Supreme Court To Hear Challenge Against Electoral Bonds Scheme On October 31

The Supreme Court will hear the batch of petitions challenging the Electoral Bonds scheme on October 31, 2023. A bench comprising CJI DY Chandrachud, Justice JB Pardiwala, and Justice Manoj Misra heard the preliminary issues today. The petitioners have decided to not argue on the scheme being passed as a money bill as of now since the issue pertaining to money bills is yet to be decided by a seven judge bench in Rojer Mathew vs. South Indian Bank Ltd.

Preliminary Submissions Before Court

At the outset, Advocate Prashant Bhushan, expressing the need for the matter to be heard soon, stated that "because of the non decision in the matter, bonds are being issued before assembly elections." The CJI assured Bhushan that the court was read to hear the matter. However, the Attorney General for India R Venkatramani interjected and stated that one of the issues raised in the challenge against the Electoral Bonds was that it was passed as a money bill. In this context, he stated that the issue pertaining to money bills was to be heard by a seven judge bench in the case of Rojer Mathews. 

Bhushan interjected and stated that while money bill was one of the issues raised in the plea, there were also other issues to be decided independent of the money bill. He asserted that anonymous funding of political parties violated the Right to Information of the citizens. He added that the anonymous nature of the funding also promoted corruption as it allowed companies, who had received certain benefits from the government of certain parties, to anonymously donate to those political parties. He said– 

"A corruption free society is a facet of right to life under Article 21."

Elaborating upon the method through which electoral bonds could be purchased, Bhushan underlined that the State Bank of India, despite opposition from the Election Commission of India and the Reserve Bank of India, has been designated as the bank where anyone could go and purchase electoral bonds in denominations of Rs 10,000 to Rs 1 crore. 

At this juncture, the CJI enquired if the bonds could be purchased by bank transfer or through cash? He added that the same was quite important as if a bond was purchased through a bank transfer, then the source of channel would be a banking channel, however, if it could be purchased by cash, the process would be completely anonymous.

Here, Advocate Shadan Farasat, also appearing for the petitioners, stepped in and clarified on the aspect of anonymity of electoral bonds. He stated–

"The real anonymity is that when you transfer to a political party. Who is donating to which party is anonymous."

The CJI, seeking clarification, asked if a person could transfer money to an individual too. Farasat stated that only a political party could encash an electoral bond. In that sense, an individual could not be transferred the money. He added–

"Earlier there were disclosure requirements for over Rs 20,000 Rs. This scheme says that if you pay through electoral bonds, the party doesn't have to disclose. It only has to disclose overall amount it received from the electoral bonds..."

He added that there was also a concomitant amendment in the Companies Act as per which shareholders of a company would also not know which political party their company had donated money to. That way, the transaction became anonymous from both ends- the shareholders would not know who their company donated to and the parties were also not required to disclose who they received the donation from. In this context, he stated–

"The information of donation is sanitised from the public domain."

Money Bill Issue Will Not Be Argued Upon 

Once the preliminary issues were argued upon, the CJI remarked–

"We will start hearing. But what about the money bill issue? Are you pressing the money bill issue? Because that is listed before a seven judge bench. It's your (petitioners) call. Do you want to hear minus the money bill issue?"

Bhushan, on behalf of the petitioners stated that they would wish to argue the matter along with the money bill issue only if Rojer Mathews case was settled by December 2023. At this, the CJI stated–

"It may be difficult to predict. Right now we have listed all for pre hearing on October 12."

Bhushan then stated that in such a case the petitioners would argue the matter without the money bill issue. 

The matter has been listed on top of the board for 31st October 2023. 

Background

By virtue of the 2017 amendment made to Section 29C of the Representation of Peoples Act 1951(RPA), a donor may buy an electoral bond at specified banks and branches using electronic modes of payment and after having completed the KYC (know your customer) requirements. However, political parties are not required to disclose the source of these bonds to the Election Commission of India (ECI). 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.

Accordingly, 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 the 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".

In 2021, the Supreme Court had refused to stay the release of electoral bonds ahead of the assembly elections in certain States.

Case Title: Association for Democratic Reforms And Anr. v. UoI WP(C) No. 333/2015 & Connected Matters