)(3))

x. The President of Bundestag shall report to the Bundestag regarding his finding on the accounts. The report shall be published as Bundestag's published paper(for public scrutiny)(Article 23(4))

xi. Donations upto 1000 Euros can be accepted in cash.The political parties are not entitled to accept donations from public corporations, professional organisations, organisations under fully or partial state ownerships, donations above 500 euros received from anonymous donors etc.(Article 25)

United Kingdom

UK also has a bicameral legislature consisting of the House of Commons and the House of Lords. The House of Commons consists of the elected representatives whereas the House of Lords consists of representatives nominated by the Queen on the advice of the Prime Minister. The Head of the Government in UK is the Prime Minister. In UK, the political parties, their conduct and other matters are governed by Political Parties Election & Referendum Act,2000(PPERA-2000). The salient points of PPERA-2000 are as follows :-

i. There shall be an independent body called the Electoral Commission(EC) which shall oversee all the electoral process in UK.(Section 1)

ii. It shall be the duty of the Electoral Commission to promote public awareness with regard to the political system in UK and the laws governing the same.(Section 19(1)(a))

iii. All political parties have to get themselves registered with the EC along with the names of its office holders(Section 24)

iv. The political parties have to set out their financial structure and get it approved by the EC(Section 26)

v. It shall be the duty of the Treasurer of the party to keep accounting records up-to-date showing the daily financial transactions(Section 41)

vi. The Treasurer of the party shall be responsible for submitting the annual accounts of the party to the EC, at the end of the financial year(Section 42)

vii. If the annual income or expenditure of a political party exceeds Pounds 2,50,000/-, the annual accounts are to be audited by a certified accountant.(Section 43)

viii. The EC shall make the annual accounts of the party for public inspection and scrutiny as early as possible, after the party has submitted its audited accounts.(Section 46)

ix. There are comprehensive provisions of permissible donations and restriction of donations received by the political parties.(Section 50,52, 53,54 & 55)

x. The Commission reserves the right to forfeit non-permissible donations,if received by the political parties.(Section 56)

xi. The political parties have to prepare a quarterly account of donations received and submit it to the EC.

USA

There is no single Legislation existing in USA which governs the conduct of Political Parties, however, the laws are based on various Supreme Court rulings and the amendments passed by the Congress. That way, the electoral laws of the US are dynamic in character which change elections after elections. The main thrust of electoral legislations in USA is about Funding of Political parties called Campaign finance. At the federal level, the campaign finance law is enacted by the Congress and enforced by the Federal Election Commission.In 2008, the political parties and independent groups spent $ 5.3 Billion on federal elections. The amount spent on Presidential race was $ 2.4 Billion. The average winner of a seat in the House of Representatives spent $ 1.4 Million and that of the Senate spent $ 9.8 Million. The political parties can accept donations from Inpiduals, Political action Committees, Organisations etc. Though there are limits to annual donations by inpiduals, however, generally there is no limit by the donations made by Political Action Committees. The current federal law requires that the candidate committees, party committees and political action committees to file periodic reports disclosing the money they receive and spend. The Federal Election Commission maintains this database and publishes the details on its website for public scrutiny.

France

France also has bicameral legislature consisting of Senate and National Assembly. The Senate consists of members who are elected by the state & local bodies whereas the elected representatives of the people form National Assembly. The Head of the State is French President who is directly elected by people. The Head of the Government is the Prime-minister who is chosen by the French President . France has an elaborate legislation to govern the political parties particularly their finances, which is called the Electoral Code. The Electoral Code is amended from time to time.The French Electoral Code works on the basic three principles (1) Money should not decide the outcome of the ballot nor favor the richest candidate. (2) A candidate must not be dependent on a generous donor (3) The State should reimburse the electoral expenses to offset the obligations put on the candidates.

There is no specific definition of a political party in France. Article 8 of the French Constitution provides that "Political parties and groups shall contribute to the public suffrage and they shall be established freely.However, for a political party to finance another party or to meet its own financial needs, the party has to get registered with the Election Commission. Two types of financing are allowed i.e. Private Financing and Public Financing. The private financing includes:-

i. Contributions from the members and elected officials of the party.

ii. Donations from inpiduals-the amount of donation cannot exceed Euro 7,500 per donor per year.

