The Supreme Court is scheduled to examine on December 6 whether to refer the case relating to electoral bonds to a larger bench. Electoral bonds are a bearer banking instrument that has become a dominant method for election funding.
The court’s decision came on October 14 while hearing a batch of petitions filed by the Association for Democratic Reforms (ADR) in 2017 and the Communist Party of India (Marxist) in 2018, among others, challenging amendments to the Finance Act, 2017, the Reserve Bank of India Act, the Foreign Contribution Regulation Act, 2010 (FCRA), the Companies Act, the Income Tax Act and the Representation of the People Act that paved the way for the electoral bonds scheme. Their argument was that it undermined the right to know and Election Commission of India (ECI) guidelines on political funding.
Prof. Jagdeep S. Chhokar, co-founder of the ADR, is dissatisfied with the progress in the case since 2017. “We have filed at least six applications in the court so far just for early hearings. One can only say that the hearings in this case have not been prompt,” he said at an event held in New Delhi recently.
‘Weighty issues’
On April 12, 2019, an interim order issued by a bench headed by former Chief Justice of India Ranjan Gogoi had noted that the “weighty issues” that the case raised had a “tremendous bearing on the sanctity of the electoral process in the country”.
“If the Supreme Court agreed that the case raises ‘weighty issues’, then it is very strange that the next hearing was held in 2021, which was an insignificant hearing. And then the next in October 2022 was only to put off the hearing till December,” said Prof. Chhokar.
The ADR had sought a stay on the electoral bonds scheme ahead of the 2019 parliamentary elections. It maintained that the amendments carried out in the relevant laws had “opened the floodgates to unlimited corporate donations to political parties and anonymous financing by Indian as well as foreign companies, which can have serious repercussions on the Indian democracy”. However, the application was not heard, said Prof. Chhokar.
His concerns remain the same in view of the forthcoming Assembly elections in Gujarat and Himachal Pradesh. “Election spending remains a huge black hole. Money will be spent like water, and nobody will know where that money is coming from. Ultimately, this money is going to fuel black money,” he said while cautioning that “the loser will be democracy and the country”.
Rebutting government claims
Rebutting government claims that the procedure for funding under the electoral bonds scheme is “absolutely transparent”, Prof. Chhokar said: “Former Union Finance Minister [the late Arun Jaitley] had stated on record that the identity of the donor of bearer bond under the scheme is anonymous. Therefore, what the Solicitor General Tushar Mehta said in the court is incorrect.”
Incidentally, the Supreme Court on April 12, 2019, had directed political parties to furnish the names of donors and the amount received. “The parties were asked to provide details in a sealed cover to the ECI. But this is crazy as the political parties are not supposed to know the donors as per the provisions of the scheme,” he said. “Ironically, some sealed covers have been received from the political parties which are not even eligible for receiving donations under the electoral bonds scheme.”
Notably, the ECI has submitted in the apex court that the scheme has only increased the opaqueness in political funding.
“The electoral bonds scheme inherently favours the ruling party. Still, opposition parties, except for the CPI(M), don’t seem serious about the issue,” Prof. Chhokar said, calling the struggle for ensuring transparency and accountability in political funding an “uphill battle”.
Petition to lift tax exemption
According to him, the income that political parties declare in their income tax returns is just the tip of the iceberg. In 2017, the Supreme Court had dismissed ADR’s petition seeking to lift tax exemption granted to parties.
“As of now very few political parties registered with the Election Commission of India file the statements of donations of more than Rs.20,000 each as required under a proviso to Section 13-A of the Income Tax Act, and Section 29-C of the Representation of the People Act, before they can get the 100 per cent exemption from income tax on their income which Section 13-A of the Income Tax Act permits,” he explained. “Our contention was that parties that were not filing the statement of donations should not have been given that exemption and the income tax officers who allow that exemption should be penalised.”
But the petition was dismissed at the very initial stage, said Prof. Chhokar.
ADR has been campaigning that political parties be declared public authorities under the Right to Information Act, 2005, as they receive huge indirect funding in the form of tax exemption, use government properties at nominal rates or even free in the capital cities.
“We provided the required data to the Central Information Commission [CIC]. Subsequently, the CIC issued an order in 2013 declaring six national political parties as public authorities under the RTI Act. However, the CIC later stated in a written order that it did not have the wherewithal to get its order implemented,” he said.
Subsequently, the ADR filed a petition in the Supreme Court in 2015 for the implementation of the CIC order. “The plea is still under consideration,” he said.
Violation of FCRA
In a separate case, on March 28, 2014, the Delhi High Court had held the Congress and the Bharatiya Janata Party (BJP) guilty of violating the provisions of the Foreign Contribution Regulation Act, 1976 (FCRA), which prohibited political parties from accepting cash donations from foreign sources. The court directed the Union of India and Election Commission of India to take action against the two parties within six months. Both the parties were quick to file appeals in the Supreme Court.
Moreover, no action was taken against the parties as the Central government, through the Finance Bill, 2018, retrospectively amended FCRA 1976. It was repealed and re-enacted in 2010 with minor changes, according to Prof. Chhokar. “The amendment was like performing a knee-replacement surgery on a person who had been dead for seven years,” the professor said.
He also raised concerns over the growing number of candidates and legislators with a criminal record.
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