SC to hear plea seeking stay on the sale of electoral bonds on March 24

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A Supreme Court Bench headed by CJI SA Bobde has agreed to hear a plea by NGO Association for Democratic Reforms (ADR) seeking a stay on the sale of a new set of electoral bonds on April 1, before the Assembly elections in West Bengal and Tamil Nadu, reported the media.

Advocates Prashant Bhushan and Neha Rathi are representing the Association for Democratic Reforms. Solicitor General Tushar Mehta informed the Chief Justice that Attorney General K.K. Venugopal would be appearing in the case.

Responding to an urgent mention made by Bhushan via video conferencing, the Chief Justice said that the matter would require a detailed hearing and posted the matter for March 24, according to The Hindu.

LiveLaw quoted Bhushan saying, “I wanted to mention Electoral Bonds matter which has been pending here since 2017. The last hearing took place two years ago. Whenever electoral bonds are released, we file application to stay. Now, new set of bonds are to be released in April. We want the application to be heard very urgently. ECI, RBI have all stated that these bonds allow transfer of illicit black money from shell companies.”

He informed the Bench on March 18 that in April 2019, the Supreme Court had sought information from political parties regarding the donations received through electoral bonds in a sealed cover.

He said, “Stay was not rejected. The Court said it was not the stage to consider stay. They said they will ask parties to furnish the details to the court in sealed cover. That was two years ago…after that two documents have emerged – one from the RBI, another from the ECI, both of which say these bonds are very detrimental to democracy”, reported LiveLaw.

The plea

ADR’s petition also including political party Communist Party of India (Marxist), and NGO Common Cause has challenged the provisions of Finance Act 2017 which paved the way for anonymous electoral bonds, as reported in the media. The Finance Act 2017 introduced amendments in Reserve Bank of India Act, Companies Act, Income Tax Act, Representation of Peoples Act and Foreign Contributions Regulations Act to make way for electoral bonds.

For instance, under the 2017 amendment made to Section 29C of the Representation of Peoples Act 1951 (RPA), political parties were permitted to not report the donations received through electoral bonds to the ECI. The amendment to Section 182 of the Companies Act did away with the restriction that contribution can be made only to the extent of 7.5% of net average profit of three preceding financial years. This enabled even newly incorporated companies to donate via electoral bonds, according to a report in The Wire.

The Hindu quoted Neha Rathi saying, “Data obtained through RTI has shown that illegal sale windows have been opened in the past to benefit certain political parties… There is a serious apprehension that any further sale of electoral bonds before the upcoming State elections in West Bengal, Tamil Nadu, Kerala and Assam would further increase illegal and illicit funding of political parties through shell companies.”

The petition has also raised the issue that the bonds can be bought for any value, in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh or Rs 1 crore. LiveLaw reported that the name of the donor will not be visible and it will be valid for 15 days from the date of issue, within which it has to be encashed by the payee (political party). The face value of the bonds is to be counted as income by way of voluntary contributions received by an eligible political party, for the purpose of exemption from Income-tax under Section 13A of the Income Tax Act, 1961.

The government, on the other hand, that notified this electoral bond scheme on January 2, 2018, defended it in court, saying that it allowed anonymity to political donors to protect them from “political victimisation” and that it will bring in more transparency in political funding, as per LiveLaw.

In related news, ADR released a report in 2019 titled ‘Analysis of Donations from Corporates & Business Houses to National Parties for FY 2016-17 & 2017-18’ analysing the sources, the type, the mode and the quantum of donations received by all political parties in the two financial years preceding the election year. The report accounts for donations above Rs. 20,000 as political parties are required to submit details of only such donations to the Election Commission of India (ECI).

The report had revealed that BJP received the highest donations from corporates (94%) while CPI received the lowest (2%) in FY 2016-17 and 2017-18.