New Delhi: The Supreme Court’s three-judge bench, comprising Chief Justice of India D.Y. Chandrachud and Justices J.B. Pardiwala and Manoj Misra, on Tuesday (October 10) directed the listing of the batch of petitions challenging the validity of the electoral bonds scheme for October 31.
The bench held a preliminary hearing in order to familiarise itself with the issues in the case.
The lead petition, filed by the Association of Democratic Reforms (ADR), challenges the Finance Act, 2017 which was enacted as a money bill and introduced the electoral bond scheme for the purpose of electoral funding. The Act also removed the previous limit of 7.5% of the company’s average three-year net profit for political donations.
As per the scheme, a company is not required to name the political parties to which such contributions are made. The donors’ names are also not revealed to the public.
The petitioners argue that these amendments will result in opaqueness, heighten the odds of conflict of interest and also drastically increase black money and corruption. The petitioners also claim that this will lead to the creation of shell companies and rise of benami transactions to channelise undocumented money into the political and electoral process in India.
On Tuesday, counsel Prashant Bhushan for the petitioners alleged that due to non-decision on the matter by the court continuously since 2017, the ruling party has been enjoying the fruits of the scheme in every general election to the Lok Sabha as well as the assembly elections, thus upsetting the level playing field.
Bhushan submitted that the scheme, apart from having been fraudulently introduced through a money bill, also seeks to legalise anonymous sources of political funding. He alleged that the scheme violates the right to information about funding of political parties, and promotes corruption. When a legislative measure is introduced by the government as a money bill, it does not require approval from the Rajya Sabha.
Bhushan explained that political parties received funds most likely from companies which received some benefit or the other from them. He told the bench that as corruption-free society is a facet of Article 21 of the Constitution, as held by the court, source of funding cannot be anonymous.
The State Bank of India (SBI), as the designated bank, sells these bonds in the denominations from Rs 10,000 to Rs 1 crore to anybody, either in cash or through bank transfers (bank account to be opened if there is a cash deposit), with the source of purchase kept in wraps. While the source is known to SBI, it is obliged not to disclose it.
Details regarding who donates to which political party and what amount are not in the public domain.
The CJI likened the electoral bonds to the bearer bonds, as in both the holder of the bonds can transfer it to any recognised political party, and the party receiving them can encash them.
Before the amendment, disclosures regarding political donations were required under the Representation of People’s Act and the Companies Act. The electoral bonds scheme makes an exception, so that the parties do not have to disclose their source of funding.
Counsel Shadan Farasat explained the features of the scheme, pointing out that while names of the donors remain anonymous, there is no bar on disclosing the overall amount donated. Companies disclose the amount of donation to their shareholders, but the latter would not know which political party is the beneficiary. Information about the donation is sanitised in the public domain, he told the court.
Attorney General R. Venkataramani was initially inclined to request deferment of the hearing, in view of the challenges to the validity of non money bills being introduced as money bills having been referred to a seven-judge bench.
On being asked by the CJI whether the petitioners are pressing the determination of the money bill issue prior to the hearing of the challenges to the electoral bonds scheme, Bhushan agreed that the court can hear them keeping the money bill issue open.
Farasat pointed out that as the law now stands, the electoral bonds scheme could not have been introduced as a money bill.
Bhushan pointed out that while the scheme cannot be stopped before the ensuing assembly elections in five states in November, the case deserves to be heard and decided well before the Lok Sabha elections next year.
Contributions to the bond are deductible from the income of both the donors and donees.
The CJI said if the court were to conclude that the scheme was validly introduced as the money bill, then there is no need to refer the case to the seven-judge bench. Therefore, the court can proceed only if the petitioners are not pressing their challenge to the scheme on the ground of its not being a money bill, the CJI pointed out.
In response to Bhushan’s question, the CJI replied that he cannot predict whether the seven-judge bench could deliver its verdict on the money bill issue before the end of this year.
Bhushan and other counsel for the petitioners and intervenors then agreed to start the arguments by avoiding their challenges on the ground of the scheme not being validly introduced as a money bill.
The bench then requested the AG to submit the government’s written submissions to the nodal counsel by October 28, so as to complete hearing the arguments from both the sides on October 31, with spillover arguments being heard on November 1.
