Funny Money Business

In the aftermath of the Tehelka exposé, the core issue of corruption at the highest levels and the scandalous business of party funding have come into sharp focus. What is intriguing is that while there is an outcry by political parties to punish those guilty and demand for filing of cases against tainted leaders, little is being talked about the proportions the party funding system has acquired.

The issue of murky transactions in party funding was addressed by the Supreme Court in 1996, when it gave a landmark judgement laying down guidelines for the collection of funds by parties. But this ruling has not been taken seriously as all parties would rather keep the present system going rather than bring about changes.

Hearing a public interest litigation filed by ngo Common Cause, the apex court ruled that political parties are under a statutory obligation to file return of income in respect of each assessment year in accordance with the provisions of the Income Tax Act. To be eligible for exemption from income tax, they have to maintain audited accounts.

But it's no secret most parties blatantly violate the procedures. So while they pretend to be in a combative mood to fight corruption, there's a near-consensus that they can't do without the existing system of fund collection, which reeks of shady pay-offs, as exposed by Tehelka's sting operation.

The political fathers obviously have reason to be silent. Crores worth of national plenaries, executive body meetings, rallies and campaigns are at stake. Most trace their roots to funds from firms, industrial houses and individuals with vested interests. And, not surprisingly, most of it is black money paid in cash and so remains unaccounted.

"Many parties receive funds from questionable sources. What is dangerous is when business houses or companies are sponsoring the parties, they obviously would seek favours in return. And this is done by tailoring policy decisions to suit them. This is happening at the cost of national interests," says D. Raja, cpi general secretary.

When the Supreme Court called for the records to find out how many parties were abiding by the law, it came across blatant violation by most. "Admittedly, most parties have done neither (maintaining audited accounts and filing returns). It is not a matter where the parties have overlooked filing a return of income by accident once or twice. The political parties have—in patent violation of law—neither maintained audited accounts nor paid tax since 1979-80. (They) are not above law and are bound to follow the same," the court said.

The court's observations clearly explain the absence of transparency in the functioning of parties. Consider this: "The political parties in their quest for power spend over Rs 1,000 crore on the general election, yet nobody accounts for the bulk of the money so spent and there is no accountability anywhere. Nobody discloses the source of the money. There are no accounts and no audit… In a democracy where rule of law prevails, this type of naked display of black money, by violating the mandatory provisions of law, cannot be permitted."

The Election Commission subsequently revised the statement of election expenses in which the candidate is asked to furnish details of the expenditure incurred by the political party which set him or her up or any other party providing support, besides association, bodies and even individuals lending their support to candidate.

But five years after the groundbreaking court judgement and initiatives taken by the commission, things haven't improved. Perhaps it has only worsened. Not many politicians deny it. "If we don't take funds, how do we run the party? The full-time party workers and office-bearers obviously need money for livelihood. Besides, the party needs money for its own functioning. It comes through donations and mostly in cash," says a candid bjp leader.

"All parties must file returns. The fact that many still are not managing their accounts shows the bankruptcy of our political system," says Congress Rajya Sabha MP Kapil Sibal, vouching that his party has been filing returns after the judgement.

Sibal, who incidentally was the advocate on behalf of the Election Commission for the case, says that according to the rules, the returns are filed on the basis of the money received legitimately. "What about the black money which is mostly in cash?" asks Sibal. "Parliament has to find a solution to this problem. State funding is the best alternative to this."

In fact, the issue of electoral reform has been discussed for long but with no results. It has been debated in Parliament many times and the present government also set up a parliamentary committee headed by the late Indrajit Gupta, whose recommendations have remained on paper.

Justifies bjp treasurer Ved Prakash Goyal, "The committee did not come out with any substantial recommendations. It talked of state funding, which is not feasible." Goyal says his party's always filed regular returns of income. But in the affidavit submitted by the Union of India in the Common Cause petition in 1996, the party never filed any return of its income till as late as 1995. Whatever the party submitted after being slapped with an I-T notice was also insufficient as there was no account of state units. The same was true of the Congress.

Interestingly, up to 1996, barring the cpi, cpi(m), aiadmk and dmk, not a single party in the country was filing income returns.

With all the rules in place, it is almost impossible to have a corrupt party funding system in India. But the fact that the agencies to check this are rendered handicapped makes the operations easy. So while it just required a team of two journalists with a spycam to nail presidents of two big parties for accepting bribes in the name of the party fund, the income-tax department, with a large force of investigators, has nothing much to boast about.

So it is not surprising the apex court had to use almost humiliating words for the I-T department. "The authorities have been who-lly remiss in the performance of their statutory duties… The said (I-T) authorities have for a long time failed to take appropriate action against the defaulter political parties."

"It is an irony of our democracy that despite the judiciary's best efforts to cleanse the system, the politicians get away with almost everything," says a senior Supreme Court lawyer.

No wonder party treasurers are still smiling. Meanwhile, rallies and expensive campaigns are constantly being devised to fight corruption. Needless to say, the money for such efforts come from illegal funds.