New Delhi: The Supreme Court observed Wednesday that it will determine whether “selective anonymity” in the electoral bonds scheme meets the proportionality test under Article 14 (equality before law), which means it will assess whether the procedure adopted for funding of political parties through this mechanism is proportionate to the objective it intends to meet.
A five-judge bench led by Chief Justice of India D.Y. Chandrachud said it did not doubt the “laudable objective” of the scheme, but the “selective anonymity/confidentiality” in it is “leading to an information hole.”
The bench’s observations came while it was hearing a batch of petitions opposing the electoral bond scheme, which was introduced in 2018.
Electoral bonds are financial instruments brought in by the Modi government with the stated aim of cleansing the political-funding system by reducing the influence of black money.
The government says electoral bonds provide a transparent procedure for those who want to contribute to political parties.
Potential donors can buy the bonds in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore from SBI branches and hand them over to a party of their choice. The bonds neither carry the name of the donor nor the recipient, and are purchased and encashed through bank accounts.
Since the SBI comes under the government, critics allege the bonds only offer “selective anonymity”, besides raising other concerns about their potential to aid quid pro quo and corruption.
Wednesday was Day 2 of the hearing on the matter in the Supreme Court. The other members on the bench are justices Sajiv Khanna, B.R. Gavai, J.B. Pardiwala and Manoj Mishra.
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‘Black money menace’
The Modi government defended the scheme in court Wednesday, contending that electoral bonds are one of the several steps it has taken to “weed out black money from politics”.
Solicitor General Tushar Mehta said every nation is grappling with the “black money menace”.
However, the CJI remarked on the potential drawback of the scheme. “What we are now doing is that in the effort to bring in white money in the process, essentially, we are providing for a complete information hole. That is the problem. The motive may be laudable completely. The question is whether you adopted the means which are proportionate or which meets the test of Article 14.”
He said the “problem with the scheme is that it provides for selective anonymity/confidentiality”.
“It’s not completely anonymous. It’s not confidential qua the SBI. It’s not confidential qua the law enforcement agency,” he added.
In that light, he doubted whether a donor would take the risk of buying electoral bonds of a massive value.
“All that the large donor has to do is to disaggregate the donation, get people who will purchase electoral bonds with small amounts which will be then purchased by official banking channels, not through cash”, the CJI said.
Mehta denied the scheme was “opaque or anonymous”, but accepted that it allowed “restricted, limited confidentiality, which can be opened and the veil can be lifted by a judicial decision”.
The electoral bond scheme, he reiterated, was one of the first steps taken to tackle use of black money for political funding. The second step was registration of shell companies. Between 2018 and 2021, the Government of India identified 2,38,223 shell companies and actions were taken. “This is one of the vehicles through which unclean money passes,” Mehta said.
This prompted Justice Gavai to pose a query on concerns that it may be possible that 100 people buy bonds of Rs 1 crore each, and somebody may purchase those Rs 100 crore worth of bonds by paying cash.
Justice Gavai said: “The advantage is that the political party will get the amount in white.”
The CJI added: “What will really happen is this — a large donor will never put his or her head on the line by being in the books of account of the SBI having purchased.”
However, Mehta contended that possible or potential abuse may not be the grounds to view the scheme as unconstitutional. Also, he said, donors were purchasing bonds directly.
Doing away with the confidentiality clause will make the scheme redundant and the old regime — which was “less transparent” — would be back in practice.
The solicitor referred to statistics of income of parties under the old scheme, and said funding of unknown sources increased by “313 percent from Rs 274.13 crore during FY 2004-2005 to Rs 1,130 crore during FY 2014-15”.
But the CJI was not convinced, saying that the court was “not precluding the government from coming out with a transparent scheme or a scheme which has a level playing field”.
He agreed that the government’s effort to ensure less cash component is involved in electoral funding is a work in progress.
“We are completely with you that this is a problem which democratic societies are grappling with. The problem of the scheme is, if it doesn’t provide a level playing field to political parties and if it suffers from opacity as the argument for the other side is. This is not to prevent the legislature or executive from coming out with a scheme which deals with these deficiencies,” the CJI said.
To the solicitor general’s concern that the old political funding scheme allowed for greater scope of misuse because cash payments from unknown sources dominated contributions, the CJI observed: “The malaise is agnostic to political parties whichever side of the political spectrum you are. So, we are not here saying that a political party is holier than the other.
“We have no problem. This figure you have said — we will not say more than that — is of 2004-05 to 2014-15. It still really begs the question in the sense that for us it’s not whether the ruling political party in power presently is going to be beneficiary of that or not. We are testing a question of constitutionality. We take your point that it is part of our political system. Whoever is in power gets the large share of the pie so far as electoral contributions are concerned. We have to deal with this uninfluenced by all this.”
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‘Why most donations to ruling party?’
To the CJI’s query on why the major share of electoral bond funding always went to the ruling party (BJP), Mehta showed data to claim that ruling parties have always got “more contribution” compared to those in Opposition, even in the earlier scheme.
“I wouldn’t be able to hazard a guess but figures say that whoever was ruling party possibly received more,” the solicitor general contended, clarifying that this response is his and not the government’s.
He added that donations were not charity, and were a market-driven phenomenon, where donors make their decisions based on their own interest.
“More powerful the leader, more capable the party, more chances of success — donor feels that he would be more comfortable doing his business,” Mehta said.
Only confidentiality, he added, can address the problem of victimisation. To this, Justice Khanna said: “Victimisation and retribution is normally by the party in power, not by the party in Opposition.”
The CJI added that “retribution is not avoided by the scheme”.
“Under the Companies Act as now modified, 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,” he said.
“So, a company says I have contributed 400 crore this financial year. Now a party, including a party in power, knows how much has come to it in terms of electoral bonds from that company. You also know from the company’s balance sheet how much it has contributed in a macro sense,” he added. “That mis-match is sufficient to know as to how much money has gone to the party in power. So it’s not that the possibility of retribution is avoided from this scheme.”
Justice Khanna pointed to another issue: “There are ways to get the information on donations to the Opposition party,” he said.
“And it is easier for the party in power to get that information. The fear is because of this selective confidentiality, the Opposition party may not know who are your donors. But donors to the Opposition party can be ascertained, at least by the investigative agencies. So, they are put at a disadvantage to question you on your donations whereas their donations can be questioned.”
Mehta sought to differ on this point and said he will explain the scheme in detail to address the issue.
(Edited by Sunanda Ranjan)
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