New Upbades On How SC Refuses To Stay On Electoral Bonds

New Updates On How SC Refuses To Stay On Electoral Bonds

Updated on 25 January, 2020

GS2 Polity
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SC made it clear on a plea filed for an interim stay, that if the Supreme Court had found it unnecessary to stay the electoral bonds scheme (EBS), it may not stay the scheme even now.

Background

  • On April 12 last year, the Supreme Court passed an interim order directing political parties to provide complete information to the ECI in sealed covers on every single donor and contribution received by them to date through electoral bonds. 
  • The April 12 interim order was meant to ensure that the balance was not tilted in anybody’s favor before the May last general elections.
  • However, given the “limited time” available then and “the weighty issues” involved in the matter, it did not stay the operation of the scheme.

Electoral Bonds

  • An electoral bond is a bearer instrument in the manner of a promissory note. It is an interest-free banking instrument.
  •  A citizen or a business entity in India are eligible to purchase (either through cheque or digital payments) the bond in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh and ₹1 crore from specific branches of the State Bank of India.
  • The windows for purchase will open for 10 days each in the months of January, April, July, and October.
  • Only political parties registered under Section 29A of the Representation of the People Act, 1951 that have secured not less than 1 percent of votes polled in the last general election to the House of the People or the Legislative Assembly of the State is eligible to receive such donations.
  • The bonds will be valid for 15 days only and shall not carry the donor's name, although the payee will have to fulfill the KYC (Know Your Customer) norms at the bank. 

Government’s position

  • The scheme is a novel experiment to eradicate black money. 
  • It claimed that the impact of the EBS would be known only after the 2019 Lok Sabha polls. 
  • Given that, it should meanwhile be allowed a free hand to execute its policy and the apex court should not pass any orders in the matter for the present.

ECI Position

  • The ECI has expressed reservations in general, about the legal anonymity of political donors and the parties receiving contributions which in turn hampers transparency in political funding.
  • Particularly, it argued that the said provisions such as the cancellation of the clause that says firms must declare political contributions in their profit and loss accounts would compromise transparency. Because it would facilitate the floating of shell companies for the sole purpose of making political donations sans any business purpose.
  • In addition to it, the amendments to the law on foreign contributions which in a way means unchecked foreign funding of political parties might open the door for foreign influence on India’s policy-making. 
  • It also maintained that the right to vote also meant the right to make an informed choice. It said that knowing the candidate was only “half the exercise”. The voters should also know the source of funding of political parties who prop up these candidates.

All in all, it had recorded its unequivocal position that the EBS would help the use of unaccounted black money for political funding. 

RBI Position

  • The electoral bond scheme in the bearer form bears the potential to increase black money circulation, money laundering, cross-border counterfeiting, and forgery.
  • The issuance of Electoral Bonds as bearer instruments in the manner currently contemplated has the possibility of misuse, through the use of shell companies. This can subject the RBI to a serious reputational risk of facilitating money laundering transactions.
  • Given that the major objective of the EB Scheme is to provide anonymity to persons making a contribution, RBI opined that this can be better achieved if EBs are issued in electronic form (Demat form), with the Reserve Bank as the depository, rather than as a physical scrip.

Issues with EBS

  • Lack of transparency: As it is not known who is giving what to whom and what they are getting in return. Also, only the government, through ministries, has access to this information.
  • Removal of the caps on campaign donations by companies poses a “serious threat to the autonomy of the country, encourage corrupt practices in a democratic setup. It also opens up the possibility of shell companies being brought into existence for routing funds to political parties through electoral bonds.
  • The contribution received by any eligible political party in the form of electoral bonds will not come under the purview of Section 13A of the Income Tax Act, thus exempted from income tax. So, the Black money menace continues to linger.

Contentions in the plea:

  • ADR (Association for Democratic reforms) filed that new facts had come up indicating that the scheme was being frequently opened to allow funds to fill the coffers of the ruling party
  • It reiterated that the court should consider the scheme with a new eye as many novel and disturbing facts had come to the fore since April 12, like
  • Instead of opening the scheme exclusively for the Lok Sabha elections, as envisaged, it had become a mechanism to funnel Benami funds to fuel political parties. 
  • Immediate contention was that the scheme would be opened again now with the Delhi elections scheduled next month.
  • ADR emphasized the objections raised by the Election Commission of India (ECI) and the Reserve Bank of India (RBI) regarding the scheme.
  • It was also argued that as per ECI submission, 95% of the payments through electoral bonds to date had been routed to the ruling party. 

Road Ahead:

The court initially gave four weeks to the ECI to file a reply, however, when argued that it would be too late by then as Delhi elections are around the corner. The court then asked the ECI to file its reply in a fortnight.

It has attracted some dissenting voices which argue that SC is taking a narrow and technical view based on the fact that ECI has already made its case clear. 

Conclusion:

Given the “weighty issues” involved in it, SC must expedite the final hearing of the petitions challenging the scheme. The need of the hour is to look into the issues of unfair advantage to the ruling party, provisions of legal anonymity and overall opacity in the electoral process. SC should assess the adverse impact of it on the democratic set up at the earliest.

Also readElectoral Bonds Worth Rs 5,850 Crore Sold So Far, 70% in 3 Metros

SC Refuses To Stay On Electoral Bonds

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