A five-judge Constitution Bench started hearing a batch of petitions challenging the electoral bonds case on Tuesday, October 31. The petitioners argued that electoral bonds are opaque and against fundamental principles of the Indian Constitution. CPI(M), one of the petitioners in the case, also argued that the scheme does not block the black channel of money flow but creates an alternate anonymous white channel. The bench headed by the Chief Justice of India DY Chandrachud, also comprises Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra.
The batch of Public Interest Litigations (PIL) challenging the electoral bonds scheme contend that the finances of political parties should be made public similarly to that of criminal antecedents of candidates. The pleas were referred to a five-judge Constitution Bench by a three-judge bench of the SC on October 16. Electoral bonds are similar to promissory notes and were introduced in 2017. Citizens and bodies incorporated in India can purchase these bonds and donate anonymously to political parties.
Senior advocate Prashant Bhushan, appearing for one of the petitioners, Association for Democratic Reforms (ADR), argued that the case goes to the root of India’s democracy and should be decided before the elections. ADR is challenging the amendments made in the Foreign Contributions Regulations Act (FCRA) on the grounds of whether it can be brought through the Finance Act. The Finance Act 2017 amended the Reserve Bank of India Act, Companies Act, Income Tax Act, Representation of Peoples Act and FCRA to introduce electoral bonds.
Under this amendment, a person intending to make donations to a political party can purchase an electoral bond in specific banks and branches through cheques or digital modes of payment. The bonds will neither have the donor’s name nor are the political parties required to disclose the source of these bonds. The value of the bonds will be calculated as income by voluntary contributions for a political party for exemption from income tax.
‘Electoral bonds are opaque, anonymous instruments’
Advocate Bhushan pointed out that earlier parties had to disclose donors who have contributed more than Rs 20,000, and an upper limit had been set on corporate donations to a political party. Both have been removed now. Currently, the companies are only required to disclose the total contribution. The political parties are also exempt from disclosing from whom they have received the electoral bonds. However, he pointed out that only the Union government knows who donated how much money to whom because the bearer bonds are issued by the State Bank of India, which maintains a record.
Stating that electoral bonds defeat the people's right to be informed, Bhushan contended that it promoted corruption in the country. “It has introduced an opaque instrument by which nobody can come to know the details other than the government. It is only the government which will know who contributed to whom,” he argued and added that even the Election Commission of India (ECI) is not aware of such details.
Stating that more than 50% of electoral bonds are received only by the ruling party in the centre and less than 1% is received by the opposition parties, he contended that it “violates the level playing field” between the ruling party and the opposition.
To this, CJI Chandrachud observed, "The reason why there could be anonymity for the people who have donated is because suppose a person who runs a business donates an amount to a party different to the one who is the ruling party of his state, then there could be ramifications."
Advocate Bhushan also argued that a citizen with the right to know about candidates, their assets and liabilities, their criminal antecedents, etc, should also have the right to know about who funds these political parties. “Electoral bonds form the bulk of political funding of parties. By making this non-transparent you're defeating an important right of people to know where they're getting money from – whether this is tainted money, black money, from shell companies, etc,” he argued. Submitting party-wise details of electoral bonds funding received, he argued that the total donations declared by the ruling BJP was more than three times the total donations declared by all other national parties put together. “During the 6-year period, more than 52% of BJP's total donations came from electoral bonds worth Rs 271 crore,” he said.
Advocate Bhushan also argued that the effect of the amendment has now led to subsidiaries of foreign companies that have never carried out legitimate business in India to secretly funnel hundreds of crores to a political party.
“The bonds are fashioned in such a way that the money could secretly change many hands to reach the ultimate political party,” he contended and added that only the Communist Party of India (Marxist) (CPI(M)) – who is also a petitioner in the case – has refused to take electoral bonds.
‘Vedanta’s donations to electoral bonds increased manifold’
Prashant Bhushan also told the apex court that the donations by Vedanta through electoral bonds have gone up despite several reports that the company is facing a financial crunch. Quoting a news report by Business Standard, he said that the multinational mining company has donated Rs 457 crore in the last five years to political parties through these bonds. “Vedanta's donation in FY23 was Rs 155 crore, which was higher than Rs 123 crore donated in FY22,” he said. He said that Vedanta Limited has been declared as the preferred bidder for various mining licences.
He further said that an investigative report by the Organised Crime and Corruption Reporting Project (OCCRP), a global network of investigative journalists titled 'Inside Indian Energy and Mining Giant Vedanta’s Campaign to Weaken Key Environmental Regulations' revealed backroom lobbying by Vedanta with the Union government.
Bhushan also argued that electoral bonds subvert democracy and violate the level playing field between political parties; and between political parties and independent candidates. The CJI also observed that shareholders in a company don’t know who has received the money as only the amount is specified.
‘Corporate sector’s voice drowning citizens’ voice is a dangerous trend’
Senior advocate Kapil Sibal, appearing for Congress leader Jaya Thakur – one of the petitioners – put forth five arguments. One is that capital symbolises power under the very concept of market economy. “The more capital you have, the more power you get. Second, the electoral process must be such that it provides a level playing field to all participants. Fair and free elections are the basic structure of the Constitution,” he argued.
Thirdly, he argued that when the corporate sector is allowed to donate with or without transparency, it becomes inconsistent with the concept of a corporate sector that is about doing business. “Fourth, this has nothing to do with electoral bonds. It is a donation to a political party to use the funds as they like. The nomenclature suggests that electoral bonds are used for elections. But there is nothing in the scheme which connects the donations made to the participation in the electoral process. It's a means for political parties to be enriched,” he argued. The fifth and final argument was that the very nature of the scheme protects those who have committed a crime.
Advocate Sibal also contended that this was not a “question of transparency” but what prevents citizens from participating in democracy. “If I don't get to know the name of the donor, I cannot know of the transaction, I cannot know the possible quid pro quo. I cannot participate in democracy. If the voice of the corporate sector drowns the voice of the citizens, that's very dangerous,” he said.
Advocate Shadan Farasat, appearing for CPI(M), argued that the electoral bonds scheme is not to reduce the black money but to create an anonymous white channel for money. “The architecture and effect of the electoral bonds scheme is not to reduce black money but to reroute non-anonymous banking channel funding to anonymous electoral bonds. This scheme is an alternative white money channel created by the government…. They've added anonymity to it,” he argued. “There was earlier a black channel. Now you've created an anonymous white channel,” he explained.
Advocate Farasat also argued that this scheme goes against the concept of “informed electorate” under Article 19(1)(a) read with 326 of the Constitution, and also violates the Right to Conscience under Article 25, as individual shareholders don’t get to know about how their money is used.
Also Read: Citizens don’t have right to know funding of political parties: Union govt on electoral bonds