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Supreme Court Posts Electoral Bonds Case To December 6

Rintu Mariam Biju
14 Oct 2022 8:13 AM GMT
Supreme Court Posts Electoral Bonds Case To December 6

The Supreme Court on Friday posted a batch of petitions challenging the anonymous electoral bonds scheme to December 6.

A bench comprising Justices BR Gavai and BV Nagarathna was considering a batch of petitions filed by Association for Democratic Reforms, Communist Party of India (Marxist) etc, challenging the electoral bonds scheme.

The case was listed today for first time after the last posting March 26, 2021.

In the brief hearing held on Friday, Senior Advocates Kapil Sibal, Gopal Sankaranarayanan and Advocate Prashant Bhushan, appearing for the petitioners, pressed for an early hearing of the matter either next week or in November, ahead of the assembly elections of Gujarat and Himachal Pradesh which are likely to be held in December.

Attorney General for India R Venkataramani and Solicitor General of India Tushar Mehta submitted that several Constitution Bench hearings are scheduled in November and requested that the present matter be posted to January 2023. The petitioners objected to this request and urged for an early listing.

Ultimately, the bench agreed to list the matter on December 6, 2022.

Court room exchange

When the matter was taken, Advocate Prashant Bhushan submitted that three interconnected issues arose - one is the electoral bonds issue. Next is whether political parties can come under RTI. Third is whether the retrospective amendment to FCRA is legal. By virtue of this amendment, Bhushan said that any body can get foreign money. Whether these changes could be introduced through a money bill is another issue, Bhushan added.

Senior Advocate Kapil Sibal submitted that the issues are important and hence the matter should be heard by a larger bench. The bench wondered if a reference can be made without finding any conflict with any other judgment. Sibal then referred to Article 145 to say that constitutionally important matters are to be heard by Constitution Benches.

Solicitor General Tushar Mehta said that the scheme has ensured transparency by eliminating black money from political funding. "The methodology of receiving the money has been so transparent. We will take your Lordships through step by step. Now it's impossible to get any black or unaccounted money. Very transparent system. To say this that this affects democracy may not hold the water", the SG said.

"Does system provide for where the money comes?", Justice Gavai asked.

"Absolutely", the SG asserted.

The bench asked the AG about his view regarding reference to larger bench. The AG replied that there should be threshold hearing by the bench before deciding on reference.

Bhushan informed the bench that the Election Commission will announce the election schedule for Gujarat and Himachal Pradesh today and added that electoral bonds are issued before every elections.

The SG said "this is not an election related issue".

The bench ultimately posted the matter to December 6. When Sibal sought for an earlier posting, Justice Gavai said "the matter has been pending for last 7 years in any case".

During the last held hearings of the case in March 2021, a bench led by the then CJI SA Bobde refused to stay the electoral bonds scheme ahead of assembly elections in 5 states, observing that there are sufficient safeguards in the scheme. The bench observed that the scheme was introduced to ensure that political donations happen through banking channels. As regards the concerns about donor anonymity, the bench had said that it could be "pierced" by culling out information from the records filed before public authorities and doing "match the following".


The petitions were filed in 2017 challenging the provisions of Finance Act 2017 which paved the way for anonymous electoral bonds. The Finance Act 2017 introduced amendments in Reserve Bank of India Act, Companies Act, Income Tax Act, Representation of Peoples Act and Foreign Contributions Regulations Act to make way for electoral bonds.

The petitions have been filed by political party Communist Party of India(Marxist), and NGOs Common Cause and Association for Democratic Reforms(ADR),which challenge the scheme as "an obscure funding system which is unchecked by any authority". The petitioners voiced the apprehension that the amendments to Companies Act 2013 will lead to "private corporate interests taking precedence over the needs and rights of the people of the State in policy considerations".

However, the case became alive only by March 2019, by which time most of the electoral bonds have been purchased.

On April 12, 2019, after several sessions of hearing held during the run up to the 2019 Lok Sabha polls, a three judges bench of the SC comprising the then CJI Ranjan Gogoi, Justice Deepak Gupta and Sanjiv Khanna had directed the political parties to submit the details of donations received to the ECI in sealed cover by May 30.

The Election Commission of India has already filed a counter-affidavit in the case expressing its concerns about the anonymous nature of bonds. The ECI has described this a "retrograde step as far as transparency of donations is concerned" and called for its withdrawal.

By virtue of the 2017 amendment made to Section 29C of the Representation of Peoples Act 1951(RPA), political parties need not report to ECI the donations received through electoral bonds. The ECI has described this a "retrograde step as far as transparency of donations is concerned" and called for withdrawal of the amendment.

The ECI said that if contributions are not reported, it will not be possible to ascertain if political parties have taken donations from government companies and foreign sources, which is prohibited under Section 29B of RPA.

The amendments made to Companies Act 2013 were also flagged by the ECI. The amendment to Section 182 of the Act took away the restriction that contribution can be made only to the extent of 7.5% of net average profit of three preceding financial years, enabling even newly incorporated companies to donate via electoral bonds.

"This opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties, with no other business consequence of having disbursable profits", said the ECI.

Also, the amendment to Section 182(3) abolished the provision that companies should declare their political contributions in their profit and loss accounts. Now, this requirement is diluted to only showing the total expenditure under the head. This would "compromise transparency" and could lead to the "increased use of black money for political funding through shell companies" expressed the ECI.

ECI had urged the Ministry to ensure that only profitable companies with proven track record should be permitted to make political donations.

The ECI had informed the Ministry that these amendments will have "serious repercussions/impact on the transparency aspect of political finance/funding of political parties".

It has also taken a stand against the amendment to Foreign Contributions Regulation Act with permitted acceptance of donations from foreign companies with retrospective effect. "This would allow unchecked foreign funding of political parties in India which could lead to Indian policies being influenced by foreign companies", said the ECI.

The ECI added that it had suggested amendments to RPA Act to make reporting compulsory even for cash donations less than the existing limit of Rs.20,000, if the total cash contributions exceeds 20 crores or 20 percentage of total contributions, whichever is lesser. It further suggested that reports of contributions of political parties should be uploaded in the website of ECI. It had also suggested that anonymous contributions above or equal to Rs.2000 should be prohibited, instead of the present limit of Rs.20,000.

But the scheme was implemented without paying any heed to the concerns expressed by the poll body.

The petitions also raise the contention that the scheme was made into effect through amendments made to RP Act, IT Act and RBI Act through a money bill - the Finance Act. This is alleged to be a colourable exercise of the money bill provision in order to circumvent scrutiny by the Rajya Sabha.

The bonds can be bought for any value, in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh or Rs 1 crore. The name of the donor will not be there in the bond. The bond will be valid for 15 days from the date of issue, within which it has to be encashed by the payee-political party. The face value of the bonds shall be counted as income by way of voluntary contributions received by an eligible political party, for the purpose of exemption from Income-tax under Section 13A of the Income Tax Act, 1961.

The Centre claims that the schemes will bring in more transparency in political funding. The anonymity of the scheme was intended to protect the privacy of the donor, stated the centre.

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