Electoral bonds

Seal of secrecy

Print edition : May 10, 2019

Members of the Citizens Whistle Blowers Forum, Admiral L. Ramdas, Supreme Court advocate Prashant Bhushan and founding member of the Association for Democratic Reforms Prof. Jagdeep Chhokar, addressing a press conference in New Delhi. A file picture. Photo: Shanker Chakravarty

Information obtained by the social worker Chandrashekhar Goud under the Right to Information Act from SBI has revealed that between March 2018 and January 24, 2019, 99.8 per cent of the donations received by political parties were through electoral bonds of the highest denominations, Rs.10 lakh and Rs.1 crore.

Attorney General of India K.K. Venugopal. Photo: Sandeep Saxena

The Supreme Court direction to political parties to submit details of donations they received under the Electoral Bonds Scheme to the Election Commission in sealed covers makes the campaign for transparency in funding political parties more difficult.

THE Supreme Court’s direction to submit information in sealed covers dismays petitioners in public interest litigation (PIL) and civil society as it underlines the paternalistic attitude of the court to matters that it deems sensitive. In the guise of balancing competing interests of privacy and the right to information, the court often takes upon itself the discretion to decide who should have access to information, when and in what manner, even if it directly impinges the outcome of the petition being heard.

The court resorted to the use of sealed covers to know the government’s contentions while hearing petitions seeking an impartial probe into allegations over the Rafale deal involving the acquisition of 36 fighter jets from France. The court’s dismissal of the Rafale petitions on the basis of sealed covers containing distorted information from the Union government provoked the petitioners to challenge the judgment. They succeeded in persuading the court to accede to a review and an intense scrutiny of the Rafale deal.

When the court on April 12 resorted to sealed covers in another pending case, it caused a feeling of deja vu, mixed with a sense of exasperation. In an interim order, the three-judge bench consisting of Chief Justice of India Ranjan Gogoi and Justices Deepak Gupta and Sanjiv Khanna directed political parties to submit to the Election Commission (E.C.) in sealed covers details of the donations they received under the Electoral Bonds Scheme and the donors before May 30, long after the completion of the Lok Sabha election process.

Concern over non-transparency

The Electoral Bonds Scheme, introduced under the Finance Act of 2017, enables any individual or private company to purchase bonds from authorised branches of State Bank of India (SBI) during specified days of the year and donate them to a political party. The parties have to deposit these bonds in their accounts within 15 days of their issue. The scheme raised concern over non-transparency in the funding of political parties and the resultant corruption and crony capitalism.

The court’s reason for the interim order was that the challenges to the constitutionality of the scheme gave rise to “weighty issues which have a tremendous bearing on the sanctity of the electoral process in the country”. Such “weighty issues”, the bench held, “would require an in-depth hearing, which could not be concluded and the issues answered within the limited time that was available before the process of funding through the Electoral Bonds comes to a closure….”

The bench apparently had in mind the current deadline of April 20, when the issue of Electoral Bonds by the authorised SBI branches would come to a close. The scheme was open from March 1 to March 15, and from April 1 to April 20. It will again open from May 6 to May 15, during the remaining phases of the Lok Sabha election. The order came on the PIL petitions filed by the non-governmental organisations, the Association for Democratic Reforms and the Common Cause and others, challenging the constitutionality of the Electoral Bonds Scheme, which was pending with the court for more than a year. The Communist Party of India (Marxist) had filed its petition in January 2018. 

It was with a sense of urgency that the court listed it for hearing on April 10 and heard it for two full days, knowing fully well that any delay in hearing the challenge would render the scheme a fait accompli.

Therefore, the court’s decision to adjourn the hearing for an in-depth examination of the issues to a later date has not left anyone any wiser. The court reasoned: “The court, therefore, has to ensure that any interim arrangement that may be made would not tilt the balance in favour of either of the parties but that the same ensures adequate safeguards against the competing claims of the parties which are yet to be adjudicated.”

But the interim order did tilt the balance in favour of the government and the ruling Bharatiya Janata Party, without ensuring any safeguards whatsoever against the competing claims of the petitioners.

In a sense, the court’s quest for ensuring a balance of convenience implied that it is an adversarial litigation, which it is not. The petitions, having been classified as PIL, should have been considered as an effort, mediated by the court, to ensure fairness in the ongoing general election and beyond. The Centre, although a respondent in the case, should have been asked by the court not to treat it as adversarial litigation, as larger questions involving the future of Indian democracy are at stake. 

