In June 2018, the State Bank of India (SBI) refused to disclose information about the buyers of electoral bonds (EBs) and the political parties which received them. The Central Public Information Officer (CPIO) denied an RTI application about buyers and the denominations of EBs they purchased, saying that compiling such information would lead to disproportionate diversion of the bank’s resources.
The officer also decided that all reports sent to the central government about the sale and purchase of EBs were in a “fiduciary capacity” and could not be disclosed under Section 8(1)(e) of the RTI Act. SBI’s CPIO provided only denomination-wise figures for the sale of EBs through the designated branches. Even this data did not match with the data that was earlier supplied to another application.
A first appeal was filed by the author with SBI’s first appellate authority (FAA) in July, 2018. The SBI’s FAA has admitted that the CPIO had goofed up while providing the EB sale data against my RTI application. In his latest communication, following the FAA’s order, the CPIO has stated that the EB sale data that was earlier provided for the Gandhinagar branch actually belonged to the Bengaluru branch of the SBI!
SBI’s FAA upholds CPIO’s rejection order mechanically
Union finance minister Arun Jaitley had claimed that the EB scheme would introduce greater transparency in political party funding. After the government launched the scheme in January this year, the SBI announced the first phase of sale of EBs in March. In July, the fourth phase of EBs were sold. I had filed an RTI application in May, after the second phase of sale. I sought information regarding the total number of electoral bonds sold by each authorised branch in March and April, along with total number of buyers in each category, among other details.
After the appeal, the CPIO has admitted that the 57 EBs he initially showed as having been sold through the Gandhinagar branch in Gujarat, were actually sold through the Bengaluru branch of SBI in Karnataka.
SBI sold ten EBs of Rs 1 lakh denomination, 38 EBs of Rs 10 lakh denomination and nine EBs of Rs 1 crore denomination, totaling Rs 12.93 crore through its designated branch in Bengaluru.
The CPIO had earlier denied access to information about the beneficial ownership declarations submitted by companies and firms that bought EBs and the reports about EB sale submitted to the Central government and the Reserve Bank of India (RBI) claiming that they were covered by Section 8(1)(e) of the RTI Act which applies to information held in a fiduciary relationship.
SBI’s FAA mechanically “concurred” with the CPIO’s order without any detailed reasons. I had made my arguments based on RBI’s master circular and the Supreme Court’s explanation of how the RBI could not claim “fiduciary relationship” with the banks it regulates, the FAA did not bother to examine the validity of the CPIO’s order against those arguments.
According to the RBI, when SBI is in a contractual relationship with its customers, the CPIO cannot claim the protection of a “fiduciary” relationship. A fiduciary relationship is a trust-based relationship. This position was also explained by the Supreme Court of India in December 2015, in the matter of Jayantilal Ratanchand Shah & Ors., vs. Reserve Bank of India. The court rejected RBI’s claim that it stands in a “fiduciary” relationship with the banks that it regulates. This ruling came in the context of information requests regarding non-performing assets (NPAs) and loan defaulters from public sector banks.
It is obvious that the same relationship will apply to SBI in its relationship with the RBI and the government of India. There can be no ‘fiduciary’ relationship between them.
SBI’s FAA refused to examine the correctness of the CPIO’s reply in light of the RBI’s master circular of July 2015 and the apex court’s ruling on the nature of “fiduciary relationship”. The FAA also ignored my citation of case law, decided by the Central Information Commission 12 years ago, about the illegal practice of using Section 7(9) of the RTI Act for refusing access to information.
It has upheld the CPIO’s decision to reject information about buyers of EBs by agreeing that such information is not available in compiled form and compiling it would disproportionately divert SBI’s resources. My argument that Section 7(9) cannot be used to reject an RTI application but must be used to facilitate access to the requested information in any other form were simply ignored by the FAA. The FAA chose to mechanically uphold the CPIO’s decision, an indication of a refusal to apply one’s mind despite compelling case law. He could have permitted file inspection but he chose not to so do. So much for the promised transparency of political party funding through the sale of EBs.
I intend to file a second appeal before the Central Information Commission against the orders of the CPIO and the FAA of SBI.
Electoral bonds scheme explained
The EB scheme allows any person (including Hindu Undivided Families), companies, firms, charitable trusts or unincorporated bodies of individuals to buy EBs from the designated branches of SBI during each windows of sale announced by the government from time to time. EBs are in the nature of promissory notes and carry no rate of interest. The identity of the buyer is not recorded. So, the political party will have no formal mechanism to know who is the actual donor through EB. A buyer could send the EBs through his/her chauffeur to be delivered at the office of a political party. EBs have a validity of 15 days only. There is no limit on how many or how much worth of EBs any person can buy. Recipient political parties have to redeem the EBs within this period using an SBI account. The value of EBs will not be credited to any other bank. If they miss the 15-day deadline, neither the buyer nor the recipient political party gets the money back. Instead, it will be deposited in the Prime Minister Relief Fund.
Through the Finance Act, 2017, the government of India made some changes to the statutory scheme of political party funding. While restricting cash donations to political parties to less than Rs 2,000 from one donor, several caveats were provided to maintain secrecy. This includes amending the Income Tax Act, 1961 to relieve political parties from the obligation of reporting details of donations received through EBs to the tax authorities in order to continue to avail IT exemption. The Representation of the People Act, 1951 was also amended to relieve political parties from the obligation of maintaining the identity of donors who use EBs and disclosing the same to the Election Commission of India.
The Companies Act, 2013 was amended to completely remove the cap on registered companies for making donations to political parties. Earlier, companies could donate not mote than 7.5% of their net profit during the three preceding years and publicly disclose them in their profit and loss at the end of the year. With the 2017 amendments, which became operational in April 2018, a company can in theory donate its entire share capital to political parties soon after formation and then wind up. Limits on both time and amounts have been removed. Further, there is no duty placed on companies to reveal the name of the political party to which they donated money, let alone through EB, in their profit and loss account.
So much for increased transparency in political party funding – the electoral bonds system which is actually proving to be a backward leap to the era of secrecy.
Venkatesh Nayak is programme coordinator, access to information, Commonwealth Human Rights Initiative, an independent NGO based in Delhi.