Electoral Bond Issue & Impact of Supreme Court Judgement on Political Contributions : Short Overview

Loading

Electoral Bond Issue & Impact of Supreme  Court  Judgement  on Political Contributions : Short Overview

 

1.  The Supreme Court had delivered a seminal judgement in the case of Association for Democratic Reforms & Anr v/s Union of India & Ors. declaring Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017) violative of Article 19(1)(a) and unconstitutional.

2.  The Court also declared the deletion of the proviso to Section 182(1) of the Companies Act that permits unlimited corporate contributions to political parties is arbitrary and violative of Article 14. Further, the Court has declared the Electoral Bond Scheme, the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017) and Section 13A(b) (as amended by Section 11 of Finance Act 2017) as violative of Article 19(1)(a) and unconstitutional.

3.  Now, the amendment made under Section 182 in 2017 is void or as if it was not made at all.  Therefore, the original provisions of Section 182 (i.e. prior to the amendment made by the Finance Act, 2017) are restored.

Considering  the amendment made to Section 182 of the Companies Act, 2013 vide Finance Act, 2017 have been declared unconstitutional, now a Company needs to ensure the following :-

Contribution to a Political Party (either directly or through an Electoral Trust) in any Financial year should not exceed 7.5% of the average net profits during the 3 immediately preceding Financial years.

Details of name of the Political Parties and the amounts contributed to such political parties have to be disclosed in the Profit and Loss account.

Note:

1.  Proviso to Sec 182(1) before 2017 amendment, restricted the contributions to political parties to 7.5% of the average net profits of the last three preceding financial years.

2.  Under Section 182(3) as it existed before the amendment, if a Company contributed funds to a political party, the company was required to disclose in its Profit and Loss account, the details of the specific contributions made to that political party. However, after the 2017 amendment, the Company is only required to disclose the contribution to a political party without disclosing the details of the political party to which the contribution was made.

3.  Section 29C of the Representation of the People Act exempts political parties from disclosing information of contributions received through Electoral Bonds.

Menu