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TMI Blog2014 (4) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... e has chosen to employ the word includes, which signifies that the entries contained in the said provision are only illustrative of what could constitute a Foreign Source. Section 2(e)(iii) of the Foreign Contribution (Regulation) Act, 1976 treats Foreign Company within the meaning of Section 591 of the Companies Act, 1956, its subsidiaries and multi-national corporations as a Foreign Source for the purpose of the Act. The term Foreign Company is not defined in the Foreign Contribution (Regulation) Act, 1976, however it prescribes that a Foreign Company within the meaning of Section 591 of the Companies Act, 1956 would be treated as a Foreign Source for the purpose of the Act - A company, incorporated outside India, however in a sense domiciled within the territory of India by establishing a place of business therein, should be brought within the regulatory framework of the Companies Act, 1956 and in public interest be saddled with some rudimentary obligations. In light of the legislative mandate flowing from clause (1) of Section 591 of the Companies Act, 1956, Vedanta is unquestionably a Foreign Company by virtue of the fact that Vedanta is incorporated outside India, i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 976, the present case is also squarely covered under Section 2(e)(vi)(c) of the Foreign Contribution (Regulation) Act, 1976 - Prima-facie the acts of the respondents inter-se, as highlighted in the present petition, clearly fall foul of the ban imposed under the Foreign Contribution (Regulation) Act, 1976 as the donations accepted by the political parties from Sterlite and Sesa accrue from 'Foreign Sources' within the meaning of law – Decided in favour of appellants. - W.P.(C) 131/2013 - - - Dated:- 28-3-2014 - For the Petitioner: Mr. Prashant Bhusan and Mr. Pranav Sachdeva For the Respondent : L. Nageshwar Rao, Rajeev Mehra, Sumeet Pushkarna, Ms. Aditi Mohan, Ms. Sara Sundaram, Aditya Malhotra, D. Abhinav Rao, Mayank Pandey, Girish Kosaraju, P.R. Chopra, V.P. Singh, K.C. Mittal, Ms. Ruchika Mittal, M.I. Choudhury, Ms. Pinky Anand, Sybhashish Soren, Anil Soni and Aayush Chandra ORDER Pradeep Nandrajog, J. Filed in public interest, the petitioner asserts that there is a blatant violation of the Foreign Contribution (Regulation) Act, 1976 (hereinafter referred to as 'FCRA') by political parties which include the Respondent No.3 and the Respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - each paid by State Trading Corporation and Metals Minerals Trading Corporation of India finds a mention in the return submitted by its Treasurer to the Election Commission of India, but seeks to explain that the donations were actually made to the National Student Union of India (NSUI) as a part of a national campaign form Centenary Celebration of Satyagaraha which was sponsored by said two Corporations, which were conceded to be Government Companies. In other words, the defence is one of it being an inadvertent mistake. A donation required to be entered in the account of NSUI has been erroneously entered in the account of the Respondent No.3. 5. We shall be discussing the effect thereof at the end of our decision, but would highlight at this stage that with respect to petitioner's pleading concerning the two Government Companies, the parties were not at variance on any question of law or fact. The only question would be to consider whether the defence of inadvertent mistake is plausible. 6. The major concern would be the interpretation of FCRA keeping in view the admitted fact that Sterlite and Sesa are companies registered in India under the Companies Act, 1956 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only when the statute is not exhaustive or where the language is ambiguous, uncertain, clouded or susceptible of more than one meaning or shades of meaning that external evidence as to the evils, if any, which the statute was intended to remedy or the circumstances which led to the passing of the statute may be looked into for the purpose of ascertaining the object which the legislature had in view in using the words in question. 12. In the decision reported as (1990) 4 SCC 366 Shashikant Laxman Kale v. Union of India the Supreme Court recognized the vital distinction between the use of material (external aids) for the purpose of finding the mischief dealt by the Act and the circumstances which necessitated the passing of such legislation as distinguished from its use for finding the meaning of the Act. The former course was held to be permissible. 13. In this regard it would be relevant to recount the words of Lord Atkinson in the decision reported as (1911) AC 641 Keates v. Lewis Merthyr Consolidated Collieries Ltd.:- In connection of statutes it is, of course, at all times and under all circumstances permissible to have regard to the state of things exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... War' that virtually polarised the war-torn world into two power blocs premised upon clear cleavage of ideology. The Western Bloc led by the United States of America comprised of the NATO and others, whereas, the Eastern Bloc was spearheaded by the Soviet Union and its allies in the Warsaw Pact. The Western Bloc countries shared a capitalistic outlook and desired a world order in such terms. Per Contra, the Eastern Bloc countries had gravitated towards a socialistic political ideology. Thus, commenced an era of unceasing conflict of rival ideologies that also engulfed within its fold the newly independent 'Non-Aligned Countries' like-India. Each bloc zealously attempting to win-over the allegiance of such countries, for creation of a world order in accordance with its ideology. Mobilizing the public opinion through Trade Unions and Voluntary Groups, circulating publications to spread propaganda, orchestrating coupes or even assassinations became the order of the day. Political Parties and pliant public functionaries were influenced by these Foreign Powers to toe their lines and in return were handsomely rewarded in myriad forms, which included bribes, extending lavish ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id of seemingly innocuous organisations like - Research Foundations, Religious and Cultural Societies, Voluntary Associations and Multi-National Corporations. It had dawned that India had denigrated into a playground for the world powers; who were coining ingenious means to latently push across huge sums of money through puppet organisations and destabilize the country. The Members of the House unanimously supported the Aim and Object(s) of the legislation and the mischief of pervasive foreign influence on our polity that it sought to suppress. 