No Way To Prohibit Trading Of Electoral Bonds Since They Can Be Transferred, Says Supreme Court During Hearing [Day 1]

While hearing the batch of petitions challenging the anonymous electoral bonds scheme, the Supreme Court today commented on the lack of control over transactions involving Electoral Bonds owing to the transferability of the bonds. The Constitution bench comprising Chief Justice of India DY Chandrachud, Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra considered arguments raised by the petitioners today. The bench delved into the discussion of anonymity of the Electoral Bonds when Senior Advocate Kapil Sibal, appearing for the petitioners submitted that in its practical application, the electoral bonds scheme was not "really anonymous" as the person who donated to a political party would himself inform the said party about the donation to derive benefits by means of engaging in a quid pro quo arrangement. At this juncture, CJI DY Chandrachud orally illustrated a scenario to show the lack of control over transactions involving Electoral Bonds. He underlined how since an Electoral Bond was a bearer bond and it could be transferred to anyone, the trading or transferring of the said bond could not be practically prohibited. He said–"Suppose 'A' purchases a bond worth 100 crores. 'A' is only the person who is being put up to purchase the bond because 'A' has KYC etc. 'A' has to only physically hand over the bond to 'B'. 'B' gives to 'C' who will in turn give it to a political party. Now there is no control over the transaction between 'A' and 'B'. So 'B' can trade on that bond for cash or for other considerations...So the person who has satisfied the requirement of transaction being through normal banking channels is 'A'. But this doesn't obviate the fact that people behind it...all they have to say is that they used authorised banking channels. Trading is prohibited. But there is no way to prohibit trading the bond."The CJI also remarked that any person could even become an aggregator of Electoral Bonds and transfer these bonds to others.Justice Khanna added that since such transactions could create a veil over the real purchaser of the bonds, there would not be questions regarding quid pro quo with the beneficiary party."Because of the curtain there cannot be any questions regarding quid pro quo," Justice Khanna said."That's right. Ultimately, people who actually invested in it will tell the political party," Sibal agreed with Justice Khanna.Following the observations by the bench, Sibal emphasized the broader implications of the issue, stating that the lack of transparency regarding donors' identities and transactions hinders citizens' participation in the democratic process. He argued that the scheme's reach extends beyond elections, lacks proportionality, and may unfairly favor the party in power, potentially violating Article 324 of the Constitution.Electoral Bonds Scheme Enriches Political Parties & Protects Corrupt People: Senior Advocate Kapil SibalIn his arguments, Senior Advocate Sibal broadly made five submissions–1. The Relationship Between Capital and Influence: Sibal highlighted the inseparable connection between capital and power in a market economy. He argued that capital symbolizes influence, implying that the use of financial resources in the political process can significantly impact decision-making and governance.2. Level Playing Field in Electoral Process: Sibal emphasized the fundamental principle of providing a level playing field for all participants in the electoral process. He asserted that free and fair elections are an essential part of the basic structure of the Indian Constitution, underscoring the need for a fair and equitable political environment.3. Corporate Donations and Shareholders' Consent: Sibal expressed concerns about corporate sector donations to political parties, emphasizing the potential inconsistency with the purpose for which shareholders invest in a corporation. He questioned the lack of consultation or consent from shareholders when their funds are used for political contributions. Sibal contended that Electoral Bonds fail to inform shareholders about how their money will be spent, creating a serious issue. He said "The shareholders put in their money to ensure that the corporation functions within the framework of MoA. Now you give the power through an amendment of this nature to allow shareholders money to be used inconsistent with the MoA. And this is done without consultation or consent of shareholders. Under which law can this ever be allowed?"4. Electoral Bonds' Misalignment with Purpose: Sibal argued that the nomenclature of "Electoral Bonds" suggests a connection to elections, but the scheme lacks provisions linking donations to the participation in the electoral process. He asserted that the scheme essentially allows political parties to enrich themselves without any specific requirements for the use of funds, potentially leading to scenarios where the money is used for purposes unrelated to elections. He illustrated the issue by stating–...

No Way To Prohibit Trading Of Electoral Bonds Since They Can Be Transferred, Says Supreme Court During Hearing [Day 1]

Padmakshi Sharma

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