Huff Post India: National: Monday,
31 August 2020.
PM
Narendra Modi's official advisor Bhaskar Khulbe wrote to the Corporate Affairs
ministry, prompting the latter to amend the Companies Act in order to bring the
PM CARES Fund at par with other Central government funds and enable it to
receive CSR money, according to documents accessed under the RTI Act.
A letter
written by one of Prime Minister Narendra Modi’s senior-most advisors
undermines the claim made by the Prime Minister’s Office that the PM CARES fund
is not a public authority under the Right To Information Act, HuffPost India
has found.
The May
12 letter written by Bhaskar Khulbe, one of PM Modi’s three advisors in the
Prime Minister’s Office, requested the Ministry of Corporate Affairs to share a
copy of its notification altering the Companies Act 2013 to include PM CARES in
schedule VII of the act thereby allowing corporations to make tax-free
donations of their budgets set aside for corporate social responsibility
obligations directly to PM CARES.
Section
2(h) of the RTI Act defines what a ‘public authority’ is. This definition
appears to include charitable trusts like the PM CARES as it is a fund
controlled by the central government. Indeed, the Delhi High Court is presently
considering a petition which makes this argument. The Prime Minister’s Office
recently told the court that it disagrees with the argument.
It is
unclear why Khulbe asked for a copy of the notification – as no such
notification existed at the time. Nonetheless, officials at the Ministry of
Corporate Affairs treated Khulbe’s request as urgent, and prepared the
notification he asked for despite ambivalence among them over the need to do
so. Because corporations could already donate their CSR funds to PM CARES
thanks to a clarification issued by the corporate affairs ministry some weeks
before (more on that later in this piece).
Khulbe’s
letter reveals how the Prime Minister’s Office has controlled and promoted this
opaque fund by keeping it legally at par with, if not above, other central
government funds to enable it to receive more money from big business. Unlike
PM CARES, other central government funds are covered by the RTI Act.
But PM
CARES has been shrouded in secrecy and ambiguity since its inception, with the
Prime Minister’s Office insisting in RTI responses that the fund is not a
public authority under the transparency law despite the Prime Minister and
senior ministers having been named trustees of the fund and the government
exercising a significant degree of control on it by decisions such as this
amendment aimed at attracting CSR funds. In fact, the fund is administered by
officials working in the PMO and its ‘head office’ is also located in the Prime
Minister’s office itself.
The
revelation that it was a letter by Khulbe – an advisor close to Prime Minister
Modi – that prompted the Ministry of Corporate Affairs to alter the Companies
Act to favour the PM CARES fund, also answers a question asked by senior
opposition leaders recently including by former finance minister P.
Chidambaram.
“Who
authorised MCA to make a retrospective amendment to the Schedule to the
Companies Act inserting the name of PM-CARES Fund in the Schedule?” Chidambaram
asked on August 20, adding that, “The retrospective amendment in favour of a
privately established fund is obviously an act of favouritism and
discriminatory. It will be challenged.”
 |
| Letter written by Bhaskar Khulbe, Advisor to PM, to Corporate Affairs secretary on 12 May 2020. Accessed under the RTI Act, 2005. |
Khulbe’s
letter is part of correspondence obtained by this reporter under the Right to
Information Act. The letter’s contents may appear abstruse to some readers; but
its consequence in the form of an amended Companies Act is significant,
according to legal experts consulted by HuffPost India.
HuffPost
India has written to Khulbe for a response about his letter that led to the
corporate affairs ministry issuing the notification amending the Companies Act.
This report will be updated if he responds.
HOW
THE MINISTRY COMPLIED WITH KHULBE’S REQUEST
The PM
CARES fund, which is reported to have garnered at least Rs 5369.6 crores in
donations from India’s biggest corporate houses and industry bodies, was
announced on March 28 as a part of Prime Minister Modi’s plan to tackle the
novel coronavirus pandemic.
This
glut of corporate donations is likely a consequence of an Office Memorandum,
issued by the Ministry of Corporate Affairs, clarifying that any contribution
made to the fund would qualify as CSR expenditure. The memorandum explicitly stated that the PM
Cares fund has been set up by the central government.
As
Aparna Mudiam, Deputy Director at the ministry, subsequently noted in
correspondence accessed by HuffPost India, an existing provision under the
Companies Act of 2013 meant that companies could donate their CSR budgets to
any fund set up by the central government for socio economic development.
“In view
of this enabling provision, it is felt that a mere clarification is sufficient
to make CSR contribution to any fund set up by the Central Government like the
PM CARES Fund as eligible activity,” Mudiam wrote in her note, laying out why
the ministry had initially not included PM CARES as a separate entity in the
Companies Act on its own and didn’t feel the need to do so.
Khulbe’s
letter pushed the ministry of corporate affairs to directly include PM CARES in
the act itself thereby bringing it at par with other central government funds
as well as the Prime Minister’s Relief Fund, which has been in existence since
1948.
On 12
May, Khulbe wrote to the secretary of the corporate affairs ministry, “With
reference to the Ministry of Corporate Affairs O.M. No. CSR-05/1/2020-CSR-MCA
dated 28.3.2020, I would request you to kindly consider providing us a copy of
the Notification issued under Section 467 of the Companies Act, 2013 inserting
PM CARES Fund in the Schedule VII of this Act as an approved activity of the
CSR.”