The Public or State Financing is in two parts:-

i. The first part is that the political party must have obtained 1% of the total votes cast during the preceding general Election. One vote corresponds to Euro 1.60.

ii. The second part is based on the number of parliamentarians who support a particular political party. Each parliamentarian's support corresponds to Euro 45,000/-.

iii. The donations from Legal persons is strictly forbidden in France. Political parties who violate this provision can lose their public funding.

The control and verification of books of accounts of Political parties is done by the Election Commission. The Election Commission,inter alia,:-

i. Verifies that political parties respect their accounting and financial obligations.

ii. Ensures that the parties accounts are published in the Official Journal of France.

iii. Brings any matter presenting possible penal violations before the Public Prosecutor.

For campaign financing, each political party has to appoint a Proxy or a specific purpose vehicle who must be registered with the Election Commission. The Financial proxy is in charge of :-

i. Opening a unique Bank account for the political party for campaign financing.

ii. Collecting all the income and making expenditure thereof.

iii. Issuing receipt to the inpidual donor ensuring that no single donor donates more than Euro 7500/- in a year and ensuring that there are no donations from Legal persons.

iv. Choosing a certified chartered accountant for auditing the campaign expenses and certifying the campaign account.

v. Sending the campaign account to the election commission within two months after the election.

From the above, it is clear that the major democracies have faced the problem of political corruption at some time or the other. However, these democracies could swiftly bring out legislations to control political corruption and bring transparency in financial matters of the political parties. Unfortunately, in India, there is a large hue and cry about political corruption but no thought has been to bring out comprehensive legislation in the line of western democracies. 

It is clear that the political parties themselves will not take any initiative in this regard therefore the only way is to start a public awareness campaign in the country. The political system must be made to :-

i. Enact a comprehensive legislation like the Law on Political Parties-1967, PPERA-2000, Electoral Code, for the formation, conduct and public accountability of political parties, just as done in western democracies.

ii. The Book of Accounts of the political parties must be audited by a certified Chartered Accountant in the first instance. The CAG should have jurisdiction  over the auditing of Books of accounts of all the political parties.

iii. The Political Parties must be brought under the RTI Act and Lokpal Act. The fudging of accounts by political parties should be treated as a punishable offence.

iv. For meeting day to day expenses by the political parties ,State Funding @ Rs.100/- per vote for Lok-sabha Election and Rs.50/- per vote for State Assembly Election may be considered on annual basis. For Lok-sabha, the annual expenditure shall be to the tune of Rs.5000 Crores per year(assuming a total of 50 Crore votes are cast in the election) and for a State Like Uttar Pradesh, the expenditure will be Rs.500 Crore per year for State assembly(assuming 10 Crore votes are cast in the UP state election). The State-funding will give some breather to political parties to survive and carry out their functions.

This will go a long way to root out the political corruption in our Country.

(Concluded)

Bibiliography

1. "The Regulatory Framework of Political Parties in Germany, UK, New Zealand & Singapore"by Chau Pak-kwan, Legislative Council Secretariat,Hongkong.

2. "Financing of Political Parties and Electoral Campaign in France"by Barbara Juan,Legal Service, CNCCFP, France.

3. "The Political Parties, Elections and Referendum Act,2000"by Justin Fisher,Brenul University,UK.

4. "The Law on Political Parties(Party Law)", Germany.

5. "Basic Law of the Federal Republic of Germany(BL)", Germany.

5. "Campaign Finance in the United States", Wikipedia.

6. "The Political Parties, Elections and Referendum Act,2000"",UK

7. Official webpages of the French Senate & National Assembly in English.

8. Julian Jahnz, Embassy of the Federal Republic of Germany,New Delhi -with special thank for providing valuable inputs.

By Sanjay Kumar

(The author holds Masters Degree in Corporate Laws)