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

The SC has essentially let its interim order become vulnerable to non-compliance by political parties.

New Delhi: Supreme Court’s interim order issued on Friday directing political parties to inform the Election Commission the details of donors and the amount they received through the electoral bonds in a sealed cover is inconsistent with at least two legal provisions, namely, Section 13A (b) of the Income Tax Act and the Proviso to Section 29C of the Representation of the People Act, 1951.

Section 13A of the Income Tax Act, the interim order rightly notes, is a special provision relating to the incomes of political parties. Under this provision, any income of a political party, which is chargeable under the head “income from house property” or “income from other sources”, or any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party.

This is provided that­ (a) such political party keeps and maintains such books of account and other documents as would enable the assessing officer to properly deduce its income therefrom; (b) in respect of each such voluntary contribution other than contribution by way of electoral bond in excess of Rs 20,000, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution.

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

The provision makes it clear that the political party concerned is not expected to “keep and maintain a record of such contribution and the name and address of the person who has made such contribution” if the amount is in excess of Rs 20,000, and by way of electoral bond.

It is not that the bench comprising the Chief Justice of India Ranjan Gogoi and Justices Deepak Gupta and Justice Sanjiv Khanna, is unaware of this provision, as at the very outset of the order, the bench reproduces this provision, and its previous unamended provision which does not exempt contributions through the electoral bond, to make it clear to the readers.

Therefore, it is intriguing how the bench, without staying this amendment, could direct political parties to furnish information about the bonds received by them, when they have been specifically exempted from disclosing this information to the Income Tax department.

The Supreme Court of India. Credit: PTI

The fact that the bench directed political parties to disclose such information in a sealed cover to the EC would not cure this infirmity in its interim order. The bench has ruled that the the sealed covers will remain in the custody of the Election Commission, which will abide by such orders as may be passed by the court.

Obviously, the bench has reserved its right to open the sealed covers and scrutinise their contents, after the declaration of the results of the general elections, to decide whether the information could be shared with others. It is not clear why the bench made the EC the custodian of the sealed covers to be submitted by the political parties, if the EC is not competent to open the sealed covers and inform itself about their contents.

The second infirmity

The second infirmity in the Friday order of the bench is its indifference to the proviso to Section 29C of the RPA, which it duly takes note of in the beginning of the order, but ignores its inconsistency with its own order.

Section 29C which deals with declaration of donations received by a political party, reads:

“The treasurer of a political party or any other person authorized by the political party in this behalf shall, in each financial year, prepare a report in respect of the following, namely: (a) the contribution in excess of twenty thousand rupees received by such political party from any person in that financial year; (b) the contribution in excess of twenty thousand rupees received by such political party from companies other than Government companies in that financial year. Provided that nothing contained in this sub­section shall apply to the contributions received by way of an electoral bond.”

If the political parties were to tell the Supreme Court that the proviso to Section 29C, as amended in 2017, gives them the liberty not to disclose information about the contributions received by way of an electoral bond to the EC, the bench may lack the required justification to question the parties why they did not care to implement the interim order of the Court.

Either way, the Supreme Court’s interim order on Friday directing the political parties to become transparent through their sealed cover reports to the EC on the electoral bonds received by them, flies in the face of two clear legal provisions, which enjoin the political parties not to do so, because contributions through the electoral bonds are considered as a separate class in itself, deserving of special treatment.

Also read: It Is Not a Voter’s Concern Where Political Parties’ Money Comes From, AG Tells SC

If the Supreme Court did not prima facie see merit in these two legal provisions, it could have stayed them, or even struck them down, so that its interim order could survive. But by clearly refusing to grant a stay, as pleaded by the petitioners, on the ground that it did not want to favour one party during the interregnum between the pronouncement of the interim order, and the final one, it let its interim order to become vulnerable to non-compliance by political parties.

Although the Supreme Court has not expressly invoked Article 142 to pass the interim order, the question arises whether the Court could exercise such power at the interim stage impliedly, to

“avoid doing injustice to either of the parties” till the matter is resolved finally.  Article 142 provides that “the Supreme Court, in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it…”

In the matter of providing relief to victims of the Bhopal gas tragedy, the Supreme Court held that “prohibitions or limitations or provisions contained in ordinary laws cannot, ipso facto, act as prohibitions or limitations on the constitutional powers under Article 142.”  In the Supreme Court Bar Association v Union of India, however, the court made it clear that Article 142 could not be used to supplant the existing law, but only to supplement the law. 

If political parties are not expected by the law to maintain a record of the donors and the donations under the Electoral Bonds Scheme, it is inconceivable that the Supreme Court could direct the parties to provide the details  to the Election Commission. If the parties plead helplessness, in the face of the express provisions of the law, the Supreme Court would equally be helpless.   

The practical option before the court would have been to hear the parties at length and pronounce the final judgment during the course of this election, so that the interregnum does not unduly favour the government. Alternatively, the option of directing the State Bank of India’s 29 authorised branches, which operate the scheme, to reveal the details in sealed covers to the Election Commission was open to the court. 

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

As the EC is entrusted with the responsibility of monitoring and preventing illegal donations to political parties, the banks can’t deny such information to it, as there is no law which prevents such disclosure by the banks. The question whether the voter has the right to know the source of funding of the political parties should not have deterred the court from adjudicating the issue immediately, as there are clear legal precedents which would affirm such a right.

Friday’s order also invites the criticism of being ex parte, as the political parties which were directed to divulge information to the EC in sealed covers were not heard, as they were not parties before the court (except the CPI(M), which is one of the petitioners).

On the other hand, Attorney General K.K. Venugopal told the bench that the banks which operate the scheme have the KYC details of the bond buyers, and could share them with investigating agencies if required. The EC, being one of such agencies, could therefore, rightly claim access to this information from the banks operating the scheme.