Transparency In Political Finance

By Sushmita R., Christ Law College, Bangalore

Editor’s Note: This paper examines the need for transparency in political finance. Due to corruption that plagues the political system of India, political parties use funds beyond specified limits during elections. These funds are often supplied by large corporations who then use such elected candidates for corporate gains. This paper analyses the current law- Representation of People Act and the Right to Information Act and suggests reforms in order to curb the menace of  non-transparent funding in politics.” 


India being the world’s biggest democracy- elections are conducted continually and thus to manage the vast and cumbersome job of elections, an Election Commission has been set up.

Democracy is sustained by free and fair elections. Only free and fair elections to the various legislative bodies in the country can guarantee the growth of a democratic polity. It is the cherished privilege of a citizen to participate in the electoral processes. In a general election, an electorate of millions goes to polls to elect members for the Lok Sabha, State Legislative Assemblies, and the Legislatures of the Union Territories.

Need For Transparency In Election Financing

India liberalized its economy in 1991, drastically reducing tax rates, tariffs, and micro-control of economy activity. At the same time, it opened up industries previously reserved for the public sector to private, including foreign, entry. These changes were expected to bring an end to the corruption that plagued India, particularly since the 1970s. Yet the disheartening fact is that in 2013, almost two decades after liberalization, an economically resurgent India, faced a crisis of governance. Scams and scandals dominated the headlines.

There are many negative social impacts of this corruption. This corruption is refelected in political financing as well. Chapter 4 of the Report of the National Commission to Review the Working of the Constitution, 2001, notes that the high cost of elections “creates a high degree of compulsion for corruption in the public arena” and that “the sources of some of the election funds are believed to be unaccounted criminal money in return for protection, unaccounted funds from business groups who expect a high return on this investment, kickbacks or commissions on contracts, etc.” It also states that “Electoral compulsions for funds become the foundation of the whole super structure of corruption”

India has successfully sustained its parliamentary system, because free and fair elections constitute an integral part of the sysrem. The framers of the Indian Constitution ensured that the Constitution of India guaranteed the right to elect and to be elected to the citizens of the country. The mechanisms of fair elections in India are ordained in Part XV of the Constitution of India and other laws are embodied in the Representation of People Acts of 1950 and 1951.

However this important aspect of the Indian democracy has brought numerous distortions, pitfalls and hindrances. This has led to the cry for maintaining the purity of the electoral process. There is a deep concern against the growing impact of factors like glaring economic and social inequalities, exploitation of caste and communal politics, the role of muscle and money power, misuse of governmental machinery and criminalization of politics. The role of money in elections has become a standard concern in recent discourses on electoral reforms in India and belongs to that category of maladies, which are systemic in origin; given the structural relationship, which has been established between economic and political power and the various forms of modern politics.

Political parties need funds for three activities: election campaigns, inter-election maintenance of their organizations and political activities, and support of research and information infrastructure for the parties. In most cases election campaigns are the primary visible activity requiring funds.

Historically, this has made political parties excessively dependent on big business and wealthy individuals[i]. The big business houses, the contractors and the black marketers donate liberally to the election funds of the political parties and then reap the harvest when the political party comes to power as the political leader who accepts the money goes out of the way to placate the donor.

This phenomenon is very evident in the current political scenario where the major political parties receive donations from affluent donors who in turn influence the activities of the party when it comes to power.

The thrust of political finance reform in democracies world-wide had four main characteristics[ii].

  1. Public funding, full or partial, of elections.
  2. Limits on expenditure (including sublimit on particular expenditure).
  3. Limits on contributions from individuals and organizations.
  4. Reporting and disclosure of election, party and candidate finances in some form.

The Representation Of People Act 1951 And Its Implications

The Representation of People Act 1951 governs the financing of elections. However it is often seen that the spirit of the Act has been diluted by the corrupt practices of candidates and parties.

Section 77 provides “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 authorized 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.”

Even the aspect of Mandatory Disclosure by the candidates has its object of accountability in accordance with the aforesaid legal provision

The Supreme Court reiterated the above judgment of Gajanan Bapat v. Dattaji Meghe [iii] and held that the practice followed by political parties of not maintaining any accounts of its candidates defeats the purpose of S. 77(1) of R.P Act. Further, it held that the political parties must disclose how much amount was collected by them and from whom and the manner in which it was spent so that the court is in position to determine whose money was actually spent through the hands of the party.