19. It would be beneficial for our purpose to cite some extracts from the speech delivered by Shri Khurshed Alam Khan on the floor of Rajya Sabha on 9th March 1976 which are luminous and throw light upon the attending circumstances necessitating the introduction of the Bill. Sir, I rise to support the Bill as amended by the Select Committee. In fact, this Bill has not been introduced too soon. Originally it was introduced on the 24th December, 1973, and the Select Committee has taken considerable time in redrafting the Bill. The nation is today poised for a take-off and we are determined to reshape our destiny and our e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons must be exposed. Contributions in the name of research and exchange programmes, etc., must be discouraged as they have always a motive behind them We are passing through a very important phase of life, in our chequered history, and the new economic programme is the beginning of an enormous task to bring about social and economic changes in the country. We have to be careful in this regard. There are still about 540 foreign companies in this country and their operations must be watched very carefully. In order to improve their prospects, they are also indulging in a lot of hospitality and aids of various types of agencies which are not working in the national interest Sir, the nation is on the move and prepared to face any challenges. The new era leads us from darkness to light, from uncertainty to stability and from lack of coincidence to self-reliance. This situation has brought about the transformation in our national life. Therefore, all loopholes, wastages and interference, whether political or through the power of money, should be stopped and done away with as early and as effectively as possible 20. Therefore it can be safely gathered that amidst a spate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 956 (1 of 1956). (2) (a) No person, resident in India, and no citizen of India resident outside India, shall accept any foreign contribution, or acquire or agree to acquire any currency from a foreign source, on behalf of any political party, or any person referred to in sub-section (1), or both. (b) No person, resident in India, shall deliver any currency, whether Indian or foreign, which has been accepted from any foreign source, to any person if he knows or has reasonable cause to believe that such other person intends, or is likely, to deliver such currency to any political party or any person referred to in sub-section (1), or both. (c) No citizen of India resident outside India shall deliver any currency, whether Indian or foreign, which has been accepted from any foreign source, to- (i) any political party or any person referred to in sub-section (1), or both, or (ii) any other person, if he knows or has reasonable cause to believe that such other person intends, or is likely, to deliver such currency to a political party or to any person referred to in sub-section (1), or both. (3) No person receiving any currency, whether Indian or foreign, from a forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning of this Act, (vi) a company within the meaning of the Companies Act, 1956 (1 of 1956), if more than one-half of the nominal value of its share capital is held, either singly or in the aggregate, by one or more of the following, namely,- (a) government of a foreign country or territory, (b) citizens of a foreign country or territory, (c) corporations incorporated in a foreign country or territory, (d) trusts, societies or other associations of individuals (whether incorporatedor not), formed or registered in a foreign country or territory, (vii) a trade union in any foreign country or territory, whether or not registered in suchforeign country or territory, (viii) a foreign trust by whatever name called, or a foreign foundation which is either inthe nature of trust or is mainly financed by a foreign country or territory, (ix) a society, club or other association of individuals formed or registers outsideIndia, (x) a citizen of a foreign country, but does not include any foreign institution which has been permitted by the CentralGovernment, by notification in the Official Gazette, to carry on its activities in India. 27. The interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in the said provision are only illustrative of what could constitute a 'Foreign Source'. 31. The reason for providing an ' inclusive definition' seems to be that the legislature, at the time of enacting the Act, was not in a position to exhaustively foresee the myriad means through which foreign contributions could be channelized into India. The debates have also recognized that such operations are covert in their innate nature and the foreign powers are known to have operated behind the cloak of 'dummy-organisations' and adopt ingenious means to perforate the polity of nations. With a view to address such a mischief, enacting an 'inclusive definition' seems to provide the best remedy since it lends the necessary flexibility to bring within its purview certain situations which do not stand expressly covered therein, lest loopholes of law may be explored and exploited in future. 32. A bare perusal of the provision also reveals that not only has the term 'Foreign Source' been defined in an inclusive manner, furthermore, nine clauses are comprised therein that deal with a wide spectrum of possible sources from which foreign contributio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is a subsidiary of a foreign company, and (b) a multi-national corporation within the meaning of this Act. 38. It is evident that Section 2(e)(iii) of the Foreign Contribution (Regulation) Act, 1976 treats 'Foreign Company' within the meaning of Section 591 of the Companies Act, 1956, its subsidiaries and multi-national corporations as a 'Foreign Source' for the purpose of the Act. The term 'Foreign Company' is not defined in the Foreign Contribution (Regulation) Act, 1976, however it prescribes that a 'Foreign Company' within the meaning of Section 591 of the Companies Act, 1956 would be treated as a 'Foreign Source' for the purpose of the Act. 39. Therefore, it would be necessary to have a glimpse at the contours of Section 591 of the Companies Act, 1956 for the purpose of unraveling the legislative prescription contained in Section 2(e)(iii) of the Foreign Contribution (Regulation) Act, 1976. 