Section 182: prohibitions and restrictions regarding political contributions

Introduction

The text printed in the India Code consolidation is the text as amended by section 154 of the Finance Act, 2017, in force from 31 March 2017 (the date of assent; that Part of the Finance Act has no separate commencement clause). Section 154 omitted the first proviso to sub-section (1), which capped contributions at seven and a half per cent. of the average net profits of the three immediately preceding financial years; removed the words "further" and "and the acceptance" from the remaining proviso; replaced party-wise disclosure in sub-section (3) with disclosure of the total amount; and inserted sub-section (3A).

On 15 February 2024 the Supreme Court, in Association for Democratic Reforms v. Union of India (2024 INSC 113, Writ Petition (C) No. 880 of 2017), held that section 182(3) as amended by section 154 of the Finance Act, 2017 violates Article 19(1)(a) and is unconstitutional, and that the deletion of the proviso to section 182(1) permitting unlimited corporate contributions is arbitrary and violates Article 14. The same conclusions declared the Electoral Bond Scheme unconstitutional. Section 182 itself commenced on 12 September 2013 under S.O. 2754(E).

Key takeaways

Who may contribute, and how

Sub-section (1) allows a company, other than a Government company and a company in existence for less than three financial years, to contribute any amount directly or indirectly to any political party. The proviso requires a resolution authorising the contribution to be passed at a Board meeting; the resolution is deemed to be justification in law for making the contribution.

Sub-section (3A), inserted in 2017, says a contribution may be made only by an account payee cheque drawn on a bank, an account payee bank draft or electronic clearing through a bank account. Its proviso allows contribution through an instrument issued under a scheme notified under any law. The Electoral Bond Scheme was such a scheme, and the Supreme Court declared it unconstitutional on 15 February 2024, so that route should not be assumed to be available.

• India Code — consolidated Companies Act, 2013, section 182
• eGazette — Finance Act, 2017 (No. 7 of 2017), section 154
• Companies Act, 2013 as published in the Gazette of India, 30 August 2013 (NCLT copy)
• eGazette — MCA notification S.O. 2754(E), 12 September 2013 (commencement)
• Supreme Court of India — Association for Democratic Reforms v. Union of India, 2024 INSC 113 (judgment of February 15, 2024)

What counts as a political contribution

Sub-section (2) widens the meaning. A donation, subscription or payment given on the company’s behalf to a person who, to its knowledge, is carrying on an activity that can reasonably be regarded as likely to affect public support for a political party is a contribution for a political purpose.

Advertisement spending in a souvenir, brochure, tract, pamphlet or similar publication is also a contribution: to the party itself if the publication is by or on behalf of a party, and a contribution for a political purpose if it is for the party’s advantage. "Political party" means a party registered under section 29A of the Representation of the People Act, 1951.

Disclosure and the 2024 judgment

As printed in the India Code, sub-section (3) requires disclosure in the profit and loss account of the total amount contributed under the section during the financial year. Before 2017 the 2013 Gazette text required the company to disclose any amount contributed to any political party, giving particulars of the total amount and the name of the party.

The Supreme Court held the amended sub-section (3) unconstitutional, and the deletion of the cap in sub-section (1) arbitrary and unconstitutional. The judgment does not appear as an amendment in the India Code text. This guide does not state how a company should now read the cap or the disclosure requirement; take legal advice before any contribution and disclose conservatively, including the party-wise particulars the original text required.

Penalty

Under sub-section (4), if a company contributes in contravention of the section, the company is punishable with a fine of up to five times the amount contributed, and every officer in default with imprisonment of up to six months and a fine of up to five times the amount contributed.

Practical preparation

Confirm the company is not a Government company and has existed for at least three financial years; pass a Board resolution at a meeting (not by circulation) before paying; pay only by account payee cheque, account payee draft or electronic transfer to the registered party; record the party’s registration under section 29A of the Representation of the People Act, 1951; disclose the contribution in the profit and loss account, with the party name and amount; get legal advice on the effect of the 15 February 2024 judgment before the contribution.

Exemption notifications issued under section 462 can modify how some provisions apply to particular classes of companies (for example private, Government, Section 8 or Nidhi companies); check whether any applies to your company before relying on this guide.

Practical checklist

Glossary

Political party

A political party registered under section 29A of the Representation of the People Act, 1951.

Government company

A company in which the Central Government, State Governments or both hold at least fifty-one per cent. of the paid-up share capital, and includes a subsidiary of such a company, as defined in section 2(45).

Electoral Bond Scheme

The scheme under which electoral bonds were issued for contributions to political parties, declared unconstitutional by the Supreme Court on 15 February 2024.

Frequently asked questions