Tesla investment announcement will not violate model code of conduct: Legal experts

Tesla's investment in India not violative of MCC, experts say

Legal experts are of the opinion that the likely announcement of Tesla Inc’s entry into India during CEO Elon Musk’s visit on April 22 does not violate the Model Code of Conduct (MCC) imposed by the Election Commission of India (ECI) due to the upcoming general elections.

“As far as the announcement of an investment by Tesla is concerned, the same can at best be said to be coinciding with the general elections. However, such a coincidence does not have the potential in any manner for Tesla to be found in violation of the MCC,” senior advocate and former Additional Solicitor General (ASG) Sanjay Jain said.

Jain added that the mere announcement of expansion of business operations in a country by a multinational company cannot be equated to a governmental scheme, which has the potential of influencing the minds of voters, when the MCC is in place.

Meanwhile, Musk took to X (formerly twitter) to confirm the chatter around his India visit on April 10. "Looking forward to meeting with Prime Minister Narendra Modi in India!" he said in a post on the social media platform. His visit coincides with the general election, which is set to begin on April 19.

“MCC can never apply to a foreign entity, Tesla’s choice to invest in India or start operations in India . It is only if the Indian government were to announce a policy will it be violative of the MCC. However, if some foreign investor wants to set up its manufacturing facility in India, it cannot be violative of the MCC,” said senior advocate and former ASG Vikas Singh.

Model Code of Conduct

The MCC  is a set of rules issued to regulate political parties prior to the conduct of elections. It commences on the day elections are announced and comes to an end the day the results of the election are declared.

C. Aryama Sundaram, senior advocate, noted that MCC was framed to ensure free and fair elections. “Naturally, if any government in power, is in a position to announce any policy decisions, or introduce any schemes attractive to the people, it would have an unfair advantage and do away with the level playing field,” he said. “This being the underlying purpose of the Code, any action has to be looked at from those eyes, since most obviously, a Government cannot stop functioning upon elections being announced, nor can the governance of the country be brought to a standstill.”

According to the senior advocate, if the investment announcement is made by Tesla and not by the government itself, with no government role at all, no fault can be found. “Equally, if the announcement is but a necessary step forward in a decision already taken by the company, pursuant to permissions, where applicable, already given by the Government prior to the Model Code of Conduct coming into force, it cannot be faulted as being violative of the Code,” said Sundaram.

Dhruv Chatterjee, partner at law firm Saraf and Partners, opined that Musk and the Indian government have been engaging with each other regarding government policy and potential investments in sectors such as electric vehicles and satellite internet over the last few years. Hence if the announcement is made now, it may not be violative of the MCC. “Any potential announcement from Tesla or Mr Musk following his meeting on 22 April is likely to be seen as the culmination of this engagement between both parties, over the last few years. However, the nature and scope of the actual announcement (if any) would need to be considered in more detail,” he said.

Shreevardhan Sinha, Senior Partner, Desai & Diwanji, noted that while the MCC prohibits declaration of  any financial grants in any form or promises,  it does not prohibit any announcement to be made by a private company like Tesla in relation to future India investments. He added, “It is pertinent to note, however, that the signing of an MoU or agreement, where the government is a party, will require the prior permission of the Election Commission.”

Elections in India

On March 16, the Election Commission of India (ECI), announced that the 2024 Lok Sabha election will be held over seven phases, from April 19 to June 1.  The results are expected to be announced on June 4.