Examining the Supreme Courts’ Stance on the Electoral Bond Scheme

By Manisha Das

Introduction (Yadav, 2021)

The Supreme Court had recently rejected to stay the sale of the electoral bonds in front of elections of the Assembly in pivotal for states such as Tamil Nadu and West Bengal. The judgment passed by the bench led by the Indian Chief Justice Sharad Arvind Bobde conveyed that the scheme had started during 2018 and carried on till 2019 and 2020 consequently, without any obstructions. This judgment occured on an imperative application proceeded by the Association of NGO particularly for the Democratic Reforms, Adv. Prashant Bhushan was the Representative, to stay the sale arranged between the period of 1st April and 10th April. Supreme Court in a current order rejected to stay the sale of the electoral bonds under the EBS in front of the elections of the legislative assembly. EBS introduced in 2018 allowed companies, people, associations, Hindu undivided families etc; to purchase electoral bonds also transfer them or donate them to the political parties, and keeping their identity anonymous. This scheme has been questioned earlier during 2019 on the basis that this anonymity in the process of donation violates the right of the citizen’s to have information about the contribution provided to political parties and also their sources. Nevertheless, the SC delayed the matter for a more comprehensive hearing post the Lok Sabha elections, and provided certain guildelines to the political parties.


Justification in the Context of Relevant Amendments

The then Chief Justice of India, Sharad Arvind Bobde contradicted a stay on the scheme, noticed that ‘it’s not as according to the operations under this Scheme are behind the iron curtains impotent of being penetrated.’ In simple words this was expressed because there is no complete obscurity in the transactions under the Electoral Bond Scheme as it needs the political parties to provide with an audit report annually and additionally the Companies Act needs the registered companies to file their financial proclamations. The court adhered that since these proclamations by the political parties and companies could be coherent together in order to detect which party from which company has got how much donations, there isn’t any need for putting a stay on the particular scheme. However, the order lacked total deliberation of the amendments which have been done in various acts for the execution of the Electoral Bond Scheme.

First and foremost, not each section of the Electoral Bond Scheme but proviso c to section 13(a)[1] of Income Tax Act needs the political parties to issue an audit report annually. However, proviso B to the similar section had been amended to impose the scheme to understandably convey that there is no need for political parties to keep a record of transactions done through electoral bonds. Therefore, due to the exemption, the electoral bonds have been completely out of the scope of the annual audit. Furthermore, according to the amendment to section 182 (3)[2] of the Companies Act, companies are no longer obliged to disclose the name of the party or the specific amount of the donation to a specific party. Instead, they only need to disclose the total amount contributed by that party. Therefore, when political parties or corporations are not required to maintain and disclose transaction records based on electoral bonds, it is difficult to imagine how to match the two.

In addition, the court rashly rejected the petitioner’s argument that foreign companies can purchase election bonds and influence the Indian election process. As per the court, according to clause 3 of the EBS, election bonds can only be purchased by Indian citizens or persons incorporated or incorporated in India. However, this statement was also accompanied by preliminary ignorance of the relevant amendments to the Financial Law and the Foreign Contribution Regulation Act (“FCRA”). After the amendment of Article 236[3] of the Financial Law and the corresponding FCRA Section 2 (1) (j) (vi)[4], even if a foreign company has more than 50% of the equity in an Indian company, the entity will not be “(“FEMA”) investment restrictions are considered foreign sources. This is problematic because according to the latest FEMA regulations, foreign investment in agriculture, railway infrastructure, pharmaceuticals, and many other fields is allowed to exceed 50%, or even 100%. Therefore, EBS may result in Indian companies that can simply be used as a means of obtaining political funds from foreign sources, because under FEMA restrictions, foreign companies can actually own all of the shares of Indian companies. In addition, the anonymity function almost negates the possibility of disclosing any details of such financing.


Purpose of the Scheme

On the premise that the court’s decision was correct, although the order supported the effectiveness of the scheme, it raised doubts about its purpose and object. As proposed by the government, during the EBS reporting period, one of the main goals of the plan was to ensure donor anonymity. In response to the challenges the plan faced in 2019, the government responded that anonymity is necessary because revealing the identity of the donor will create pressure for other political parties to accept donations. However, as the latest Supreme Court order observed that by matching the financial statements of the two, information about the identities of the bond purchaser (donor) and the donor can be obtained, the plan is insufficient to ensure that the donor Anonymity. Therefore, either the plan did not achieve one of its main purposes, or the court erroneously ruled that the public can easily obtain information about such transactions. If the first is correct, then first the necessity of the program becomes questionable because it does not perform its declared function. If the latter is correct, the plan cannot explain how its procedures are opaque and do not violate citizens’ right to know.


