Supreme Court of India. (Source: Supreme Court of India website)

What The Debate Around Electoral Bonds Is All About

The Supreme Court yesterday reserved its order on a plea seeking a stay on electoral bonds for political funding.

The bench headed by Chief Justice of India Ranjan Gogoi, which heard arguments from both sides for over a day, will pronounce its verdict today.

The electoral bonds, introduced in the budget for 2017-18, have triggered a debate. While the government calls the scheme transparent, the Election Commission objected to it arguing that these instruments made political funding opaque. The Congress has promised to scrap it if voted to power.

Prime Minister Narendra Modi’s Bharatiya Janata Party received 95 percent of the political donations made through electoral bonds in 2017-2018, multiple media reports said citing the party’s annual report.

Any interested donor can buy these bonds of any value from specific State Bank of India branches and issue them to any political party. Once the bond is issued, the party has 15 days to encash it. While the party doesn’t get to know the identity of the donor, the bank knows but is expected to keep it confidential. Political parties that secured more than 1 percent votes in the last general election are eligible for such funding.

Legal Challenge

The Association for Democratic Reforms challenged the scheme and the first hearing took place in October 2017. The court agreed to hear the matter and issued notices to the central government and the Election Commission.

The next hearing, however, took place in March 2019 when the matter came up before the bench headed by Chief Justice Gogoi.

When the 2019 elections were approaching, ADR filed an application for early hearing with the registrar of the top court around February, Jagdeep Chokkar, founding member of the ADR, said. They also filed an application seeking a stay.

Advocate Prashant Bhushan, representing the petitioners, also sought disclosure of the names of donors who made contributions using the electoral bonds. After the application for an early listing was filed in February, the case came up for hearing and was adjourned on March 11 and 22 and then on April 5. On April 10, the court heard the demand for interim relief where all the three parties—ADR, Election Commission and the government—put forward their arguments.

The scheme under a bad government can serve as a means for “hafta vasooli (extortion),” Sanjay Hegde, senior advocate at the Supreme Court, said. “The fact that the government will have ability to figure out the donor makes it unlikely that the donations from the bonds will go to parties that the party in power does not like.”

Advocate Apar Gupta said electoral bonds bring in secrecy to the funding process. There is also a concern that these instruments are designed to prevent any kind of transparency in the public, so it prevents scrutiny of the source of funding, he said.

Arguments Of Petitioners

The main ground of the challenge is the anonymity factor which the petitions argue affected the transparency in electoral funding as it takes away the requirement of declaring the identity of donors. Bhushan, who was arguing for the petitioners, asked the court to either put a halt on the scheme or disclose the identity of the donors. Opaqueness of the scheme has opened the floodgates for corruption, he said.

The petition questioned the introduction of electoral bonds through a money bill, arguing that it was done to bypass the Rajya Sabha. “The new amendments are a mala fide attempt to bypass the approval of the Rajya Sabha, which holds an important place in the Constitutional and democratic framework of law-making.”

The act also removed the previous limit of 7.5 percent of the company’s average three-year net profit for political donations as donor is no longer required to name the parties to which contributions are made, the petition pointed out. “It opens the doors to unchecked, unknown funding to political parties.”

Bhushan argued that the electoral bonds also can be purchased by subsidiaries of foreign companies, defeating the purpose of Foreign Contribution Regulation Act—aimed at protecting political parties from foreign influence.

Election Commission’s Stand

The Election Commission called the scheme against the idea of transparency in political funding. Opposing electoral bonds in the Supreme Court, the commission in its affidavit informed the court about the letters it had written about the amendments in May 2017.

Senior Advocate Rakesh Dwivedi, who appeared for the commission, said it was not against the electoral bonds but its objection is based on the fact that they these instruments enable anonymous donations.

The Election Commission also opposed other amendments to the FCRA in Finance Bill, 2017, which allowed foreign companies with majority stake in Indian entities to donate to political parties.

Government’s View

The government said the Election Commission’s concern was without merit. Citing the Right to Privacy judgment, Attorney General KK Venugopal, arguing on behalf of the government, said voters do not have the right to know the source of funding of political parties.

He argued that electoral bonds are meant to curb black money from making its way to the political process as all funds raised by electoral bonds come through banking channels.

The government, in its affidavit, said while political parties do not get to know the details of the donors and thus do not have to disclose the identity of the donors, the banks issuing the bonds do have to ensure KYC compliance of the donors.

The government called the introduction of electoral bonds as a shift from the old system which suffered from many loopholes. The political parties also have to disclose the money they receive from the bonds even though they do not get to know the identity of the donors, it said.

The attorney general urged the court not to interfere with what he called “an experiment” to curb black money. “I request not to interfere for the time being. Let it continue till the end of this elections. Once the new government comes to power, it will review the scheme.”

The government said the Election Commission’s concern on electoral bonds enabling foreign companies to control Indian policies was without any factual or legal merit.

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