Law

Electoral Bonds: The SC's Interim Order Puts It in a Catch-22 of Its Own Making

The provisions implemented under the scheme entail that parties do not know who their donors are. As a result, it leaves the apex court's order open to non-compliance.

The Supreme Court of India (SC) pronounced a significant “interim order” on April 12, 2019, in what might be called the electoral bonds case. These “group of writ petitions” have challenged the introduction of electoral bonds in the Budget of 2017. The first petition was filed by the Association for Democratic Reforms (ADR) in September 2017, and another was filed by the Communist Party of India (Marxist) in January 2018.

Electoral bonds have been mired in controversy ever since they were introduced. The government has repeatedly asserted that they will lead to greater transparency in political and electoral financing. But detailed provisions of the scheme as well as amendments to existing laws to put the scheme into operation, will do exactly the opposite – make electoral almost completely opaque. They will also legalise the unchecked flow of money to political parties from all kinds of sources without anyone, except the State Bank of India, knowing who has given how much money to which party.

It is in this context that the petitions were filed and the “interim order” of the Supreme Court assumes importance. It rightly states that “the rival contentions give rise to weighty issues which have a tremendous bearing on the sanctity of the electoral process in the country”.

Also Read: No Ban on Electoral Bonds for Now, as SC Asks for Details on Donations in Sealed Cover

Given the importance of the order, it is worth reproducing four paragraphs which form the operative part of the interim order:

11. All that we would like to state for the present is that the rival contentions give rise to weighty issues which have a tremendous bearing on the sanctity of the electoral process in the country. Such weighty issues would require an in-depth hearing which cannot be concluded and the issues answered within the limited time that is available before the process of funding through the Electoral Bonds comes to a closure, as per the schedule noted earlier.

12. The Court, therefore, has to ensure that any interim arrangement that may be made would not tilt the balance in favour of either of the parties but that the same ensures adequate safeguards against the competing claims of the parties which are yet to be adjudicated.

13. In the above perspective, according to us, the just and proper interim direction would be to require all the political parties who have received donations through Electoral Bonds to submit to the Election Commission of India in sealed cover, detailed particulars of the donors as against the (sic) each Bond; the amount of each such bond and the full particulars of the credit received against each bond, namely, the particulars of the bank account to which the amount has been credited and the date of each such credit.

14. The above details will be furnished forthwith in respect of Electoral Bonds received by a political party till date. The details of such other bonds that may be received by such a political party up to the date fixed for issuing such bonds as per the Note of the Ministry of Finance dated 28.2.2019, i.e. 15.5.2019 will be submitted on or before 30th May, 2019. The sealed covers will remain in the custody of the Election Commission of India and will abide by such orders as may be passed by the Court.

The SC’s recognition that these are “weighty issues which have a tremendous bearing on the sanctity of the electoral process in the country,” is very welcome. One hopes the political establishment as a whole will realise the importance of this issue and will not treat it as political football, the way they seem to treat most, if not all, issues.

The next observation of the SC that “such weighty issues would require an indepth hearing” is also unexceptionable but what is baffling is that this observation was made after a hearing that lasted a full one and a half days.

A somewhat perplexing observation is about “the limited time that is available before the process of funding through the Electoral Bonds comes to a closure, as per the schedule noted earlier.” The “schedule noted earlier” is “(i) 01.03.2019 to 15.03.2019, (ii) 01.04.2019 to 20.04.2019, (iii) 06.05.3019 to 15.05.2019.”

Also Read: Supreme Court’s Interim Order on Electoral Bonds Inconsistent with Two Laws

This is only the latest schedule, announced by the finance ministry on February 28, 2019. This was the 8th announcement of a schedule. The first schedule was announced on February 22, 2018, and the time window was between March 1 and March 10, 2018. After that, there have been seven announcements, and the one mentioned in the interim order is the eighth one.

What this shows is that the process of funding through electoral bonds is an ongoing one, which is not likely to come to a closure. Therefore, the observation of the court regarding “limited time (being) available before the process of funding through the Electoral Bonds comes to a closure,” seems somewhat misplaced.

Then comes what may well be the most confusing direction of the interim order, one where the court gives what it calls “the just and proper interim direction” which directs:

All the political parties who have received donations through Electoral Bonds to submit to the Election Commission of India in sealed cover, detailed particulars of the donors as against the (sic) each Bond; the amount of each such bond and the full particulars of the credit received against each bond, namely, the particulars of the bank account to which the amount has been credited and the date of each such credit.

