55 companies’ electoral bond donations topped the 7.5% cap in 2022-24

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CategoryPolity

Last Updated06/04/2024

The Supreme Court’s verdict on electoral bonds (EBs) had held the deletion of a provision contained in Section 182 (1) of the Companies Act, 2013 as “violative of Article 14 of the Indian constitution”.
The provision enabled unlimited corporate contributions to political parties.

The provision had restricted corporate donations to a cap of 7.5% of the donor companies’ average net profits in the three preceding financial years.
The Finance Act, 2017, had deleted the provision.
The total amount donated above the rescinded 7.5% cap figure stood at ₹1,377.9 crore, which was more than 69% of their aggregate donation of ₹1,993 crore.
The ruling party alone received close to 71%, or ₹1,414 crore, of the total donations.
Specifically, the EB donation data of these firms from 2019-20 to 2023-24 was matched against their financial data from 2016-17 to 2022-23.

It amended The Representation of the People Act, 1951 (RPA), The Income-tax Act, 1961, and The Companies Act, 2013.
The amendments allowed electoral bonds to cut through many of the restrictions on political party funding by completely doing away with the donation limit for companies,
- And removing the requirements to declare and maintain a record of donations through electoral bonds.

A number of changes were made to Section 182 of the Act, which details the prohibitions and restrictions a company must abide by when giving political contributions.
Prior to the amendment, Section 182(1) placed a cap on the amount of money a company could donate in a single financial year
- Limiting it to 7.5% of the company’s average net profits during the previous three financial years.
Section 182(3) required a company to disclose any amount contributed to any political party along with the particulars of the amount donated and the name of the receiving party
Only the total amount contributed had to be disclosed
- And the company would no longer be required to declare which political party it had sent a donation to, nor the specific amount.
The court struck down this amendment. Chief Justice of India observed that “permitting unlimited corporate contributions authorises unrestrained influence of companies in the electoral process”.