Sale of Electoral Bonds Begins Amid Polls in 5 Indian States

Image used for representational purpose only. ANI Photo
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*SC lays down guidelines, seeks details of EB funds of political parties

NEW DELHI: The sale of controversial Electoral Bonds (EBs), described by democracy activists as “bribe from the private corporate houses”, started on Monday, November 06, 2023, as five states – Madhya Pradesh, Chhattisgarh, Rajasthan, Telangana and Mizoram – are witnessing elections in India.

Besides the elections in five India states, the sale of Electoral Bonds began within days of the Indian Supreme Court reserving its verdict on a challenge to the legality and their maintainability. A batch of petitions in the were filed in the top Indian court challenging their legality since their inception in 2018.

This round of electoral bonds comes in a short interval of about a month after the 28th phase, which opened for sale on October 4, 2023, that too after the elections to the five Indian states were announced by Election Commission of India (ECI).

The government approved on Saturday, November 04, 2023, issuance of the latest round of electoral bonds, days after the Supreme Court reserved its verdict on a batch of petitions challenging the validity of the electoral bonds scheme for funding political parties.

On October 31, a five-judge constitution bench comprising Chief Justice DY Chandrachud and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra commenced hearing arguments on the four petitions, including those filed by Congress leader Jaya Thakur, Communist Party of India-Marxist and NGO Association for Democratic Reforms (ADR).

After the detailed hearing on the petitions, the top court reserved the judgement on November 2, 2023 while directing the ECI to provide details of the amounts of money collected by each political party in the country through Electoral Bonds.

Two days after this, the central government issued notification for issuance of latest round electoral bonds.

It is to be noted that Mizoram and the first phase of Chhattisgarh assembly polls were held on November 7, 2023.

The polling in all these five Indian states would end on November 30, and counting of votes would be done on December 3, 2023.

The Electoral Bonds scheme, which was notified by the government on January 2, 2018, was pitched as an alternative to cash donations made to political parties as part of efforts to bring in transparency in political funding.

“Government of India has authorised State Bank of India, in the XXIX (29th) Phase of sale, to issue and encash Electoral Bonds through its 29 Authorised Branches w.e.f. November 6 to 20, 2023,” the finance ministry had said in a statement on Saturday.

Electoral bonds are encashed by an eligible political party only through a bank account with the authorised bank.

SBI is the only authorised bank to issue electoral bonds.

The authorised SBI branches include those in Bengaluru, Lucknow, Shimla, Dehradun, Kolkata, Guwahati, Chennai, Patna, New Delhi, Chandigarh, Srinagar, Gandhinagar, Bhopal, Raipur, and Mumbai.

The finance ministry had said that electoral bonds will be valid for 15 calendar days from the date of issue and no payment will be made to any payee political party if the bond is deposited after expiry of the validity period.

“The electoral bond deposited by an eligible political party in its account shall be credited on the same day,” it added.

SC lays down guidelines on Electoral Bonds

The Supreme Court on Thursday, November 02, 2023, asked the Central Government to redesign the Electoral Bonds scheme which doesn’t have the flaws, while reducing cash in the elections, encouraging authorised banking channels, need for transparency and also no legitimate kickbacks and quid pro quo between the power centres and the benefactors.

A bench led by Chief Justice DY Chandrachud and comprising Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Maoj Mishra, was hearing a clutch of petitions challenging the validity of the electoral bonds scheme as a source of political funding.

Solicitor General Tushar Mehta, representing the Centre, submitted that there cannot be a system where a donor and donee would not know each other.

Justice Khanna asked him why not make it open. As it is, everyone knows and the only person who is deprived is the voter. He said it is slightly difficult to accept that the voter would not know. Mehta said then we go back to the earlier policy.

At this juncture, the Chief Justice outlined the considerations which must be borne in mind while implementing an electoral bond scheme: 1. Need to reduce the cash element in the electoral process. 2. Need to encourage the use of authorised banking channels. 3. Incentivising the use of banking channels. 4. Need for transparency, and 5. The scheme should not legitimise kickbacks and quid pro quo between the power centres, whether the Centre or states, and the people who are benefectors of that power.

The Chief Justice said, “The balance has to be drawn by the legislature and the executive, and not by us…but it is not that either you have this or you go back to the entire cash system. You can design another system that does not have flaws of this system and they put a premium on opacity…. devise a system which balances out in a proportional way. How it is to be done, we will not enter that arena as the government has to think…..”

Against the backdrop of five considerations outlined, the Chief Justice stressed on a cap on a company’s donation to percentage of net profit. It means the company must be in a position to have net profits and initially it was 5%, then it became 7.5% under the 2013 law, and the company may have zero profits, it may have zero turnover but it still makes a donation.

As regards profit, Mehta argued that a non-profit company cannot donate because then a shell company can donate which defeats the objective. He said the central governmeent has removed 2.3 lakh shell companies for the system. The CJI asked: What will you do? Will you bring an amendment in the Companies Act?

The Chief Justice queried whether the government will amend the Companies Act to bring back the position what it was namely that donations will be a percentage of net profit.

Solicitor General Mehta said he is only stressing that donations will be given by the profit-making companies.

