Midnight Hawala: AAP’s Excuses Do Not Wash

Cheques do not ensure transparency and accountability. The party’s old assurance that its highest governing body would investigate donations amounting Rs 10,00,000 or more proved false. Disclosure on website does not prove there was no quid pro quo.

On Monday, 2 February, with barely a week before Delhi’s voters cast their vote in the assembly elections, AVAM – AAP Volunteer Action Manch- dropped a bomb shell on the Aam Aadmi Party. AVAM alleged that AAP received four donations of Rs 50 lakh each from ‘dubious companies’. They named the four companies and said they were checking on 31 companies.

This being an election season, media, which is otherwise happy to promote Arvind Kejriwal as the last Prophet of Honesty, was forced to investigate the matter further. Some of the media houses took to the investigation in the right earnest beyond optics, and discovered that the four donor companies in question were shell companies with fake addresses, and the same set of people acting as directors in those companies. More dubious details are being uncovered by every hour.

The AAP’s defense of the accusations is on predictable lines. AVAM was accused as a “BJP front” and AVAM members were accused of being sympathetic to the Bharatiya Janata Party. Senior journalists and editors in media accepted these without raising a logical question, whether it was a crime to be a BJP sympathizer in India. While the defensive reactions were par course on the political front, more serious apology was put up, implying there was nothing wrong whatsoever in the AAP’s act of accepting huge donations from unknown entities with questionable background.

Meera Sanyal. senior leader of the AAP, and a former banker with a long standing in the banking industry, alleged that the AAP funding allegation was a “malicious move by (a) desperate BJP”. To quote her:

As a banker, I can tell you with full responsibility that all transactions are legitimate and its process is transparent. We got bank cheques from the donors, brought them into the notice of the Political Affairs Committee (PAC) of the party as it is necessary for any donations exceeding Rs 10 lakh and after getting its clearance, the cheques were submitted in the bank account. As the transactions were completed, we uploaded its details on our website with the transaction ID. Therefore, there is nothing illegal in the entire process.

As a senior banker, Sanyal’s defence assumes significance over the political rhetoric about the timing of the allegation.

More curious is the editorial of the leading financial daily Economic Times  published on 4 February titled, “AAP stays champion of transparent campaign finance in India”. The editorial toes the AAP’s line of defence saying “If AVAM’s charge that this amount — paltry by today’s political expenses — amounts to laundering money, then why did the money arrive through cheques and why did the AAP bother to record the donations on its website?”

Ironically the last line of the editorial says “It would help if corporate donors, the biggest financiers of politics, channel all their funding through open, transparent means, instead of funding crony politicians.” Probably the AAP and Kejriwal are by definition exempt from the definition of “crony politician”; hence, Economic Times believes donations to the AAP are “through open and transparent means” since “the money arrive(d) through cheques” and the “AAP bother(ed) to record the donations on its website”.

Some of the myths that Sanyal and Economic Times have tried to create through their assertions are:

1. Receiving money by cheque amounts to “open and transparent” funding;

2. No due diligence is required by the recipient of funds;

3. AAP’s Political Affairs Committee (PAC) exercised necessary “due diligence” while accepting donations of Rs 2 crores;

4. Disclosure on website amounts to ensuring there is no quid-pro-quo;

5. AAP does not owe any explanation except to government’s law enforcement agencies.

There are many other excuses being provided to justify the AAP’s actions and protect Kejriwal’s brand as the last prophet of honesty. The modus operandi of Kejriwal evangelists reminds one of how brand Manmohan Singh was built and marketed successfully for over a decade as ‘personally’ honest.

Myth: Receiving money by cheque amounts to “open and transparent” funding
This is complete hogwash. If such was the case, regulators all over the world won’t be spending a major portion of their time in tracking funds moving across the banking channels worldwide. Billions of dollars are being spent every year by regulators, governments, intelligence agencies, corporations, clearing houses, payment services providers and the banks themselves in tracking funds to monitor tax evasion and terror financing.

Ironically, Kejriwal and the AAP launched their brand by accusing Sonia Gandhi’s son-in-law Robert Vadra of profiting from irregular land dealings, where apparently all funds moved through proper banking channels. This movement of funds through banking channels, however, did not deter Kejriwal from ascribing corrupt motives to Vadra’s dealings with DLF. It appears that Kejriwal and his esteemed supporters like Sanyal and Economic Times’ editors do not hold the AAP to the same standards of probity that Kejriwalexpects of others.

Myth: No due diligence is required by recipient of funds
Kejriwal, the AAP leaders and some of the esteemed “intellectuals” have been quick to “turn around” the allegation and ask BJP leaders why they are not launching an investigation and prosecution of the AAP leaders if there is anything mala fide involved in the donations. Kejriwal said, “I challenge the government to arrest me if they have the courage,” adding “”They don’t have the guts to do that.” As per senior banker Sanyal, “Banking privacy laws prohibit people from knowing information about companies. It is just not possible to go checking everyone’s address. How can we be blamed for trusting the country’s banking system?”

This is probably the most serious and atrocious lie coming from a senior banker. Sanyal should produce a banking regulation that says parties engaged in financial transactions cannot demand and receive information about each other’s businesses such as directors, shareholding, registered office, branches and other offices, employees, memorandum of association, articles of association, financial statements and so on.

