The Telegraph
Sunday , March 30 , 2014
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Funds red face for top two

New Delhi, March 29: The Congress and the BJP have suffered a big embarrassment, with Delhi High Court holding them prima facie guilty of accepting donations from foreign sources in violation of the law.

A bench of Justices Pradeep Nandrajog and Jayant Nath upheld a PIL alleging that the two parties had received donations running into several crores from Sterlite Industries India Ltd and Sesa Goa Ltd — Indian subsidiaries of the UK-based Vedanta Groupup to 2009 in breach of the Foreign Contribution (Regulation) Act, 1976 (FCRA).

The law, which bars political parties from accepting donations from foreign sources, was enacted as a shield to protect the country from subversive activities, the court said yesterday.

“Amidst a spate of subversive activities sponsored by the foreign powers to destabilise our nation, the Foreign Contribution (Regulation) Act, 1976, was enacted by Parliament to serve as a shield in our legislative armoury… and insulate the sensitive areas of national life like journalism, judiciary and politics from extraneous influences,” it said.

The court directed the Centre to act against the two parties in line with the law and to complete within six months a probe into any donations received by other parties from foreign sources.

The PIL was filed by an NGO, the Association for Protection of Democratic Rights. The NGO, through its counsel Prashant Bhushan and Pranava Sachdeva, had argued that though the donors are companies registered in India under the Companies Act, 1956, more than half of their share capital is held by Vedanta, a company incorporated in the UK.

The Centre, represented by additional solicitor-general L. Nageshwar Rao, accepted this but argued that more than half of the share capital of Vedanta is held by Anil Agarwal, an Indian citizen.

Rejecting the Centre’s argument, the court said: “The nationality of a company is determined exclusively on the touchstone of the situs of its incorporation and there exists a profusion of judicial authorities to this effect. The nationality of its shareholders or directors has no bearing upon the nationality of a company….

“We are of the considered view that Vedanta is a ‘foreign company’ within the meaning of Section 591 of the Companies Act, 1956, and therefore, Vedanta and its subsidiaries — Sterlite and Sesa — are a ‘foreign source’ as contemplated under Section 2(e)(iii) of the Foreign Contribution (Regulation) Act, 1976.”

Accordingly, the court said the Union home and finance ministries would probe the allegations of donations “made to political parties not only by Sterlite and Sesa but other similarly situated companies/corporations”.

The Centre can now either file a case against the Congress and the BJP or appeal in the Supreme Court.