ADR Moves Supreme Court Seeking Stay On Further Sale Of Electoral Bonds Ahead Of Assembly Elections In Kerala, West Bengal, TN Etc.

The application for directions has been filed through Advocate Prashant Bhushan in a writ petition filed by the NGO in 2017, challenging the provisions of Finance Act 2017 which paved the way for anonymous electoral bonds.

Whereas the matter is sub-judice, the Petitioner-NGO has moved an urgent application before the Top Court praying that until pendency of the instant writ petition, the Government be directed to not open any further window for sale of Electoral Bonds.

The application states,

"the Electoral Bonds Scheme has opened the floodgates to unlimited corporate donations to political parties and anonymous financing by Indian as well as foreign companies which can have serious repercussions on the Indian democracy."

It further cites following concerns with respect to use of Electoral Bonds for political donations:

• Political Parties are not required to disclose the name of the person/entity donating to a party through electoral bonds. Since the bonds are bearer instruments and have to be physically given to the political parties for them to encash, parties will know who is donating to them. It is only the general citizens who will not know who is donating to which party. Thus, electoral bonds increase the anonymity of political donations.
• The requirement to disclose in the profit & loss account the name of the political party to which a donation has been made is also removed. Only the total amount of donations to political parties has to be disclosed without the name of the political party.
• With the removal of the 7.5% cap on the net profits of the last 3 years of a company, now corporate funding has increase manifold as there is no limit to how much a company can donate. Even loss-making companies now qualify to make donations of any amount to political parties out of their capital or reserves. Further, it opens up the possibility of companies being brought into existence by unscrupulous elements primarily for routing funds to political parties through anonymous and opaque instruments like electoral bonds.
• Anonymity of political donations has increased the opacity of funding of political parties, and the danger of quid pro quo and opacity of any benefits are passed on to such companies or their group companies by the elected government. This has a major negative implication on transparency in political funding and are in violation of citizens' right to information, a fundamental right.

The Petitioner-NGO has further pointed out that previously, on two occasions, the Government opened special sale window of EBs right before the State assembly elections, and so far more than Rs. 6500 crores worth of EBs have been sold with the majority of donations going to the ruling party.

Background

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 Petitioner-NGO had moved the Top Court in September 2017 on the issue of corruption and subversion of democracy through illicit & foreign funding of political parties and lack of transparency in the accounts of all political parties.

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, 2019.

In November 2019, the NGO filed an application for early hearing of the case, in the light of certain media reports that the electoral bonds were hurried by the government ignoring grave concerns raised by the Reserve Bank of India and the ECI.

On January 2020, a bench headed by then CJI Bobde adjourned the matter for two weeks. However, the case has not been posted since then.

Significantly, the Election Commission of India has also raised objection on the scheme and described this a "retrograde step as far as transparency of donations is concerned" and called for its withdrawal.

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.

Meanwhile, Centre has claimed 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.

Also Read: Electoral Bonds: No Public Interest In Disclosing Identities Of Donors & Donees, Says CIC Rejecting RTI Application

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