New Delhi: Over a month and a half after the Supreme Court struck down the centre’s electoral bonds scheme, declaring it “unconstitutional” and violative of voters’ right to information, Prime Minister Narendra Modi broke his silence and said that it was because of the scheme that a money trail can be established, and those who are “dancing” over the issue will regret it.
“Tell me what have we done that I should see as a setback? I firmly believe that those dancing over the issue and taking pride in it are going to regret it,” he said in an interview with Thanthi TV on Sunday.
“I want to ask these people, before 2014, money was spent during elections. Was there any trail of funds that were given to political parties during elections? Which agency can say where the money was sourced from, who did it go to and who spent it? Because Modi made electoral bonds, we can now search who bought the bonds, where it went, and how it was spent. Otherwise, before this we did not even know. Elections included spending. Today there is a trail because of electoral bonds. No system is perfect. There may be shortcomings, which can be fixed. But at least due to electoral bonds you know where the money has gone.”
While Modi has claimed that because of the scheme brought in by his government in 2018, a money trail can now be established, a look at his government’s continued defence both inside and outside court shows that the BJP government went out on a limb to protect the anonymity of the money trail until the Supreme Court scrapped the scheme following which the SBI and the EC were forced to make public these details.
The Supreme Court, in its order nixing electoral bonds on February 15 had crucially said, “There is also a legitimate possibility that financial contributions to a political party would lead to a quid pro quo arrangement because of the close nexus between money and politics.”
Of the total number of electoral bonds worth Rs 12,008 crore sold between 2017-2018 and 2022-2023, the BJP has received nearly 55% or Rs 6,564 crore. After the Election Commission of India published on its website the Supreme Court-mandated data including unique numbers of bonds purchased and encashed by political parties between April 2019 to January 2024, The Wire has reported that three of the top five donor companies donated their largest amounts to the BJP. The data also shows that BJP got 93% of bonds before the 2019 Lok Sabha Polls, and the top five recipients of bonds saw their fortunes turning with elections in this period.
How laws were amended to keep donations anonymous
The electoral bonds scheme was notified in January 2018, that allowed companies and individuals in India to make anonymous donations to political parties. Under the scheme, the State Bank of India (SBI)- the country’s largest public sector bank-was authorised to sell these bonds, and political parties who encashed them too had to do so from their verified accounts in the bank in one of its authorised branches.
The scheme did away with the earlier requirement under law that said that any individual or organisation making a political donation of Rs 2,000 or more to any political party, is required to furnish information about the donor.
The scheme allowed political donations ranging from Rs 1,000 to Rs 1 crore to any political party without his or her identity having to be revealed. All that a political party was required to disclose was the total amount of contribution that has been raised for it through the medium of electoral bonds.
Representative image. Photo: Unsplash
To introduce electoral bonds the Modi government amended several laws in 2017 (after making changes in the Finance Act, 2017, and corresponding amendments in statutes such as the Representation of People Act,1951, the Reserve Bank of India Act, 1934, the Income Tax Act, 1961, Foreign Contributions Regulation Act, 2010, and Companies Act, 2013, as has been reported by SC Observer.
These amendments allowed foreign companies who have a majority share in Indian companies to donate to political parties. Prior to this foreign companies were prohibited from donating to political parties under the FCRA and the Foreign Exchange Management Act, 1999.
The Finance Act, 2017 amended the Income Tax Act exempting political parties from keeping a detailed record of contributions received through electoral bonds. It also amended the Representation of the People Act, 1951 (RoPA), exempting political parties from publishing contributions received through electoral bonds in Contribution Reports. It amended the Reserve Bank of India Act to permit the Union government to “authorise any scheduled bank to issue electoral bonds. In addition, the Companies Act, 2013 was amended to remove the upper limit on how much a company could donate to a political party.
How Jaitley defended anonymity
In a Facebook post in 2018, former finance minister the late Arun Jaitley referred to his budget speech for the year 2017-18 and said that “scheme of electoral bonds was announced to enable clean money and substantial transparency being brought into the system of political funding.”
Defending the electoral bond scheme, he said that anonymity was essential as “past experience” had shown that without it, donors would not find the scheme attractive.
