Electoral Bonds: SC Declines Immediate Stay on the EB Scheme; Seeks Election Commission Reply Within 2 Weeks
Moneylife Digital Team 20 January 2020
The Supreme Court on Monday refused to grant an immediate stay on the implementation of the electoral bonds (EB) scheme, 2018 ahead of assembly elections in Delhi. A bench headed by Chief Justice SA Bobde and comprising Justice BR Gavai and Justice Surya Kant asked the Election Commission of India (ECI) to file a response within two weeks.
Association for Democratic Reforms and CPI(M) had sought stay on the EB scheme, especially during the ongoing Delhi assembly polls. Appearing for the petitioners, counsel Prashant Bhushan contented that "Initially the scheme was meant only for Lok Sabha elections. But now, every time there is an election, they open it and ruling party gets 1000s of crores."
In 2017, ADR had filed a writ petition challenging provisions of Finance Act, 2017 and Finance Act, 2016, both passed as money bills. It says, "(passing of the Acts as money bill have) opened doors to unlimited political donations, even from foreign companies and thereby legitimising electoral corruption at a huge scale, while at the same time ensuring complete non-transparency in
political funding."  
On 2 January 2018, the ministry of finance had notified the EB scheme. As per the scheme, an electoral bond is a bond issued in the nature of promissory note, it may be purchased by a person who is a citizen of India or entities incorporated or established in India. The bonds are issued in multiples of Rs1,000, Rs10,000, Rs1 lakh, Rs10 lakh and Rs1 crore. These are available at specified branches of SBI and any account holder compliant with know-your-customer (KYC) norms can buy these bonds. Donors can donate the bonds to their party of choice, which can then be encashed by the party's verified account within 15 days. The bond does not carry the name of the buyer or the payee. The political party does not have to disclose who it has received the bond from in its account. Neither does the donor entity have to state to which party it has donated. Also, as per the scheme only eligible political parties with 1% vote share are eligible to buy electoral bonds. 
The plea filed by ADR also stated that the RBI had given repeated warning to the government against electoral bond scheme stating that it has the potential to increase black money circulation, money laundering, cross-border counterfeiting and forgery. This has been revealed in replies received under right to information (RTI) act by transparency activists Commodore Lokesh Batra (Retd) and Anjali Bhardwaj. 
However, concerns raised by the RBI were dismissed by the ministry of finance in a note dated 30 January 2017, which is signed by the revenue secretary and carries signature of Arun Jaitley, the then finance minister. The note procured under RTI states: "It appears to me that the RBI has not understood the proposed mechanism of having pre-paid instruments for the purpose of keeping the identity of the donor secret, while ensuring that donation is made only out of fully tax paid money of a person. Since there will be a time limit for redeeming the pre-paid instruments and since there will be a limitation of redeeming such bonds only in the designated accounts of registered political parties, the fear of such bearer instrument being used as currency is totally unfounded. Also this advice has come quite late at a time when the Finance Bill is already printed. We may, therefore, go ahead with our proposal.”
"Not only were the objections raised by the RBI disregarded, but even the suggestions made to make the scheme less vulnerable to fraud were ignored. The only suggestion which was accepted was regarding restricting the validity of these electoral bearer bonds to 15 days. The documents obtained through the RTI Act show that the central bank never actually gave the government its explicit consent to go ahead with the electoral bond scheme as envisaged. Instead, the government had to resort to using the RBI’s 'indirect approval' as recorded in a hand written noting by secretary (EA) dated 21 November 2017 and also carrying signature of the finance minister," the petition filed by ADR says. 
According to ADR, so far, electoral bonds worth more than Rs6,000 crore have been sold in 12 cycles. Quoting a report from Factly.in, the petition says, so far, a total of Rs3,355.93 crore worth of electoral bonds were sold in the current financial year of 2019-20. This is higher than the whole of the previous financial year which was Rs2,550.78 crore. 
"About 99.7% of the bonds purchased by value are of Rs1 crore and Rs10 lakh denomination as of October 2019. Electoral Bonds with the highest denomination of ?1 Crores form 45.68% of the total number of electoral bonds, their value makes up for 91.76% of the total worth. This is exceedingly high compared to the value of other denominations with the value of Rs10 lakh denominations amounting to 7.95% and Rs1 lakh denominations being only 0.27%. The share of the lower denominations in the total value is negligible," the plea says.
Until the latest window period till October 2019, a total of 12,313 electoral bonds of various denominations were purchased. A major portion of them is the highest value denomination of Rs1 crore (5,624 bonds) followed by the next highest denomination of Rs10 lakh (4,877 bonds). A total of 1,695 bonds of Rs1 lakh denomination were sold in these 12 cycles. Meanwhile, the purchases made for the lower denominations of Rs1,000 and Rs10,000 are only 47 and 70 electoral bonds, respectively. 
The report from Factly.in shows that while Mumbai and Kolkata are the cities where the highest amount of electoral bonds were purchased, it is New Delhi where the largest share of the purchased bonds were redeemed. The total value of electoral bonds redeemed in New Delhi is Rs4,917.51 crore, which make up to nearly 80.5% of the total amount, the report says.
ADR, in its petition submitted that total income through electoral bonds as declared by the political parties who have submitted their audit reports for 2018-19 amounts to just Rs599.07 crore or 23.5% of the total electoral bonds purchased in 2018-19. In other words, it says, "The two national parties together could have cornered more than 70% worth of the bonds in 2018-19. As of November 2019, nearly 76.5% of the electoral bonds purchased during 2018-19, cannot be traced to any specific political party. The delay and noncompliance by political parties defeats the purpose of any such reporting."
Earlier this month, the Central Information Commissioner (CIC) has asked four public authorities – the Reserve Bank of India (RBI); State Bank of India (SBI); the ECI and the Department of Economic Affairs (DEA) to provide names of individuals and entities that wanted to hide their identities in the electoral bond scheme. 
The commission, which is the apex body under the Right to Information (RTI) Act, issued a show cause notice to all four asking as to why penalty should not be imposed on their central public information officers (CIPOs) for not providing information that falls in the ambit of their organisation.
The order is part of a two-year battle fought by well-known RTI activists Venkatesh Nayak, who is a research scholar at the Commonwealth Human Rights Initiative (CHRI) and Cmde Batra. 
4 years ago
Strange.. because granting a stay wouldn't have caused any great harm. Electoral Bonds seem to be nothing short of corporatized corruption. Donors and recipients should be known to all.
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