The court’s order was intriguing as it had taken note of the concerns of the petitioners. The scheme affects transparency in political funding as political parties need not disclose the identity of the donors who make contributions through electoral bonds when they file their annual contribution reports to the E.C. This, it was contended, affected the citizens’ right to know the monetary contributions made to political parties and the source of such contributions.

The removal of the cap on donations by an amendment to the Companies Act, 2013, and amendments to Section 236 of the Foreign Contribution (Regulation) Act (FCRA), 2010, has been challenged as the petitioners feel it could open avenues of foreign contribution to political parties.

The bench had taken note of the E.C.’s concerns raised through its affidavit filed on March 27. The E.C. had stated that it conveyed its concerns over the provisions of the Finance Act, 2017, and the corresponding amendments in the Income Tax Act, the Representation of the People Act (RPA), 1951, and the Companies Act, to the Centre through a letter on May 26, 2017. The E.C. told the Centre that these amendments would have “serious repercussions/impact on the transparency aspect of political finance/funding of political parties”.

In particular, it stated that by inserting a proviso to Section 29C of the RPA, any donation received by a political party through an electoral bond had been taken out of the ambit of reporting under the Contribution Report as prescribed under this provision. 

The E.C. told the Centre that because of this proviso, it could not ascertain whether the political party had taken any donation in violation of the provisions under Section 29B of the RPA, which prohibits political parties from taking donations from government companies and foreign sources.

Concern over amendment

 to Companies Act

The E.C. expressed concern over the amendment of the Companies Act resulting in the removal of the requirement that only those companies that registered at least 7.5 per cent of the average net profits in the preceding three financial years could contribute to political parties. This, the E.C. claimed, opened up the possibility of shell companies being set up for the sole purpose of making donations to political parties, with no other business of consequence having disbursable profits.

The E.C. urged the government to restore the requirement in the Companies Act to make declaration of party-wise contributions made by companies in their Profit and Loss Accounts mandatory. The E.C. claimed that the removal of this requirement would lead to increased use of black money for political funding through shell companies. The E.C. made a case for reintroduction of the earlier provision as it would ensure that only profitable companies with a proven track record could provide donations to political parties.

The E.C. feared that the changes made in the FCRA, 2010, through the Finance Act, 2016, would allow unchecked foreign funding of political parties in India, which could lead to Indian policies being influenced by foreign companies.

Ironically, the Centre had nothing to say in response to the concerns of the E.C. except make a bland claim that the Electoral Bonds Scheme aimed at dealing with the menace of unaccounted money coming into the country’s economy through political funding.

The Centre, through Attorney General K.K. Venugopal also made the astounding claim that the voter did not have the right to know the source of funding of political parties and that political parties too had their right to privacy on the basis of the Supreme Court’s judgment in 2017 declaring the right to privacy a fundamental right. Strangely, the interim order chose to be silent on this assertion, although it is inconsistent with the long line of judgments from the Supreme Court recognising that the voter’s right to know is interlinked with the freedom of expression guaranteed by the Constitution.

Having recognised the voter’s right to know the assets, educational qualifications and criminal antecedents of contesting candidates, the court cannot go back and accept the Attorney General’s shocking claim that the voter cannot have a right to know the source of funding of political parties. The Attorney General’s denial of the right to know the source of party funding implied that the parties and the companies are free to enter into a quid pro quo under the scheme, which would be beyond scrutiny by voters and civil society. The removal of safeguards in various laws to facilitate the operation of the scheme must be understood for their grave implications for encouraging corruption of huge proportions once the party that received huge donations through the bonds comes to power.

Information obtained by the social worker Chandrashekhar Goud under the Right to Information Act from SBI has revealed that between March 2018 and January 24, 2019, 99.8 per cent of the donations received by political parties were through electoral bonds of the highest denominations—Rs.10 lakh and Rs.1 crore. Donors purchased bonds worth Rs.1,407.09 crore of which Rs.1,403.90 crore was in the highest denominations of Rs.10 lakh and Rs.1 crore during the period. The donors bought 1,459 bonds of Rs.10 lakh denomination and 1,258 bonds of Rs.1 crore denomination. 

Electoral bonds worth Rs.1,395.89 crore were redeemed by the parties. SBI refused to disclose information about how many parties redeemed the bonds, and how much. Civil society’s future campaign for greater transparency in funding of political parties appears arduous.

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