“How much each donor has distributed to a political party would be known only to the donor. This is necessary because once this disclosure is made, past experience has shown, donors would not find the scheme attractive and would go back to the less-desirable option of donating by cash.”
In April 2019 Jaitley in a blog post wrote further about the need to mask the identity link between donor and the party.
Referring to the electoral trust scheme brought in 2010 by then finance minister Pranab Mukherjee, Jaitley wrote: “Donors fear the consequences of their revealed identities being linked to a political party to whom they donated. He (Mukherjee) very wisely masked the identity by creating a pass-through electoral trust in 2010.”
“In 2017, based on the principle of masking the identity link between the party and the donor, the NDA created the instrument of electoral bonds.”
Government’s anonymity defence in court
Contrary to Modi’s claims, during the hearings in the Supreme Court challenging the scheme, the central government consistently defended masking donor identities and their recipient parties.
The apex court had held in its February 2024 order that the scheme was violative of citizen’s right to information under Article 19 (1) (a).
In October 2023, the centre told the court that citizens did not have the fundamental right to know the source of political funding. Attorney general R. Venkataramani said that the “right to know” must be subject to reasonable restrictions and can be exercised for specific ends or purposes.
In November 2023, solicitor general Tushar Mehta once again referred to “donor resistance” and safeguarding their identities and suggested that eliminating the confidentiality aspect of the scheme would render it ineffective and could potentially lead to a resurgence of cash-based political contributions.
Mehta argued that there would be no quid pro quo between the party in government and the way electoral bonds have been devised and that the party in power would not be able to know who is donating to whom.
To this, CJI Chandrachud had said, “Retribution is not avoided by the scheme. I’ll tell you the simple reason. Under the Companies Act, now modified, a company doesn’t have to disclose to which political party it has contributed. But it has to show how much it has contributed.”
“So a company says I’ve contributed 400 crore this FY. Now, the party in power knows how much has come to it in terms of Electoral Bonds from that company.”
SG Mehta said, “It can never know.” The CJI said, “No, the party of course knows,”
In the final judgement in February, the SC has also said that it did not agree with the centre’s submission that the donor and the recipient party was not revealed and said “de jure anonymity of the contributors does not translate to de facto anonymity.”
It said that the bonds “provide economically resourced contributors who already have a seat at the table selective anonymity vis-à-vis the public and not the political party.”
The Wire has reported that the electoral bond data uploaded following the Supreme Court’s directions revealed that the top donors include companies that were raided or under scanner of central agencies including the Income Tax Department and Enforcement Directorate and also reported that three of the top five donor companies donated their largest amounts to the BJP. Other reports have also pointed out that some companies have bought electoral bonds worth much more than their annual profits.
Role of SBI in maintaining anonymity
In court the SBI’s moves to first miss the deadline, then seek time till after the Lok Sabha elections to furnish the electoral bonds data, and then subsequently successfully publishing it following the apex court’s rap has also raised questions about whether the country’s largest public sector bank was trying to hide donor and recipient details.
Transparency activist Anjali Bhardwaj has noted that the data shows that the invisible alphanumeric codes on each bond slip was tracked by the SBI – contrary to what the Modi government had explicitly claimed.
Former finance secretary Subhash Chandra Garg had told Indian Express that by recording the alphanumeric codes of the bonds sold to donors and encashed by political parties, the bank had “hit at the basic feature of the scheme that was brought in by the government” to enable anonymous political donations.
Anonymity in the interest of curbing black money
According to a report by HuffPost India the Modi government ignored the Reserve Bank of India’s recommendation not to go ahead with the scheme. The report cited documents that stated that the RBI said that the amendments to the Reserve Bank of India Act would set a “bad precedent” and encourage money laundering.
Alarm was also raised by the Election Commission that warned the government that electoral bonds would help political parties hide illegal donations from foreign sources and might even “lead to increased use of black money for political funding through shell companies.”
However, the Election Commission changed its stance in 2021.
The SC Observer has noted that in its judgement the Supreme Court said that while the centre had submitted that since the implementation of the scheme, 47% of political contributions had come through legal channels, the court found that this submission wrongly relied on the idea that non-disclosure of information has a rational nexus with curbing black money.
