The Supreme Court on Thursday agreed to hear on March 24 an application seeking stay of the release of new set of electoral bonds, ahead of assembly polls in Kerala, West Bengal, Pudhucherry and Assam.Advocate Prashant Bhushan, appearing for Association for Democratic Reforms, mentioned the application before the Chief Justice of India today for urgent listing."I wanted to mention Electoral...
The Supreme Court on Thursday agreed to hear on March 24 an application seeking stay of the release of new set of electoral bonds, ahead of assembly polls in Kerala, West Bengal, Pudhucherry and Assam.
Advocate Prashant Bhushan, appearing for Association for Democratic Reforms, mentioned the application before the Chief Justice of India today for urgent listing.
"I wanted to mention Electoral Bonds matter. which has been pending here since 2017. The last hearing took place two years ago. Whenever electoral bonds are released, we file application to stay. Now new set of bonds are to be released in April. We want the application to be heard very urgently. ECI, RBI have all stated that these bonds allow transfer of illicit black money from shell companies", Bhushan told the CJI.
The CJI asked if the plea for stay was refused earlier.
Bhushan informed that in April 2019, the Supreme Court had sought for information from political parties regarding the donations received through electoral bonds in a sealed cover.
"Stay was not rejected. The Court said it was not the stage to consider stay. They said at they will ask parties to furnish the details to court in sealed cover. That was two years ago...after that two documents have emerged - one from the RBI, another from the ECI, both of which say these bonds are very detrimental to democracy", Bhushan informed the bench.
The CJI then said that the matter can be listed on next Friday, March 26. However, Bhushan sought for an earlier date, saying that the Centre will delay the matter by seeking time to reply. He pointed out that the new bonds are slated for release on April 1.
At this juncture, CJI called Solicitor General of India, Tushar Mehta, and told him about the mentioning being made.
"Any request for time to reply is not delaying the matter", the SG replied. The CJI suggested that the matter can be posted on next Wednesday.
The SG indicated that the Attorney General of India might be appearing in the matter.
Background
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.