Section 77 of the Representation of People’s Act was also at the heart of controversy in the case of Common Cause v. Union of India.[iv] The case mainly dealt with the issue of lack of transparency in the process of fund collection and expenditure incurred by the political parties. It was alleged that most of the political parties had not been filing returns of income in violation of the mandatory provisions of law and that they were receiving large amounts of money by way of donations/contribution from companies on a quid pro quo basis.

Critical Analysis Of Election Reform: Checking Accounts Of Political Parties

Lavish expenditure in the elections is one of the most critical problems in India’s electoral system. It is widely believed that in many cases successfully contesting an election costs a significant amount of money that is often much greater than the prescribed limits. [v] Due to this being such a costly affair, many good candidates are unfortunately kept out from contesting elections.

This pollution in our political system is a big obstacle in the performance and creates great friction and hurdle and is one of the biggest reasons for non-performance. This also results in compromised governance of the country. [vi]

Part XV of The Indian Constitution deals with the matter to elections- How to conduct elections, the officials of the Election Commission, their qualifications or giving powers to the Parliament to make special provisions with respect to elections to legislature.[vii] The articles covered under this part extent from 324 to 329 (A). Articles 327 and 328 of the Constitution talks about special provisions-

Power of Parliament to make provision with respect to elections to Legislatures- Subject to the provisions of this constitution, Parliament may from time to time by law made provision with respect to all matters relating to, or in connection with, elections to either House of Parliament or to the House or either House of the Legislature of a State including the preparation of electoral rolls, the delimitation of constituencies and all other matters necessary for securing the due constitution of such House or Houses.

Power of Legislature of a State to make provision with respect to elections to such Legislature- Subject to the provisions of this Constitution and in so far as provision in that behalf is not made by Parliament, the Legislature of a State may from time to time by law make provision with respect to all matters relating to, or in connection with, the elections to the House or either House of the Legislature of the State including the preparation of electoral rolls and all other matters necessary for securing the due constitution of such House or Houses.

In Common Cause- A Registered Society v. Union of India, it was argued that elections in India are fought with money power and so the people should know the sources of expenditure incurred by the political parties and the candidates in the process of elections. The court ruled that purity of elections are fundamental to democracy and the commission can ask the candidates about the expenditure incurred by the candidates and by a political party for this purpose.

In a democracy where rule of law prevails this type of naked display of black money, by violating the mandatory provisions of law, cannot be permitted. The court, therefore, ruled that under Art. 324, the commission can issue suitable directions to maintain the clarity in elections and to bring transparency in the process. The commission has power to issue directions requiring the political parties to submit to it, for scrutiny, the details of the expenditure incurred or authorized by the parties in connection with the election of their respective candidates. The court further observed, “The Constitution has made comprehensive provision under Art. 324 to take care of surprise situations and it operates in areas left unoccupied by legislation.”[viii]

The campaign expenditure by candidates is in large of about twenty to thirty times the legal limit. [ix] This calls for reforms in the legal framework relating to finance in elections.

Reforms To Ensure Transparency In Election Funding

The principle of government funding of political parties or candidates or election campaign activities is well established across the democratic world. The idea of State Funding was also discussed during constituent assembly debates. K. T. Shah, one of the Constituent Assembly’s members had moved an amendment seeking that election expenses be borne by the state.

The Government did not oppose the principle underlying the amendment but maintained that it would impose an unbearable burden on the state exchequer. A major argument in support of state funding of political parties is the ‘public function’ argument. State funding of political parties is justified because political parties are presumed to perform important public functions of informing and educating common people about the policies and programmes of the government on the one hand and pointing out their shortcomings and deficiencies on the other. State funding is also expected to safeguard democracy by reducing the dependence of political parties on black money.

Complete funding by the state will indeed create an equal footing for the major parties as well as small parties which get same amount of funds thereby removing their economic disparities

However this might prove disastrous as many times the state funds are used as additional funds along with the unaccounted money used in the elections. Hence this way of funding does not aid the elimination of black money in the process of election.

There should be reasonable ceilings imposed from time to time and all expenditure by parties, candidates and their friends should be included in the ceiling limits. Any illegitimate expenditure to give inducements to voters, bribe officials or indulge in electoral malpractices should result in fines and penal proceedings Therefore it is important to make both fund raising and spending practices transparent.