The AAP was perfectly within its rights to demand these documents and more. Claiming that banking laws prohibit asking for such information is simply preposterous. Sanyal should very well know that the prohibition on sharing information applies to banks, who are obliged to protect the privacy of customers’ information, and not to two parties dealing with each other.

As regards Sanyal’s claim that people are entitled to “trust country’s banking system”, it is perfectly acceptable. However, that does not mean the AAP should restrict its due diligence to ensuring that they get a cheque and that the cheque is cleared through the bank. What if the cheque was signed by someone who is not authorized by the Company’s board of directors to sign the cheque? What if the person who signed the cheque was not the one who s/he claims to be? It is customary to ask for a copy of the board resolution authorizing the signatory to sign the cheques and the limit up to which they are authorized. Additionally, in case of large amounts involved, identity proof of the concerned persons can also be demanded.

In many cases the companies require more than one signatory for cheques of large amounts and, hence, this becomes important. Likewise, Companies Act, 2008, puts restrictions on how much money companies can donate to political parties and how the donations should be authorized. It is impossible to believe Sanyal is not aware of such regulations and processes, which most of the people who engage in financial dealings in India are aware of.

Myth: AAP’s PAC exercised necessary “due diligence” while accepting donations of Rs 2 crores
Sanyal has claimed that the AAP’s PAC exercised “due diligence” while accepting the donation of Rs 2 crores. The donations were accepted on 5 April, 2014, which is merely 8 months back. Hence it should be easy for the AAP to pull out the necessary documents and throw them in the face of media, just as they are used to throwing documents around, when they hurl allegations at others. At the most basic level, they should have produced the minutes of the meeting where the donation was discussed, showing who were present at the meeting, what matters were discussed, which documents were reviewed and on what basis the decision was made.

If it takes days to produce the minutes of the meeting, naturally suspicion will arise that these documents have been fabricated after the allegations were made by AVAM.

The AAP cannot also escape this responsibility in view of the fact that this single donation constitutes a disproportionately high amount of its total donations in the run-up to the Lok Sabha elections of May 2014.

Myth: Disclosure on website amounts to ensuring there is no quid-pro-quo
One more defence put forward is that the AAP has disclosed the amount on the website when legally it is not bound to do so. Thus the AAP’s motives behind accepting the donation must not be questioned! It is worthwhile to note that the AAP made a big deal of ensuring transparency in election funding. As per a report on the AAP which quotes its leaders, “Unlike other political parties that have opposed outright the Central Information Commission ruling bringing parties under the Right to Information (RTI) Act and directing parties to declare their sources of funding, the the AAP has made transparency the lynchpin of its functioning.”

Hence, the fact that the AAP disclosed donations on the website is no defence. They are bound to do so to back up their claim of entering politics to clean up the system. But for such ingenious practices, they would not have received any public support and branding.

The AAP has, however, been as non-transparent as other political parties when it comes to responding to RTI queries, submitting accounts to the EC, or publishing amounts they spent during elections. Thus the AAP’s claim to transparency rests solely on their disclosure of donations which itself is under question now.

Myth: the AAP does not owe any explanation except to government’s law enforcement agencies
An activist Nutan Thakur had approached judiciary through a PIL seeking probe against Robert Vadra based on Kejriwal’s allegations. The High Court bench observed that “there is absolutely no merit (in the PIL) and hence it deserves to be dismissed while recording a note of caution against filing of such petitions.” Note that the High Court did not say that there was nothing mala fide in Robert Vadra’s dealings but that it had only struck down the PIL route.

There is a process of law laid down in the rule books. Income Tax authorities are best qualified to judge whether there is a prima facie case to launch investigation against the AAP. If so, notice will be issued to the defendant (in this case, the AAP), with sufficient time provided to clarify their stand. The party’s submissions will be heard and order passed. The order can be appealed against by the party through tribunals and courts. Finally, the AAP may or may not be held guilty of any offence. Going by the last 6 decades of track record of the Indian taxation system and jurisprudence, this is likely to take anywhere between 10 years to 30-40 years!

Kejriwal and the AAP are well aware of this process of law. Kejriwal was himself an Indian Revenue Service officer for some years, and his colleagues like Prashant Bhushan have long experience of fighting such battles in the court of law. Meanwhile, Kejriwal should not take shelter under the process of law which is very time consuming and must answer to the people of India, and people of Delhi, in particular.

In the AAP’s defence
The AAP as a newbie on the block is obviously entitled to its share of ‘errors’ due to lack of experience. However, the current set of allegations of dubious donations cannot be classified as errors even if one wants to be most generous by any standards.

All is not lost as yet. Keeping Delhi elections in focus the AAP can still come clean on the facts and re-establish its claim of being an honest and transparent political party.

In order to successfully defend itself, the AAP must produce all the evidence and put it out so that people can form their own opinion. There is a long time to go before they have to answer the law. They should at the least produce copies of the minutes of meeting of the PAC, which reviewed the donation and decided to accept it, and produce other documents such as cheque copies, affidavit of the donor (if any), minutes of meeting of the board of directors of the donor companies authorizing he signatory as well as the donation, names of the people whom the AAP leaders or PAC met in person, etc. This will help establish there was no mala fide intention, the money was not dirty and that there is no quid pro quo involved.