Kuldip Singh, J. - (1.) Common cause - a society registered under the Societies Registration Act, 1860 which takes up various matters of general public interest / importance for redress before the Courts- through its Director Mr. H. D. Shourie, has filed this public interest petition under Article 32 of the Constitution of India. The primary contention raised in the petition is that the cumulative effect of the three statutory provisions, namely, Section 293-A of the Companies Act 1956, Section 13-A of the Income-tax Act 1961 and Section 77 of the Representation of the People Act 1950 is, to bring transparency in the election-funding. People of India must know the source of expenditure incurred by the political parties and by the candidates in the process of election. It is contended that the mandatory provisions of law are being violated by the political parties with impunity. During the elections crores of rupees are spent by the political parties without indicating the source of the money so spent. According to Mr. Shourie the elections in this country are fought with the help of money-power which is gathered from black-sources. Once elected to power, it becomes easy to collect tons of black-money which s used for retaining power and for re-election. The vicious circle, according to Mr. Shourie, has totally polluted the basic democracy in the country.
(2.) Second 293-A of the Companies Act, 1956 (the Companies Act) is as under: "293-A. (1) Notwithstanding anything contained in any other provisions of this Act - (a) no Government company; and (b) no other Company which has been in existence for less than three financial years. shall contribute any amount or amounts, directly or indirectly,- (i) to any political party; or (ii) for any political purpose to any person. (2) A company, not being a company referred to in Clause (a) or Clause (b) of sub-section (1), may contribute any amount or amounts, directly or indirectly,- (a) to any political party; or (b) for any political purpose to any person: Provided that the amount or, as the case may be, the aggregate of the amounts which may be so contributed by a company in any financial year shall not exceed five percent of its average net profits determined in accordance with the provisions of Sections 349 and 350 during the three immediately preceding financial years. Provided further that no such contribution shall be made by a company unless a resolution authorising the making of such contribution is passed at a meeting of the Board of Directors and such resolution shall, subject to the other provisions of this section, be deemed to be justification in law for the making and the acceptance of the contribution authorised by it. Explanation:Where a portion of a financial year of the company falls before the commencement of the Companies (Amendment) Act, 1985, and a portions falls after such commencement, the latter portion shall be deemed to be a financial year within the meaning, and for the purpose, of this sub-section: (3) ********** (4) Every company shall disclose in its profit and loss account any amount or amounts contributed by it to any person during the financial year to which that account relates, giving particulars of the total amount contributed and the name of the party or person to which or to whom such amount has been contributed." Section 13-A of the Income-tax Act, 1961 (the Income-tax Act) is reproduced hereunder: "13-A. Any income of a political party which is chargeable under the head 'Income from house property' or 'Income from other sources' or any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party:- Provided that - (a) such political party keeps and maintains such books of account and other documents as would enable the (Assessing) Officer to properly deduct its income therefrom; (b) in repeat of each such voluntary contribution in excess of ten thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution; and (c) the account of such political party are audited by an accountant as defined in the Explanation below sub-section (2) of Section 288. Explanation ********** " Section 77 of the Representation of the People Act, 1950 (the R. P. Act) is in the following term: "77. Account of election expenses and maximum thereof.- (1) Every candidate at an election shall, either by himself or by his election agent, keep a separate and correct account of all expenditure in connection with the election incurred or authorised by him or by his election agent between (the date on which he has been nominated) and the date of declaration of the result thereof, both dates inclusive. (Explanation 1. - Notwithstanding any judgment, order or decision of any Court to the contrary, any expenditure incurred or authorised in connection with the election of a candidate by a political party or by any other association or body of persons or by any individual (other than the candidate or his election agent) shall not be deemed to be, and shall not ever be deemed to have been, expenditure in connection with the election incurred or authorised by the candidate or by his election agent for the purposes of this sub-section."
(3.) It is averred in the petition that most of the political parties in the country - registered and recognised by the Election Commission - have, for many years, been flouting the provisions of the Income-tax Act so much so that they have not been maintaining accounts as required under Section 13-A of the Income-tax Act. Most of the political parties have not been filing returns of income in violation of the mandatory provisions of law. According to the petitioner it is a matter of common knowledge that political parties receive large amounts of money by way of donations / contributions from companies on a qua pro quo basis. The companies invest to seek favours when the party is in power. Neither the companies nor the political parties show the contribution / donations in their account-books. The donations and contributions received by the political parties are obviously out-of-account and in the nature of black money which would not figure in the balance sheets of the companies concerned. There is, thus, patent violation of Section 293-A of the Companies Act and Section 13-A of the Income-tax Act.;