Retrospective amendment in Foreign Contribution Regulation Act 2010-Who will be benefited?
Political parties cannot receive contribution from any foreign source as defined under Clause (c) of Section 2 of the FCRA, 1976. Section 29 B of the Representation of the Peoples Act, 1951 also prohibits political parties from receiving foreign contributions.
Under the Foreign Contribution (Regulation) Act, 2010, “foreign contribution” means the donation, delivery or transfer of specified articles, currency, security etc. by any foreign source.
Further sub-clause (vi) of clause (j) of sub-section (1) of section 2 provides that foreign source include a company within the meaning of the Companies Act, 1956, and more than one-half of the nominal value of its share capital is held, either singly or in the aggregate, by one or more of the following, namely:-
(a) the Government of a foreign country or territory;
(b) the citizens of a foreign country or territory;
(c) corporations incorporated in a foreign country or territory;
(d) trusts, societies or other associations of individuals (whether incorporated or not), formed or registered in a foreign country or territory;
(e) foreign company;
The proviso inserted by Finance Act, 2016 provided that where the nominal value of share capital is within the limits specified for foreign investment under the Foreign Exchange Management Act, 1999, or the rules or regulations made thereunder, then, notwithstanding the nominal value of share capital of a company being more than one-half of such value at the time of making the contribution, such company shall not be a foreign source.
However, the Finance Bill, 2018 seeks to amend Section 236 of the Finance Act, 2016 to bring the said amendment with effect from the 5th August, 1976 the date of commencement of the Foreign Contribution (Regulation) Act, 1976.
The main objective of the proposed amendment as stated by the Minister of State for Home Affairs, Shri Kiren Rijiju in written reply to a question in the Rajya Sabha today is, to ensure that the definition of ‘foreign source’ remains consistent with the FDI Policy of the Government of India; and provisions of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014
However, it can not be overlooked that in 2014, both the ruling BJP and the Congress have been held guilty by the Delhi High Court for receiving foreign funds from two subsidiaries of a U.K. based company. In 2016, the Supreme Court had dismissed the SLPs filed by the Congress and the BJP. The retrospective amendment will directly benefit both the political parties along with others.