A division bench of justices Pradeep Nandrajog and Jayant Nath directed authorities to take appropriate action against the two political parties within six months.
The verdict was delivered on a PIL by a NGO, Association for Democratic Reforms, which had alleged that the Ministry of Home Affairs in its reply has factually admitted the position that fundings came to these parties from Vedanta.
The court had reserved its verdict on February 28 after hearing arguments on behalf an NGO, which had filed the PIL, the Centre and both the political parties.
The PIL also filed by E A S Sarma, a former secretary of the Government of India had sought a direction for a "court-monitored investigation by the Special Investigation Team or the Central Bureau of Investigation into the violation of foreign funding and other laws by major political parties, corporate groups and PSUs.
It had alleged that the two political parties have violated the Representation of People's Act and the Foreign Contribution (Regulation) Act (FCRA) by taking donations from government companies and foreign sources, which is prohibited under both the legislations.
The petition alleged that Vedanta Resources and its subsidiary companies in India, including Sterlite Industries, Sesa Goa and Malco, "have donated several crores of rupees to major political parties such as the Indian National Congress and the BJP".