The
ministry of corporate affairs complied with Khulbe’s request with alacrity, the
documents show.
Khulbe’s
letter was marked ‘urgent’. Deputy Director Mudiam said Khulbe needed to be
considered.
“In view
of the PMO’s reference dated 12th May 2020, we may consider inclusion of the PM
CARES Fund in Schedule VII of the Companies Act, 2013 through a gazette
notification for better clarity,” Mudiam wrote.
On May
25, the ministry drafted a clarification stating that the OM issued on 28 March
was now “redundant and hence stands superseded” since the notification it was
planning to issue the next day would be “deemed to have come into force on 28th
March 2020”. In other words, this was an amendment applied retrospectively and
by replacing the office memo mentioned earlier.
An
amendment was drafted and Corporate Affairs minister Nirmala Sitharaman had
already signed it on 19 May. A few legal corrections later, the amendment
notification was notified on 26 May.
 |
| Internal notes of the Ministry of Corporate Affairs |
To sum
up, the Ministry of Corporate Affairs changed the law on the PMO’s request to
ensure the PM CARES fund was specifically mentioned in the Companies Act 2013.
To be
sure, the government is within its rights to make these changes. Yet even as
these changes were being contemplated and implemented, a separate paper trail
had begun.
On April
1, law student Harsha Kandukuri had filed a Right To Information request with
the PMO requesting a copy of the trust deed of PM CARES and all the government
orders, notifications and circulations about its creation and operation.
The PMO
finally replied on May 29, three days after the changes requested by Khulbe had
been implemented. In its reply, the Modi-led PMO denied Kandukuri the
information on the grounds that PM CARES was “not a public authority under the
ambit of Section 2(h) of the RTI Act, 2005”.
As
explained earlier in this report, this section of the RTI law clearly states
that any authority or body set up or controlled by the government is a ’public
authority” under the act and should provide information when requested by
applicants. PMO’s response to Kandukuri did not explain why the PM CARES Fund
is not a public authority under the ambit of Section 2(h) of the RTI Act.
WHY
EXPERTS THINK PM CARES MUST BE COVERED BY THE RTI ACT
Advocates
and RTI experts told HuffPost India that the changes to the Companies Act, done
in response to Khulbe’s letter, only further confirms that the PM CARES is a
central government run fund and so should fall under the ambit of the RTI Act.
Senior
Advocate Sanjay Hegde said, in his opinion, the PM CARES is very much a fund
set up by the central government, and should logically fall under the RTI.
“The
Office Memorandum appears to have been replaced by the notification only to
ensure abundant caution, ” he said, explaining that Khulbe’s request which led
to the inclusion of the PM CARES directly in the Companies Act was probably
meant to remove any legal ambiguity around whether companies could donate their
CSR expenditures to PM CARES.
Dushyant
Dave, Senior Advocate and President of the Supreme Court Bar Association,
criticised the government’s decision to allow companies to donate to PM CARES
instead of spending the money on communities directly affected by the business
activities of corporations.
“You can
amend the law, you are the government, you are the lawmaker, so you can do
whatever,” Dave said. “But CSR as understood is actually a CSR activity which
is done within the immediate proximity of companies which exist anywhere in the
country. The idea is that they support social activities around themselves, not
a distant entity like the PM CARE fund.”
Dave
recently appeared in a matter arguing for PM CARES to be audited by the
Comptroller and Auditor General, a plea that was rejected by the Supreme Court.
The
Prime Minister should set an example by declaring PM CARES as part of NDRF
subject to RTI and CAG without any further delay, whether the Supreme Court has
justified it or not, I think the PM must do it.
Dushyant
Dave, Senior Advocate and President of the Supreme Court Bar Association
“The
Prime Minister should set an example by declaring PM CARES as part of NDRF
subject to RTI and CAG without any further delay, whether the Supreme Court has
justified it or not, I think the PM must do it,” Dave said.
“I
definitely feel that what has been done by the advisers of the Prime Minister
is not right, it is not in the good interest of democracy like India,” Dave
said.
RTI
expert and transparency campaigner Venkatesh Nayak said the government’s clear
involvement in first setting up the fund, and subsequently tweaking the
companies act at the request of the PMO, makes it clear that PM CARES is a
government fund.
“Both
actions ultimately strike at the very root of the government’s argument that
the PM Cares fund is only a public charitable trust, because no other
non-government agency either in the private sector or in the social sector or
in the voluntary sector has been given this kind of treatment where it is
inserted in the Companies Act for the purpose of spending CSR money,” Nayak
said.
Nayak
further argued that, even if the PMO or any other public authority in
government claims that the PM CARES Fund is not a public authority, they are
liable to share information that they hold with themselves about it.
“All
information held by government agencies including ministries plus the Prime
Minister’s Office relating to the affairs of the PM CARES fund would still be
information within the definition of that term given in section 2(F) of the RTI
Act,” he noted.
“Therefore,
whichever agency holds material custody of such papers and information, is duty
bound to make a decision of disclosure relating to the affairs of the fund
subject, of course, to the exemptions as may be applicable,” Nayak said.
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