Electoral Bonds: SC Gives Two Weeks Time To Election Commission To Reply

The Supreme Court on Monday declined to grant an immediate stay on the 2018 Electoral Bonds Scheme ahead of the Delhi Assembly polls, granting the Election Commission two weeks' time to reply.

"A stay was not given by this court before. So we may not do it now", observed the bench headed by Chief Justice S. A. Bobde. However, noting Advocate Prashant Bhushan's submission that the polls in Delhi, which are scheduled for February 8, would be over by then and the ruling party will have received a tremendous influx of funds by opening the scheme, the bench cut short the time accorded to the ECI from the earlier 4 weeks to 2 weeks.

"Alarming facts have to light...the scheme, which was meant only for the Lok Sabha polls, is being illegally opened before state elections also for 1000s of crores of illicit funds to come into the ruling party's pocket...the RBI and the ECI have cautioned against this inflow of black money...the ruling party has done so before every state election...", advanced Mr. Bhushan.

"The matter has been argued before and the request for stay was not allowed. There may not be any new arguments...we are not on merits right now. We will hear in 4 weeks", remarked the bench.

"By that time, they will have got crores of funds illegally, without any regulation of the donors. Elections take place in Delhi in February! Parties will get undue advantages! This scheme is prima facie illegal and until its validity is finally decided, it should be stayed!...take a look at the RBI's letter. The government has received kick-backs!", pressed Mr. Bhushan, convincing the bench to reduce the wait to two weeks.

ADR had filed a writ petition 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.

On April 12, 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.

During last week of November, the NGO moved an application for interim stay, in the light of a series of recent investigative reports which indicated that the Central Government had ignored serious concerns raised by Reserve Bank of India and Election Commission of India against anonymous electoral bonds.

In the stay application, the ADR states that these reports revealed that the RBI gave repeated warnings to the government against the electoral bond scheme stating that it has "the potential to increase black money circulation, money laundering, cross-border counterfeiting and forgery."

Since the bonds are transferable any number of times like currency, its inherent anonymity can be exploited for money laundering, RBI was stated to have said.

The ADR also referred to communications sent by the former RBI Governor Urjit Patel to the then Finance Minister Arun Jaitley stating that the "issue of EBs as bearer instruments in the manner currently contemplated has the possibility of misuse more particularly through use of shell companies".

The objections raised by the Election Commission of India are also highlighted in the application for stay.

The ECI has described this a "retrograde step as far as transparency of donations is concerned" and called for its withdrawal.

It may be noted that the ECI has already filed a counter-affidavit in the case expressing its concerns.

By virtue of the 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 are 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 had 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.

Read the Order Here