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SC expresses concern over the possible misuse electoral bonds, reserves its order on the matter

Attorney General KK Venugopal, claims that after electoral bonds were launched in 2018, black money in election funding, has been kept under check

electoral bonds

The Supreme Court has expressed concern over the possible misuse of electoral bonds. The SC reserved its order on a plea of Association For Democratic Reforms (ADR), a non-governmental organisation which sought a stay on the sale of fresh electoral bonds ahead of Assembly elections in West Bengal, Tamil Nadu, Kerala, Assam and in the Union Territory of Puducherry. According to news reports, a three-judge bench, headed by Chief Justice of India (CJI) SA Bobde, has expressed concerns and asked the Centre to examine the possibility of the bonds being misused.

Hindustan Times reported that the SC asked, “If a political party gets ₹100 crore worth bonds what is the control over the use of these bonds for illegal activities or purposes outside political agenda?”

Attorney General KK Venugopal, who is representing the Centre, claimed that black money in election funding has been kept under check after the electoral bonds scheme was launched in 2018, as no cash is collected. He said that this was so because bonds can be purchased only through cheque or DD. According to HT, senior advocate Rakesh Dwivedi, who represented the Election Commission (EC), has said that the EC is not opposed to these bonds but has “raised concerns over its anonymity.” The electoral bond scheme was notified by the Union government on January 2, 2018. Electoral bonds were introduced through Finance Act 2017, which in turn amended three other statutes – the RBI Act, the Income Tax Act and the Representation of People Act.  The Finance Act, 2017 introduced a system of electoral bonds to be issued by any scheduled bank for the purpose of electoral funding. 

The SC is hearing a petition filed by ADR that has sought directions to stop the fresh sale of electoral bonds from April 1. The ADR sought an urgent hearing stating that the sale of fresh electoral bonds “should be stopped till the top court decides the three pending petitions challenging the electoral bond scheme 2018 which grants anonymity to donors of political parties,” stated media reports. The bonds are issued specifically for the purpose of contributing funds to political parties, and can be purchased by any Indian citizen, company, firm or association of persons established in India. The ADR in its PIL had sought that the amendments carried out to the Finance Act be struck down, citing, “a lack of transparency in the accounts of all political parties.” The  petition stated that, “these donations enjoy 100% tax exemption as they need not be reported to the Income Tax department.

The Bar and Bench reported that CJI Bobde asked Attorney General KK Venugopal, “But this angle of misuse of funds for illegal purposes for purposes of terrorism we would like you as a government to look into. It is not to suggest that political parties have violence on their agenda.”

Advocate Prashant Bhushan, appearing for ADR today, cited a letter written by the Governor of the Reserve Bank of India (RBI) in which it was stated that the Electoral Bond scheme was fraught with risk and would impact India’s financial system saying, “RBI said there may be use of these electoral bonds to fund shell companies etc. RBI said this will put them at reputational risk. Here, bribing has been made through government channels.” Responding to CJI Bobde’s statement that such contributions can be anonymous even if they are in demat form, Bhushan added, “If it’s anonymous, then it will be direct bribery. This can be given to political parties as quid pro quo,” reported the legal news portal.   

According to the report CJI Bobde also stated that, “We are sure there are political parties who have violence on their agenda. Can not a political party fund terrorist operations?…Can’t a party receive bonds and then fund a protest which turns violent? If a party buys Electoral Bonds worth ₹100 crore, what is the assurance that it won’t be used for illegal purposes or fund violence?” The AG reportedly replied, “Every party has to file their income tax returns. Apart from Communist party and one national party, no one had declared this. Even Congress did not file. It was after your judgment that all started filing. So now question of such misuse cannot arise.”

According to AG Venugopal and Solicitor General Tushar Mehta “funds received through Electoral Bonds were white money” that could only be issued through cheque and demand draft, and for which Know Your Customer (KYC) norms had to be followed. The ADR plea had stated that there was a “serious apprehension that any further sale of Electoral Bonds before the upcoming State Assembly elections” as they “would further increase illegal and illicit funding of political parties through shell companies.”

 

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