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Electoral Bonds Case to be Heard on September 19 by Supreme Court

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Priyanka Singh

Published on: September 16, 2022 at 20:02 IST

In 2017, a petition was filed by the Association for Democratic Reforms (WP(c) 880/2017) which challenged the anonymous electoral bonds scheme. The petition has now been listed on the Advance List published for September 19.

No information is yet available about the bench on the case.

During the tenure of CJI Ramana, no listing was made although promptness was urged in the case by the petitioners.

CJI Ramana had agreed to hear the matter to be heard on 5 April, after it was requested by Senior Advocate Prashant Bhushan, yet the matter went unlisted.

In the last held hearing of the case, in April 2021, the CJI SA Bobde led bench refused to stay the electoral bonds scheme ahead of the assembly election in 5 states, observing that there are sufficient safeguards in the scheme.

The bench observed that the scheme was initiated to ensure that political donations take place through banking channels. Regarding the subject of donor anonymity, the bench iterated about the solution being the matching of information from the records filed before public authorities.

Previously –

The petitions, in 2017, challenged the provisions of the Finance Act 2017 which made it possible for anonymous electoral bonds to exist.

The Finance Act 2017 made amendments to the Reserve Bank of India, Companies Act, Foreign Contributions Regulations Act, Representation of Peoples Act and the Income Tax Act to pave the way for electoral bonds.

The petitions were filed by the political party, the Communist Party of India (Marxist), and NGOs Common Cause and the Association for Democratic Reforms (ADR), which challenge the scheme, calling it “an obscure funding system which is unchecked by any authority.”

The petitioners opposed any amendments being made to the Companies Act, 2018, explaining the consequence to be “private corporate interest taking precedence over the needs and rights of the people of the State in the policy considerations.”

ECI’s Stand –

The Election Commission of India had already filed a counter-affidavit expressing concerns about the nature of such anonymity of bonds, focusing on the lack of transparency it has to offer, and called for its withdrawal.

The ECI cautioned the lack of possibility to ascertain whether the political parties have taken donations from the Govt. companies and foreign sources, if the contributions go unreported. Such transactions are prohibited under Section 29B of the Representations of Peoples Act, 1951.

The amendments made to the Companies Act were also referred to by the ECI, where it marked out that the amendment to the Section 182 of the Act detracted the restriction of contributing only up to 7.5% of net average profit of three preceding financial years, enabling the newly incorporated companies to donate through electoral bonds as well, and quoted,

“Also, the amendment to Section 182(3) abolished 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.”

The ECI informed the Ministry of the “serious repercussions/impact on the transparency aspect of political finance/funding of political parties,” also urging the Ministry to warrant that only the profitable companies with verified track record are permitted to make political donations.

With regards to the amendments to the Foreign Contributions Regulation Act, the ECI took a stand against it, stating the influence that the unchecked foreign funding could bring to Indian policies would be undesirable.

The ECI attached its suggestions to amend the RPA Act to report cash donations compulsorily, even if the amount falls under the existing limit of Rs. 20,000 or exceeding 20 Cr or 20% of the total contributions, whichever is lesser, also suggesting the record of such contributions being uploaded on the ECI website, also suggesting the prohibition of anonymous contribution of above or equal to Rs. 2000 should be prohibited, replacing the current limit of Rs. 20,000.

The Petition –

The above suggestions and red flags were neglected and the scheme was implemented, thus giving birth to the submitted petition.

The petition also raised the contention that the scheme was put into play via amendments to the RPA, IT Act, and RBI Act through a Money Bill i.e., the Finance Act. This is notable exhaustion of the money bill to kill the inspection from Rajya Sabha.

The topic of anonymity was tackled by the Centre stating that the act was to protect identity of the donor, while allowing bonds of any value to be bought in multiples of Rs. 1000, Rs. 10,000, Rs. 1 Lakh, Rs. 10 Lakh or Rs. 1 Crore, while the validity of the bond being up to 15 days from the date of issue and also being counted as income while exempting it from Section 14A of the Income Tax Act, 1961.