SC Reserves Orders On Petition To Stay Electoral Bonds

SC Reserves Orders On Petition To Stay Electoral Bonds

The Hon’ble SC on 24th March 2021, Wednesday reserved order on an application seeking a stay of release of a fresh set of electoral bonds ahead of the assembly polls in West Bengal, Kerala, Assam, Puducherry, etc. 

The Hon’ble SC bench comprising CJI was hearing an application filed by NGO Association for Democratic Reforms (hereinafter referred to as “ADR”). Notably, the Election Commission of India (hereinafter referred to as “ECI”)opposed the stay of electoral bonds. 

The ECI stated that they are not opposed to electoral bonds, but the board wants more transparency. The issue of transparency can be considered at the final argument stage, and there should be no interim stay, the ECE’s told the SC. 

Necessitating to mention that the petitions were filed in 2017 challenging the provisions of the Finance Act 2017 which covered the way for unidentified electoral bonds. The Finance Act 2017 introduced amendments in the 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. 

Furthermore, the petitioners voiced the apprehension that the amendments to Companies Act 2013 will lead to “private corporate interests taking precedence over the needs and rights of the people of the State in policy considerations”. 

However, after several sessions of hearing held during the run-up to the 2019 Lok Sabha polls, a three judges bench of the SC had directed the political parties to submit the details of donations received to the ECI in a sealed cover. The ECI has already filed a counter affidavit in the present case articulating its concerns about the anonymous nature of bonds. The ECI has described this as a “regressive step as far as transparency of donations is concerned” and called for its withdrawal. Under the 2017 amendment made to Section 29C of the Representation of Peoples Act 1951(RPA), political parties need not report to ECI the donations received through electoral bonds. 

The ECI further said that if donations are not testified, it will not be possible to determine if political parties have taken donations from government companies and foreign sources, which is forbidden under Section 29B of RPA. The amendments made to the Companies Act 2013 were also highlighted by the ECI. The amendment to Section 182 of the Act took away the restraint that contribution can be made only to the extent of 7.5% of net average profit of three preceding financial years, permitting even newly incorporated companies to donate via electoral bonds. “This opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties, with no other business consequence of having disposable profits”. 

It was also stated by the ECI that the amendment to Section 182(3) eliminated the provision that companies should declare their political contributions in their profit and loss accounts. Now, this requirement is diluted to only showing the total expenditure under the head. This would “compromise transparency” and could lead to the “increased use of black money for political funding through shell companies” expressed the ECI. 

ECI furthermore had urged the Ministry to ensure that only profitable companies with a proven track record should be permitted to make political donations. The ECI had informed the Ministry that these amendments will have “serious consequences/influence on the transparency aspect of political finance/funding of political parties”. It has also taken a stand against the amendment to the Foreign Contributions Regulation Act with permitted acceptance of donations from foreign companies with retrospective effect. “This would allow unchecked foreign funding of political parties in India which could lead to Indian policies being influenced by foreign companies”, said the ECI. 

The ECI added that it is recommended that amendments to the RPA Act make reporting compulsory even for cash donations less than the existing limit of Rs.20,000 if the total cash contributions exceed 20 crores or 20 percent of total contributions, whichever is lesser. It further suggested that reports of contributions of political parties should be uploaded to the website of ECI. It had also suggested that anonymous contributions above or equal to Rs.2000 should be prohibited, instead of the present limit of Rs.20,000. But the scheme was executed without paying any attention to the concerns articulated by the poll body. 

The petitions also raise the argument that the scheme was made into effect through amendments made to RP Act, IT Act, and RBI Act through a money bill, the Finance Act. This is alleged to be a colorable exercise of the money bill provision to avoid scrutiny by the Rajya Sabha. 

Furthermore, it was held by the Hon’ble court 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. The name of the donor will not be there in the bond. The bond 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 shall be counted as income by way of voluntary contributions received by an eligible political party, for exemption from Income-tax under Section 13A of the Income Tax Act, 1961. The Centre claims that the schemes will bring in more transparency in political funding. The concealment of the scheme was proposed to protect the privacy of the supporter, stated the centre.