The Purview of the Right to Know and Its Continuous distortion

The responsibility of public institutions and the lucidity of their operations are unavoidable for real democracy. The insufficiency of information on the work of the state /public authorities hinders the power of the people, since it undermines the basis on which they can review the functioning of the state, and therefore does not conform to the principles of representative government. In a 2013 ruling, the Central Information Commission (“CIC”) affirmed that political parties are public institutions within the scope of the Right to Information Law. In addition, the Supreme Court noted in the PUCL v UOI[5] case that, pursuant to Article 19 (1) (a)[6], citizens have the basic right to know the details of the candidates for the elections in order to properly exercise their right of expression through voting. Similarly, details of political party funding sources are equally important (considering the importance of political parties in Indian elections) because it sensitizes citizens to the secret tendencies of political parties so that they can make informed decisions. About matches. Except for the fact that the parties did not comply with the CIC ruling by providing data on their internal operations, the EBS plan is a complementary violation of the same content. In addition, the two orders of the Supreme Court did not fully pay attention to citizens’ right to know about the financial operations of political parties. In the 2019 order, although the court ordered the political parties to submit the details of the bond buyers and their amounts to the Election Commission of India (“ECI”), the same must be done on the sealed cover. This means that the public will not know the details provided to ECI. This is problematic because it confuses people’s right to know the source of political funding (used to make informed decisions) with the need to regulate unauthorized party funding. Information about election bonds is critical to the public, not only because citizens need to know whether political parties are funded by unauthorized sources. It is also because they must be able to access the details of the source of authority in order to understand the tendency of the party in power and their hidden interests in legislative or policy changes.

In the contemporary order, it was observed that since bond purchases and collections can only be done through bank channels, they will inevitably be reflected in the documents that eventually enter the public domain. In addition, CJI stated ‘it requires only takes a little more effort to delete such information from both parties and perform some matching the following’. This particular stance is both evasive and ignorant of the right to know. First, it circumvents the problem that even if such information does reach the public domain, its relevance may be weakened because the election has already taken place, so people cannot do so. Add this information when you vote until the next election. This evasive position is more evident in paragraph 21 of the order, in which the court stated that the issue of political parties not to submit its audited annual accounts is another matter and cannot be considered in this request. Second, CJI stated that the right to know is not a right at all. It is indirectly equivalent to saying that people seeking information should find it themselves. By refusing to suspend the transaction on the basis of “more effort” to obtain information on the electoral bond transactions, the order shifts the burden from political parties to the individuals or organizations seeking such information. Therefore, this method does not consider the right to know as a basic right, but as a favour, which can only be done when the information seeker cannot obtain it himself.


Government’s point of view

  • The government had notified the scheme on 2nd January 2018, and defended electoral bonds as an antidote to the influence of black money in politics and anonymous cash donations of huge amounts.

  • The Ministry of Finance affidavit in the top court had denied ECI’s statement that the inconspicuousness afforded to benefactors was a “inverse step” and that would demolish transparency in the funding of politics.

  • The government’s affidavit had mentioned the cerement of confidentiality was one of the results of ‘well calculated policy deliberations'. It mentioned the previous system of currency donations had raised some concern between the donors that with their identity revealed, there would be competitive pressure from several political parties receiving donation”.

  • The SC in its previous hearing had conveyed its concerns that political parties might embezzle crores acquired as donations by the electoral bonds in order to bankroll aggressive protests or terror.

  • The SC had questioned how the government intended to flex “control” on how political parties would use the donations.


Conclusion

The Supreme Court’s order did not correctly assess the extent and scope of EBS violations. Given that the amendments to the Income Tax Law and the Company Law exempt the disclosure of election bond transactions and the names of parties holding election bonds, the court held that the view that people can obtain financing details through election bonds is ostensibly flawed. The amount donated to each of them. The order explained the right to know in a very limited way and did not give due consideration to the important issue of foreign financing. Therefore, in the author’s view, the order requires reconsideration of violations of the right to know, damage to election transparency and the vulnerability of elections to foreign funds caused by EBS.

[1] Section 13A The Income Tax Act 1995; [2] Section 182(3) of the Companies Act, 2013: Prohibitions and restrictions regarding political contributions; [3] Article 236 of the Constitution of India, 1949; [4] Section 2 (1)(j)(iv) in the Foreign Contribution (Regulation) Act, 2010; [5] The People’s Union of Civil Liberties vs. Union of India AIR 1997 SC 568 SCR 321; [6] Article 19 (1) (a) right to freedom of speech and expression;


Author: Manisha Das

Year: 2year, student

College: Amity Law School Kolkata

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