The Chief Justice cited an example that a company with Rs 1 profit will make a donation of Rs 100 crore. Why would a company do that? These caps were introduced for legitimate reasons, namely that the company’s purpose is to carry on business and the purpose is not to donate to political parties “and if your purpose is not to donate to a political party, then you donate only a small portion…..”

On Wednesday on the second day of the hearing, the top court had observed that the electoral bonds create an information hole and doesn’t provide for a level-playing field for all political parties. The Centre had contended that it doesn’t have access to the details of the donors of electoral bonds and the scheme mandates the SBI to keep the information in fiduciary capacity.

The Solicitor General urged the Supreme Court to criminalise any breach of donor confidentiality by the State Bank of India, which is also authorised to sell electoral bonds and keep the information of the purchaser/donor confidential.

Meeting the apprehension of the court on donor confidentiality, the Solicitor General also suggested that there was no need to strike down the scheme and provision around the access to donor information can be tightened, like in the Aadhaar case.

“The court can say investigating agencies can get information of an electoral bond donor only if there is a court order, something akin to Aadhar card case, kindly read this into the scheme,” submitted Tushar Mehta, who is appearing for the government of India in the case pertaining to the challenge to the Electoral Bond Scheme for funding of political parties.

The Solicitor General tried to assuage the apprehension of the court suggesting that no one can access the information held with the bank on donor and if the court feels that donor confidentiality needs to be better protected “another layer of safeguard may be added” by reading into the existing frame work of the Electoral Bond Scheme.

SC asks EC To Produce Data Of Funds of Political Parties Received Through Electoral Bonds Till September 30

The Supreme Court on Thursday, November 02, 2023, directed the Election Commission of India (ECI) to produce before it in sealed cover the “up to date” data of funds received by political parties through electoral bonds till September 30, 2023.

A five-judge constitution bench headed by Chief Justice D Y Chandrachud referred to the April 12, 2019 interim direction passed by the apex court directing political parties to furnish the details of funds received by them through electoral bonds to the poll panel in a sealed cover.

The bench said the April 2019 order was not restrictive to the date on which it was pronounced, and if there was any ambiguity, it was necessary for the poll panel to seek a clarification from the top court.

While hearing arguments on a batch of petitions challenging the validity of the electoral bonds scheme for funding political parties, the bench observed the ECI should have the up to date data.

“In any event, we now direct that the Election Commission shall produce up to date data until September 30, 2023 in terms of the interim direction which was issued on April 12, 2019,” the bench ordered.

It said the exercise be carried out within two weeks and data handed over to the registrar (judicial) of the apex court in a sealed cover.

The bench reserved its verdict on the petitions, including those filed by Congress leader Jaya Thakur, the Communist Party of India (Marxist) and NGO Association for Democratic Reforms (ADR), after hearing arguments for three days.

During the hearing, the bench asked the EC’s counsel about the quantum of electoral bonds which have been subscribed.

The EC’s counsel said he had some data in terms of the April 2019 order in a sealed cover and he can place that before the court.

“Is the data up to date, at least till March 2023?” the bench asked.

The counsel referred to the April 2019 order of the apex court and said the details were till 2019 only.

“You have to continue to collect the data,” the bench said, adding, the EC never came back to the court for clarification if there was any doubt regarding the earlier directive.

“You should have got the data when you were coming to the court… That day we had emphasised and all of us had expressed the view and we expected you to come back with the data,” the bench told the EC’s counsel.

The counsel said he can provide the data and the EC can seek details from all political parties.

The bench said it will not ask the State Bank of India to reveal the identity of the donors at this stage but it would like to know about the quantum of bonds subscribed.

“What is time frame in which data has to be given every year? Is it every financial year? What is the deadline?” the bench asked.

The counsel informed the court the data was to be given six months after a financial year got over.

“You ought to have the data. You will have the total quantum of electoral bonds and what is the bifurcation between different political parties,” it told the EC’s counsel, who said the poll panel will have to collate that.

“File the data as of March 31, 2023 and submit it to us. You can even give us the data till September 30, 2023,” the bench told the lawyer.

In its April 2019 order, the top court, which had not stayed the Centre’s Electoral Bond Scheme, 2018, made it clear it would accord an in-depth hearing to the pleas as the Centre and the EC have raised “weighty issues” having “tremendous bearing on the sanctity of the electoral process in the country”.

“According to us, the just and proper interim direction would be to require all the political parties who have received donations through electoral bonds to submit to the Election Commission of India in sealed cover detailed particulars of the donors as against each bond; the amount of each such bond and the full particulars of the credit received against each bond, namely, the particulars of the bank account to which the amount has been credited and the date of each such credit,” it had said.

The scheme, which was notified by the government on January 2, 2018, was pitched as an alternative to cash donations made to political parties as part of efforts to bring in transparency in political funding.

According to the provisions of the scheme, electoral bonds may be purchased by any citizen of India or entity incorporated or established in India. An individual can buy electoral bonds, either singly or jointly with other individuals.

Only the political parties registered under Section 29A of the Representation of the People Act, 1951 and which secured not less than 1 per cent of the votes polled in the last election to the Lok Sabha or a state legislative Assembly are eligible to receive electoral bonds.

According to the notification, electoral bonds shall be encashed by an eligible political party only through an account with an authorised bank.