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31/08/2020 8:04 AM IST | Updated 31/08/2020 8:04 AM IST

Modi Advisor's Letter Undermines PMO Claim That PM CARES Isn't Covered By RTI

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.

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In this photo illustration, Prime Minister Narendra Modi is found speaking to the Nation about Covid19 crisis on a smartphone. 

NEW DELHI— 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.”

Akshay Deshmane/HuffPost India
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.  

Akshay Deshmane/HuffPost India
Internal notes of the Ministry of Corporate Affairs show the officials felt the existing clarification was sufficient to facilitate Corporate Social Responsibility Funds for PM CARES but decided to issue notification because it was a reference received from the Prime Minister's Office on 12 May 2020.

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.