Here is why PM CARES should be scrutinised by the CAG – not by independent auditors

In the face of the coronavirus pandemic, Prime Minister Narendra Modi on March 28 constituted a brand-new trust fund for public contributions – the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund, bearing the catchy acronym of the PM CARES Fund.

On Friday, the Prime Minister’s Office refused to provide details about the Fund under the Right to Information Act, stating that PM CARES was not a “public authority” under the definition of the legislation.

Under the RTI Act, a public authority is an organisation established (a) under or by the Constitution (b) by any other law made by the parliament or (c) by a notification or order issued by the government. The definition also covers organisations financed substantially by the government, including non-governmental organisations.

What is also disquieting is that PM CARES will be audited by an independent auditor and not by the Comptroller and Auditor General, the constitutional office charged with auditing all receipts and expenditure of the Central and state governments, as well as the accounts of authorities substantially financed by the government.

But looking at the conditions under which the PM CARES Fund has been set up and the manner in which donations have been solicited, there is a good case for it to be audited by the CAG, a move that would make it more transparent and enhance its credibility.

Foreign donations allowed

Shortly after the Fund was set up, several benefits were extended to it. Donations made to the fund would receive 100% tax deduction under Section 80G of the Income Tax Act relating to charities. It was allowed to receive foreign donations under the Foreign Contribution (Regulation) Act and also made eligible for contributions to be treated as Corporate Social Responsibility expenditure under the Companies Act.

By contrast, Chief Ministers’ Relief Funds as well as state-specific Covid-19 Relief Funds are not entitled to receive the Corporate Social Responsibility contributions that large Indian companies are legally required to spend on social causes.

The PM CARES website says that it is a “public charitable trust”, headed by the prime minister as its ex-officio chairman – which is to say that he holds the position by virtue of his position as the prime minister. The minister of defence, minister of home affairs and minister of finance are ex-officio trustees. The chairperson of the Board of Trustees has the power to nominate three “eminent persons” though “no such appointment has been made so far”, the website says.

The fact that PM CARES is a public trust merely implies that the beneficiary is the general public or a class thereof, and not specified individuals.

According to NDTV, officials in the office of the CAG have already indicated that their office will not audit the Fund unless the trustees ask them to do so .

This begs the question: can the PM CARES Fund be beyond the scrutiny of the CAG?

Prime Minister’s National Relief Fund

Drawing a comparison with the Prime Minister’s National Relief Fund set up in 1948 offers little help. The Prime Minister’s National Relief Fund too is a privately audited trust. In 2009, information pertaining to the Prime Minister’s National Relief Fund was initially denied under the Right to Information Act, but allowed on appeal by the Central Information Commission in 2012. A single judge of the Delhi High Court upheld the order of the commission in 2015.

However, the issue has not been resolved as on further appeal, there was a difference of opinion between two judges and a reference to a third judge on the specific issue of whether the Prime Minister’s fund is a “public authority” under the Right to Information Act.

Moreover, though basic financial particulars, like a summary of receipts and payments for the past decade are available in the public domain, and the CAG has scrutinised previous disbursements made from the Prime Minister’s National Relief Fund, the fund is opaque and not subject to regular audits by the CAG.

It is relevant to note, though, that more than Rs. 3,800 crores were already available under the Prime Minister’s National Relief Fund as of June, so it isn’t clear why it was necessary to create another fund at the central level.

Generous donations

Reports suggest that PM CARES has already received contributions in excess of Rs. 10,000 crores. It amassed a staggering Rs. 6,500 crores in its very first week with donations from large corporate houses (despite lay-offs and pay cuts in some of them, as reported here previously) and celebrities.

Public Sector Units and government departments are reported to have contributed nearly Rs. 2,000 crores to PM CARES. For employees of some government departments (including registry officials of the Supreme Court), contributions were cut from their salaries. . Those who did chose not to make this contribution were asked to provide an explanation for their decision in writing, reports said.

In all this, Prime Minister Modi has been the face of the fund and has solicited contributions.

In addition to the calls for contributions made by Modi in his capacity as executive head of the nation, other features of the PM Cares worth considering include:

(a) Advertisements for PM CARES contain references to the office of the Prime Minister, use Modi’s pictorial representations and, on the face of it, suggests the patronage of the government of India. This is actually prohibited by the Emblems and Names Act, unless these symbols are being used by the Central government itself or permission to use them has been obtained from by the Central government.