This “direction” is confusing because several provisions made by the government while introducing the electoral bonds scheme make it impossible for political parties to provide this information for the simple reason that according to the stipulations in the scheme, political parties are not expected to, supposed to, and not required to possess this information.

To begin with, para 7(4) of the notification issued by the ministry of finance on January 02, 2018 says, “The information furnished by the buyer shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency”.

Political funding and electoral bonds. Credit: PTI

The government said under the new system, the political party must disclose the receipt of money through electoral bonds and must also account for the same. Credit: PTI

In addition, para 11 of the Finance Bill 2017 which amends Section 13A of the Income Tax Act, when read in the context of both, Section 13A and Section 139(4B) of the Income Tax Act, clarifies that the proposed amendments mean that political parties will not be required to disclose information about the “electoral bonds” even to the Income Tax department. Political parties will continue to enjoy the 100% exemption from income tax even without reporting these “electoral bonds” to the department.

Also Read: Much Ado About Nothing: Electoral Bonds and an Unapologetic Lack of Transparency

Similarly, paragraphs 135 and 136 of the Finance Bill 2017 which amended the Representation of the People Act, 1951, permit political parties to not disclose the identities of individuals and companies who donate these “electoral bonds” to the political parties.

If this was not enough, the government of the day, and in particular, the finance minister, has been repeatedly not only saying and clarifying but also emphasising that the anonymity of the donor is the most desirable characteristic of electoral bonds. Two examples, one from the day the announcement of the electoral bond scheme was made for the first time, and the other very recent, are given below to illustrate this.

The budget speech of the finance minister in the Lok Sabha on February 01, 2017, had a separate section titled ‘Transparency in Electoral Funding’. The same day, Arun Jaitley had a customary “media interaction” on the budget in which he said, “These bonds will be bearer in character to keep the donor anonymous”.

The second example comes from a very recent blog by Jaitley, on April 07, 2019, mere three days before the hearing in the Supreme Court was scheduled. The blog tells us that the “principle” behind the electoral bond scheme is “masking the identity link between the party and the donor”.

Given that the ‘anonymity’ of the donor, and ‘masking the identity link between the party and the donor’ are essential features of electoral bonds, it will be impossible to fault political parties if – in the ‘sealed covers’ that they submit to the Election Commission of India, in pursuance of the SC Order of April 12, 2019 – they say that they do not know who has donated the electoral bonds to them. To reiterate, under the provisions of the electoral bonds scheme, as formulated and implemented, political parties are not supposed to know who the donor is.

This is what makes the Supreme Court’s order directing “all the political parties who have received donations through electoral bonds to submit to the Election Commission of India in sealed cover, detailed particulars of the donors as against the each bond; the amount of each such bond and the full particulars of the credit received against each bond, namely, the particulars of the bank account to which the amount has been credited and the date of each such credit”, confusing.

Also Read: Why Jaitley’s Defence of Electoral Bonds Doesn’t Hold Water

It could even be said that if some political parties do end up providing the “detailed particulars of the donors as against each bond,” they might well be in breach of the conditions of the electoral bonds scheme, and may be liable to have some action initiated against them.

With the highest respect to the Supreme Court, what the court should have done was (a) to ask the SBI to provide details of the electoral bonds sold till date, and (b) to ask political parties to provide the details of electoral bonds received by them, including “the amount of each such bond and the full particulars of the credit received against each bond, namely, the particulars of the bank account to which the amount has been credited and the date of each such credit,” part of which they have already asked in the order of April 12, 2019.

What adds to the confusion is the fact that the counsel for the petitioner had specifically requested the court to direct the SBI to declare the details of electoral bonds sold till date, but the court does not “grant a stay of the Electoral Bond Scheme, 2018 notified by the Central Government vide notification dated 02.01.2018.”

It is impossible to predict what political parties will do but two courses of action they have is to either provide the information that the court has asked for – in which case they might be held guilty of violating the provisions of the scheme – or to say to the EC, in sealed covers, that they do not have the information asked for.

In the latter case, it will mean that the case is almost back to square one, as it will have to wait for a month and a half before any progress can be made.

The saving grace is that the petitions have not been dismissed and the importance of the issues raised has been acknowledged by the Supreme Court.

Jagdeep S. Chhokar is a former professor, dean and director-in-charge of IIM, Ahmedabad.