FCRA amendment in Finance Bill

To benefit BJP and Congress held guilty by the Delhi HC for receiving funds from Vedanta subsidiaries

The Union government has proposed to amend the repealed Foreign Contribution Regulation Act (FCRA), 1976, retrospectively, a move that will benefit the ruling Bharatiya Janata Party and the Congress held guilty by the Delhi High Court for receiving foreign funds from two subsidiaries of Vedanta, a U.K.-based company.

The Representation of the People Act and the FCRA bar political parties from receiving foreign funds.

In 2016, the government amended the FCRA through the Finance Bill 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”.

The amendment, though done retrospectively, only made valid the foreign donations received after 2010, the year when the 1976 Act was amended.

The retrospective amendment did not apply to donations prior to 2010. In a move to extend relief to the two parties, the government has again proposed an amendment through the Finance Bill, 2018. It says, “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 …. effect from the 5th August, 1976 the date of commencement of the FCRA, 1976, which was repealed and re-enacted as the FCRA, 2010.”

The Hindu reported on May 10, 2017 that the Home Ministry had sought the Attorney-General’s opinion to amend the repealed Act. The original provision in the FCRA, which declared that any company with over 50% FDI was a foreign entity, was inconsistent with the view of the Finance and the Commerce Ministries, which treated companies based in India and having Indian directors and employees as Indian subsidiaries.

The Supreme Court in November 2017 issued notice to the Centre on a plea by the Association for Democratic Reforms, a political watchdog, that challenged the amendment through the Finance Bill route. It was on the organisation’s plea that the Delhi High Court 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.