Impact Of Right To Information Act, 2005 On Political Party Funding

In Union of India v. Association for Democratic Reforms[x] the Supreme Court directed the Election Commission to issue certain instructions to candidates to file affidavit detailing information about themselves under certain specific heads. This was done to stop criminalization of politics.[xi] People have a right to know about the candidate for whom they are being urged to vote. The right to know flows from Art. 19 (1)(a).

Pursuant to the judgment passed by the Supreme Court on March 13, 2003 of the case People Union for Civil Liberties & Another Vs. Union of India,[xii] Election Commission of India issued an order stating that the candidates for electoral office must submit an affidavit disclosing their assets and liabilities because it was alleged that the candidates have given grossly undervalued information about their assets. This fact was noted by the Election Commission in its report Proposed Electoral Reforms, 2004. [xiii]

In its decision on 3rd June, 2013, the Central Information Commission held that political parties- namely AICC/NIC, BJP, CPI(M), CPI, NCP, and BSP are “public authorities” under section 2(h) of the RTI Act. The reasoning behind it was that there is indirect financing of the political parties by the central government and they perform public duty. The motive behind the formation of the said act was to provide for effectuating the right of information under Article 19 of the Constitution. The Act was enacted to guarantee information be making the Freedom of Information Act, 2002 much more meaningful. [xiv]

Still, there are many instances that prove that law has been unable to address the inadequacies in the electoral system-

  • Large tracts of land in prime areas Delhi have been placed at the disposal of the political parties in question at exceptionally low rates.
  • Huge government accommodation has been placed at the disposal of political parties at hugely cheap rates.
  • More over exemptions granted to the parties and free airtime on All India Radio and Doordarshan at the time of elections.

Recommendations & Conclusion

It is being suggested that political parties should only have funds from legal sources. This can be done in a two-step process. The first step is to set reasonable limits for the expenditure of campaign. The second step is to plug the loopholes in the present rules, like Explanation 1 to section 77(1) of the Representation of the People Act 1951, where persons other than the candidate or his agent are not held liable for the election expenses they incur. [xv]

The Preamble of the Constitution declares India to be a Democratic Republic. Democracy is the basic feature of the Indian Constitution. Thus, the Supreme Court has time and again asked the legislature and the election commission to bring about reforms in the process of election funding to prevent the influx of black money in the election process. Successive governments have promised electoral reforms and have setup committees to look into the matter. It is imperative that the authorities enforce these reforms and cleanse our electoral process of the vicious circle of corruption and black money that threatens the very foundation of our democracy. Unless drastic and radical steps are taken to cleanse public offices by the government, political parties and people at large, corruption will continue to corrode the vitals of the country.

 Edited by Kudrat Agrawal

[i] See E. Sridharan, Reforming Political Finance,

http://www.india-seminar.com2001/506/ 5046536%20e.%20sridharan.html

[ii] M.V Pylee, Electoral Reforms: Urgent Need, in OUR CONSTITUTION, GOVERNMENT AND POLITICS (2000).

[iii] (1995) 5 SCC 437.

[iv] (1996) 2 SCC 752.

[v] Background Paper On Electoral Reforms (Prepared By The Core-Committee On Electoral Reforms), Legislative Department Ministry Of Law And Justice Government Of India, Co-Sponsored By The Election Commission Of India, December, 2010.

[vi] National Commission To Review The Working Of The Constitution, A Consultation Paper* On, Review  Of Election  Law,  Processes And Reform   Options.

[vii] P.M. Bakshi, “The Constitution Of India”, New Delhi, Universal Law Publishing Co. 2012, Pp 299.

[viii] M.P. Jain, “Indian Constitutional Law”, Nagpur, LexisNexis Butterworths wadhwa, 2011 pp 883.

[ix] Consultation Paper to the National Commission to Review the Working of the Constitution, 2001.

[x] (2002) 5 SCC 294.

[xi] Ch. XXIV, Sec. C.

[xii] Writ Petition (civil) 490 of 2002.

[xiii] Background paper on electoral reforms (prepared by the core-committee on electoral reforms), legislative department ministry of law and justice government of India, co-sponsored by the election commission of india, December, 2010.

[xiv] Report by: Press Information Bureau, Government of India. August, 2013.


1 thought on “Transparency In Political Finance”

  1. I want put forward my village sarpanch forward to
    He had spend money while election s
    And making his side


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