The Representation of the People’s Act, 1951 largely controls the elections of the State parliament and the State legislatures in India. It is forbidden by Section 29(B) of this Act for all political parties, associated with the Election Commission, to accept any donation from a foreign source. The parties can accept voluntary contribution by any person or company except a government company under the provisions of the Companies Act, 1956.
The Foreign Contribution (Regulation) Act, 2010 replaced the Foreign Contribution Act 1976. The 2010 Act was passed for the regulation for the acceptance and utilization of the foreign contribution by the person or company and prevent the use of that contribution which can be destructive for the national interest.
According to Section 3(1) of the Foreign Contribution (Regulation) Act, 2010, people or entities are prohibited from accepting foreign contributions which include election candidates, legislative members, political parties, office-holder of a political party, political organizations and media houses related to it. If a person is an Indian residing within or outside the country, he is not allowed to engage in foreign contribution on behalf of any political party. Delivery of currency is also prohibited if it comes from a foreign source and is to be delivered to a political party.
Chapter VIII of the Act consists of the offences and penalties for the violation of these provisions. Section 35 states that if a person accepts or assists in acceptance of any foreign contribution or currency and contravenes the provisions of the Act then the person can be imprisoned for a term that can extend to five years.
If the offence is committed by a company then, according to Section 39 of the Act, all the people responsible for the offence along with the company shall be held liable and punished accordingly, provided that this provision shall not render such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
In 2016, the BJP government enacted a retroactive amendment to the Foreign Contribution (Regulation) Act, 2010 as a part of the Finance Bill, 2016. It was done in response to the judgment passed by the Delhi High Court in 2014, it was found that the BJP and Congress party violated the ban on foreign contributions by accepting cash from London-based companies between 2004 and 2012 as the company’s one-half of the share capital was held by a foreign company so the donations made to the political parties are considered to come from a foreign source and therefore, is in violation of the Act.
The amendment to the Foreign Contribution (Regulation) Act, 2010 redefines the term “foreign source” to include a proviso that “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 contributing, such company shall not be a foreign source”.