40. Part XI of the Companies Act, 1956 under the caption 'Companies Incorporated Outside India' has Sections 591 to 608 as a part of the Chapter. Section 591 reads as under:- 591. Application of sections 592 to 602 to forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following two classes, namely:- (a) companies incorporated outside India which, after the commencement of this Act, establish a place of business within India; and (b) companies incorporated outside India which have, before the commencement of this Act, established a place of business within India and continue to have an established place of business within India at the commencement of this Act. 43. It may also be worthwhile to notice that the recently encated Companies Act, 2013 distinctly defines 'Foreign Company' under section 2(42) in the following terms- 2. In this Act, unless the context otherwise requires,- xxxxxxx (42) foreign company means any company or body corporate incorporated outside India which (a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and (b) conducts any business activity in India in any other manner. 44. In light of the legislative mandate flowing from clause (1) of Section 591 of the Companies Act, 1956, Vedanta is unquestionably a 'Foreign Company' by virtue of the fact that Vedanta is incorporated outside India i.e. in the United Kingdom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;Foreign Company' within the meaning of section 591(1) of Companies Act, 1956) is held by one or more citizens of India or by one or more bodies corporate incorporated in India, or by one or more citizens of India and one or more bodies corporate incorporated in India, whether singly or in the aggregate, such company shall comply with such of the provisions of this Act as may be prescribed with regard to the business carried on by it in India, as if it were a company incorporated in India. 50. Therefore, by virtue of the fulfilment of the conditions prescribed in clause (2) of Section 591 of the Companies Act, 1956, a fiction of law operates, and even a 'Foreign Company' as defined is clause (1) is obliged to scrupulously comply with all the provisions of the Companies Act, 1956 as if it were a company incorporated in India and not merely comply with sections 592 to 602 of the said Act. 51. The sublime philosophy and rationale for introduction of clause (2) seems that it was being experienced that some 'Foreign Companies' operating in India were foreign only namesake, i.e., only by virtue of incorporation in a foreign country, but the business was being es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xists a profusion of judicial authorities to this effect. The nationality of its shareholders or directors have no bearing upon the nationality of a company, the company being a distinct jural entity having an existence independent of its constituents. Reliance may be placed on the decision of the House of Lords reported as (1902) A.C 484 Janson v. Driefontein Consolidated Mines, Private Limited. In our considered view, there is nothing contained in the language of Clause (2) of Section 591 which affords an interpretation that it militates against the recognized principle of law that the nationality of a company is premised on the situs of incorporation de hors the nationality of its constituents. 55. In this regard it would be apposite to cite the view of an eminent author - C.R.Dutta in his celebrated treatise on Company Law, wherein he has expressed the view that a company incorporated in England having shareholders who are all Indian citizens would be construed as 'Foreign Company' [C.R Dutta-'The Company Law', 6th Edition, 2008-Volume 4; Page7087]. 56. Thus, in ultimate analysis, we are of the considered view that Vedanta is a 'Foreign Company' wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of1950), or the Representation of the People Act, 1951 (43 of 1951), shall have the meanings respectively assigned to them in such Act. 61. However, we find that the term - 'corporation' is not defined in either of the statutes referred above. Even the General Clauses Act, 1897 does not assign meaning to the term 'corporation'. 62. Therefore, this Court must traverse beyond in order to ascertain the true meaning and import of the term 'corporation', which has not been defined under the Foreign Contribution (Regulation) Act, 1976 or the statutes prescribed therein. 63. It has been pertinently observed in the decision reported as (1914) 1 KB 641 Camden (Marquis) v. IRC- It is for the court to interpret the statute as best it can. In so doing the court may no doubt assist itself in the discharge of its duty by any literary help which it can find, including of course the consultation of standard authors and references to well known and authoritative dictionaries. 64. The Supreme Court has held in the decision reported as 1985 Supp SCC 280 State of Orissa v. Titaghur Paper Mills Co. Ltd. that the court may take the aid of dictionari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utside India but does not include (a) a corporation sole; (b) a co-operative society registered under any law relating to co-operative societies; and (c) any other body corporate not being a company as defined in this Act which the Central Government may, by notification in the Official Gazette, specify in this behalf; 68. The new Companies Act, 2013 defines a 'Corporation' under section 2(11). 2. In this Act, unless the context otherwise requires, - xxxxxx (11) body corporate or corporation includes a company incorporated outside India, but does not include - (i ) a co-operative society registered under any law relating to co-operative societies; and (ii ) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf; 69. Thus, it is unequivocal that the term 'corporation' ordinarily includes within its meaning entities like a company; amongst others. 70. We have already highlighted in the earlier part of our judgment that the legislature in its wisdom has defined the term 'Foreign Source' in a wide and an expansive manner with a vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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