Govt Notifies Electoral Bonds Again As SC Continues To Sit Over Pleas Challenging Validity Of Scheme

Ignoring criticisms from several quarters, including the Election Commission of India, that anonymous electoral bonds scheme adversely affect transparency in political funding, the Centre has brazenly moved ahead to sanction yet another round of issue of electoral bonds.

In view of the upcoming assembly polls in Maharashtra and Haryana, the Central Government on Monday announced the issuance of electoral bonds from October 1 to 10 through branches of State Bank of India.

These bonds can be used individuals and companies to make anonymous donations to political parties.

The Government is perhaps feeling emboldened by the inordinate delay on the part of the Supreme Court in deciding the petitions challenging the constitutional validity of the electoral bond schemes.

These petitions were filed soon after the passing of Finance Act 2017, which introduced the legislative amendments for the scheme. However, the case became alive only by March 2019, by which time most of the electoral bonds have been purchased. The failure to consider these cases timely is a grave concern, as the Election Commission of India itself has come on record saying that the scheme has dangerous impact on transparency in political funding.

The counter-affidavit filed by the ECI in the Supreme Court in response to the PILs reveals that it had expressed concerns way back in May 2017 itself, immediately after the passage of the Finance Act 2017.

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 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 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".

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.

On April 12, after several sessions of hearing held during the run up to the 2019 Lok Sabha polls, the three judges bench of the SC comprising 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 bench observed :

"the rival contentions give rise to weighty issues which have a tremendous bearing on the sanctity of the electoral process in the country. 

Such weighty issues would require an indepth hearing which cannot be concluded and the issues answered within the limited time that is available before the process of funding through the Electoral Bonds comes to a closure, as per the schedule noted earlier." 

Despite observing that the case has "weighty issues" having "tremendous bearing on the sanctity of electoral process in the country", the matter has not witnessed any further action after April 12.

A timely decision by SC on the petitions filed way back in 2017 would have cleared the concerns about the scheme once and for all.