'If What You're Saying Is Correct, We'll Have To Strike Down The Law' : CJI To Bhushan In Electoral Bonds Case

Bhushan referred to the communications sent by the former RBI Governor Urjit Patel to the then Finance Minister Arun Jaitley, expressing "discomfiture" about EBs. He pointed out that the RBI Governor had called the bonds a "fraud scheme" having implications on banking system and "possibility of misuse, more particularly through shell companies".

He emphasized that anonymous electoral bonds is "legalized corruption" and will pave way for shell companies to essentially offer bribes. He submitted that at least the Reserve Bank should be informed as to who the initial subscriber is. "Now it is issued in scripted form, like cash, and no one except SBI knows the donor identity," he said.

When the CJI commented that the bonds can be given to any political party, and not necessarily the ruling party, Bhushan responded,

"It can be given to any political party. But ruling party is in a position to give favours. So, companies will support ruling parties, as they are in a position to give benefits. It might go to the party ruling the state govt or central govt depending on what the quid pro quo is."

Bhushan also referred to the objections raised by the Election Commission on sale of EBs.

He submitted,

"The only person who wants anonymity is the person who is paying bribe to the party in power…there is no justification for the argument that anonymity is maintained for the safety of donor. Because, it is not anonymous to the Government who the donor is. Govt can track identity. But it is anonymous to everyone else."

The CJI asked if the petitioner is seeking complete anonymity.

"No, no. I want complete transparency. This Court has held that candidates should disclose their assets, criminal background etc. Even without a law, this Court directed that. This court has held that transparency is absolutely necessary in an election," he responded.

Bhushan further took objection to the manner in which the provisions of EB were inserted by way of an amendment to the Finance Bill, essentially to circumvent the mandate of the Upper House of the Parliament.

He said,

"These amendments are made through the Finance Bill, in order to avoid going to the Rajya Sabha where the Government did not have a majority. This cannot be done through Finance Bill."

He submitted that the Finance Bill 2017 allowed foreign companies to donate through Indian subsidiaries, thereby allowing foreign companies to influence Indian elections. Even the Election Commission has called this a "retrogade step", he argued. He added that the Finance Bill 2017 removed the requirement of profit threshold for donations, allowing shell companies to donate.

At this juncture, the CJI said that if the submissions made by Bhushan are taken on face, then the Court will have to strike down the impugned law.

"If what you are saying is correct, we will have to strike down the law. How can it be done through an interim order?" the CJI asked.

Bhushan then clarified that as of now, they are only seeking a stay on a fresh tranche of bonds that are proposed to be sold from next week, ahead of assembly polls in West Bengal, Kerala, Assam, Puducherry etc.

He then continued his submissions on the concerns raised by Election Commission with respect to EBs.

"It is not a question of morality. It is a question of democracy. The electors have the right to know the source and background. If you remove transparency in political funding, it goes to the heart of electoral democracy."

He submitted that stopping bonds will not harm anyone. "Legitimate donations can be made. They have to maintain transparency", he argued. He added, "There is no public interest to be served by allowing these anonymous electoral bonds."

He submitted that the ECI has also recommended disclosure of donors of parties.

"Mere fact that the scheme says that the bonds are not for trading does not mean anything, as there is anonymity involved at every levels…ECI has comprehensively pointed out that in order to maintain purity of election process, complete transparency in political funding. This (bonds) is driving a coach through transparency."

He submitted that earlier the law was that only donations less than Rs 20,000 can be kept undisclosed however, the Government has now removed the 7.5 % cap and has allowed foreign companies to donate.

Govt's submissions

The Attorney General for India KK Venugopal submitted that the Election Commission has allowed the sale of electoral bonds from April 1 to April 10.

He maintained that EBs will serve in eradicating black money from political funding, and to prevent the donors from being victimized. He submitted, "The then Finance Minister Arun Jaitley said that blackmoney was a huge menace in political funding. Therefore, this bond was devised…All payments have to made through banking channels. Therefore, no cash, no blackmoney".

On being asked if these (donated) amounts will be brought to tax anywhere, the AG informed the Bench, "All payments need to be through cheque, or DD, so it has to be through banking channels, so no blackmoney."

Advocate Prashant Bhushan interjected at this juncture, to state that subsequent purchaser of EBs can buy through cash. That was also an objection of the RBI.

"That can be said of any transaction, unless you make it non-transferable," CJI said brushed.

The Solicitor General interjected here to submit that no one can buy EBs subsequently, as trading in bonds is not permitted. He further informed that that bonds are purchased following KYC norms.