New Companies Act: India Inc avoids naming political parties it funds
NEW DELHI Don't make us reveal which political party we fund — that's India Inc's message to the government.
The reason: privately, industry is apprehensive that full disclosure of political funding beneficiaries, as required under the new Companies Act, may lead to backlash from political parties that feel relatively less-generously funded.
Rules governing the operation of the New Companies Act are in the process of being framed.
No company ET spoke to was willing to speak on record on the matter. But a number of private-sector veterans said naming the political party that receives company funds is a requirement that carries some risk in, as an executive put it, "a volatile democracy like ours".
The Confederation of indian industry (CII) has written to the government urging it to change Section 182 (3) of the new Companies Act that says corporates must disclose names of political parties they give money to in their profit and loss account. Political parties for this purpose are defined as those registered under Section 29A of the Representation of People Act, 1951.
Section 182 (3) reads: "Every company shall disclose in its profits and loss account any amount...contributed by it to any political party...giving particulars of the total amount contributed and the name of the party..." The earlier version of the companies law allowed corporates to name persons while disclosing political funding.
Most companies, therefore, avoided naming a political party, a senior industry executive said, on the condition of anonymity. "Such a clause will put us in a discomfiting position vis a vis political parties," this executive said.
Chandrajit Banerjee, director-general of CII, confirmed to ET that such a representation has been made.
The industry lobby wants this clause to be made non-obligatory.
Official view not firmed up yet
Aministry of corporate affairs official told ET the ministry has received the representation but that official views are not firmed up since rules for the Act are being framed. But no decision has been taken, he said. This official said he did not wish to be identified as the matter was a "sensitive one and required high-level deliberations". The rules committee that's looking into this and other matters has representation from India inc heavyweights.
A few private sector veterans disagree. Former Infosys heavyweight Mohandas Pai, now chairman, Manipal Global Education, said, "CII is acting out of fear...I don't agree with this view...industry should be proud of our democracy and disclose who we fund."
Kiran Karnik, former Nasscom chief, also took the same position, saying CII's position is like a "half-way house". "We are undertaking not to give money underhand, but not disclosing who we give money to."
CII also has an issue with what it says is a contradiction between rules governing funding parties directly and through trusts. The 1956 Act that governs Electoral Trusts, CII says, does not require disclosure of names of political parties. Industry's argument is that there's a misalignment between the two sets of rules and, therefore, rules for the new Act should be amended. The trust law's "enabling provision does not correspond with (new Companies Act) disclosure requirements", the CII letter says.
