SC questions selective anonymity in Electoral Bonds scheme; says it is legalising kickback

New Delhi: The Supreme Court on Wednesday questioned selective anonymity in the 2018 Electoral Bonds scheme, introduced for political parties to receive contributions, saying the problem was that it was not open for the general public, but it is not so for the SBI and other investigating agencies.

A five-judge Constitution bench led by CJI D Y Chandrachud also said it is legalising the kickback by giving money to the political party, as opposed to people who are involved. The top court also said that if the government intended to create a level playing field for all political parties, then donations should be given to Election Commission which will distribute on equitable basis.

Examining validity of the scheme, a five-judge bench also said if it is struck down, it would not preclude the government from bringing out a more transparent scheme providing a level playing field.

The Union government led by Solicitor General Tushar Mehta objected to use of terms -- anonymity and opacity -- claiming the scheme is rather confidential. He also said it has been a trend throughout for the ruling party to get a bigger pie in the share of political funds.

He maintained the present scheme is an attempt to ensure clean money coming through banking channels to the political parties. Mehta said that anonymity is required in political donations to ensure that there is no retribution. He compared the scheme with the previous regime when bulk of funds received by political parties were from "unknown sources" as they were not disclosed to reveal sources of contribution below Rs 20,000.

The bench, also comprising Justices Sanjiv Khanna, B R Gavai, J B Pardiwala, and Manoj Misra, said the problem with the scheme is its selective confidentiality.

“It is not confidential qua SBI, it is not confidential qua law enforcement agencies. So, a large donor will never take the risk of buying the electoral bonds for the purpose of tendering to the political party. All the large donor has to do is to disaggregate the donation. Give money to people who will purchase electoral bonds with small amounts which will be purchased through official banking channels and not through cash," the bench said.

“A large donor will never put his or her head on the line by being on the books of account of SBI having purchased….the scheme is capable of selective anonymity, selective confidentiality,” the bench added.

With regard to Mehta’s contention that if the court were to strike down the scheme, then we would revert to the prior situation, the bench said this will not be valid in itself for that reason, “we are not precluding the government from coming with a transparent scheme or a scheme which has a level playing field.”

The bench said the purpose of ensuring the electoral bonds is that the electoral funding rely less on cash component and more on the accountable component.

"It is a work in progress, and the court is completely with Mehta on this, as it is a problem that democratic societies are grappling with," the bench said.

Flagging the problem with the scheme, the bench said it doesn’t provide a level playing field to political parties; and it suffers from opacity as the petitioners’ have argued. The court also felt the earlier scheme failed as it could not get as much white money into the electoral funding as expected.

Referring to the safeguards in the earlier scheme of political parties funding, the bench said a cap on the net profit a company can contribute, a disclosure within a company's own accounts allows shareholders to know that company is funding a political party. “Motive may be perfectly laudable, question is whether you adopted means which are proportional,” the bench asked Mehta.

Mehta said we will have to trust at some stage on someone as the final fiduciary authority and nobody has taken the court through the scheme and how it operates and he intends to do that. Mehta said there is a possibility it may not be a 100 per cent full proof scheme.

The bench said retribution is not avoided by this scheme and under modified Companies Act, a company is not required to disclose to which political party it has contributed but it has to disclose how much it has contributed totally.

“So a company says I have contributed Rs 400 crore this Financial Year. Now the party in power knows how much has come to it in terms of electoral bonds from that company. The party of course knows how much has come from this company into its coffers and from the balance sheet of the company it would be known how much it has contributed in a macro sense….That mismatch is sufficient to know as to how much money has gone to the party in power. It is not that the possibility of retribution is averted by this scheme,” the bench said.

Mehat said suppose, the electoral bonds scheme is not in existence and an individual wants to give a kickback, then kickback has to be by way of cash. The bench agreed with Mehta, who while citing the worst scenario, said through the electoral bonds scheme the amount will come via white money route and also into the official channel.The bench, however, remarked it is legalising the kickback by giving money to the political party.

The electoral bonds scheme was notified on January 2, 2018. It introduced money instruments through which companies and individuals in India can donate to political parties anonymously. The hearing in the matter will continue on Thursday.

NGO Association for Democratic Reforms, Communist Party of India (Marxist), Dr Jaya Thakur (Congress leader), Spandan Biswal, and others challenged its validity by writ petitions.