A claim that a public charitable trust is not governed by the Emblems and Names Act and Rules would permit any private citizen to set up a trust akin to the PM CARES Fund and collect money, without any ramifications.

(b) In similar vein, PM CARES uses the State Emblem of India (an adaptation of the Ashoka Pillar at Sarnath) in a manner that creates the impression that it is related to the government. The use of this symbol is governed by the State Emblem of India Act and Rules, and is a prohibited offence unless permitted by the Central government.

(c) The chairman and trustees are associated with PM CARES “ex-officio”, that is, by virtue of their status or office. This not only gives continuity to PM CARES and makes it impervious to shuffling of portfolios or demission of office, but also gives it a garb of being an official Central government fund or account.

(d) The Fund is cross-linked to the official website of the Prime Minister of India, and is listed as one of the three Prime Minister’s Funds (along with the Prime Minister’s National Relief Fund and the National Defence Fund). In addition, the website of the Fund is hosted using the official “.gov.in” domain, which would mean that is has been deemed eligible to have been allotted this domain name by the National Informatics Centre under the Ministry of Electronics and Information Technology regulations.

(e) Most importantly, it is the taxpayers who are paying for the public machinery operationalised in support of the Fund, as well as its advertisements and appeals for contributions.

All these factors, including the deduction and deposit of salaries of government employees to the PM CARES Fund undertaken as a departmental or ministerial policy, would indicate that it has all the trappings of a public account set up by the government of India.

Under Article 266(2) of the Constitution, “public moneys received by or on behalf of the Government of India”, which is not on account of revenue from taxes, duties, repayment of loans and the like should be credited to the Public Account of India.

Under Section 13(b) of the CAG Act, it is the duty of the CAG to audit “all transactions” of the Union relating to public accounts.

There is also a second tier of oversight, as reports of the CAG are required to be submitted to the President, who causes them to be laid before each House of Parliament under Article 151(1) of the Constitution.

Voluntary contributions

The argument against conferring PM CARES the status of a “public account” seems to be that it is a fund based on voluntary contributions of individuals and organisations, and as such, beyond the full-fledged scrutiny of the CAG. However, the voluntary nature of contributions to PM CARES cannot imply that this is not “public money received on behalf of the Government of India”.

“These are ultimately funds raised by the government, these are not funds raised in private capacity by the Prime Minister,” Senior Advocate Dushyant Dave noted. “So all funds which are raised and given by the people in whatever form, even if it is in the form of a relief fund, must be subject to audit automatically.”

Secondly, the very purpose of having a separate public account of India under Article 266(2), as against the Consolidated Fund of India [Article 266(1)] and the Contingency Fund of India (Article 267), is to cover receipts that do not fall in either of these two funds.

In any event, concerns of accountability and transparency, and dispelling the likelihood of misappropriation of funds outweigh any interpretation that protects PM CARES for scrutiny by the CAG.

As the Supreme Court observed in 2013 in a case involving distribution of gits by political parties in Tamil Nadu, the CAG examines the “propriety, legality and validity of all expenses incurred by the government” and exercises effective control over government accounts and incurrence of expenditure.

Part of the ‘basic structure’

In another decision of the top court, the duties and powers conferred upon the CAG have been held to be a “basic structure” of the Constitution.

In the same case, a wide meaning was given to the term “all transactions” in Section 13 of the CAG Act and purposive interpretation was applied so as to permit a CAG audit of private telecom service providers since they were dealing with spectrum – a natural resource belonging to the people, but held by the State.

Similarly, since PM CARES conforms to being a “public account” and as vast sums of money have been collected manifestly at the behest of the government of India, allowing the CAG to audit it will be a step in the direction of transparency and instil public confidence in the Fund.

This will also ensure that PM CARES will be accountable to Parliament when the CAG report is placed before it, thereby “upholding parliamentary democracy” (in the words of the Supreme Court in the telecom spectrum case cited above).

Needless to say, these observations also apply to subjecting the Prime Minister’s National Relief Fund, the Chief Minister’s funds and other similar funds to audit by the CAG and, as a conseequence, to legislative oversight.

In a similar vein, bringing these funds under the ambit of RTI would increase transparency.

Rohan Deshpande is a practicing advocate based in Mumbai. His Twitter handle is @RohanDesh13.