Electoral bonds meant for 'enriching' political parties, carry no spending requirement, no accountability: SC told

A key hearing on a batch of pleas challenging the validity of the electoral bonds scheme for funding political parties commenced in the Supreme Court on Tuesday. Kapil Sibal, representing one of the petitioners, argued that the electoral bonds scheme was only meant to make political parties richer. "I make a donation of Rs 10 crores to a political party through electoral bonds and the political party can give it to a mainstream media channel and say propagate my ideology or give a present to someone," he argued. -- Reports ETV Bharat's Sumit Saxena.

New Delhi:Senior advocate Kapil Sibal Tuesday told the Supreme Court that funding through electoral bonds is not restricted to elections, as there are no spending rules involved in funding of political parties through the electoral bond scheme.

Sibal, representing one of the petitioners, contended before a five-judge constitution bench led by Chief Justice of India D Y Chandrachud citing drawbacks of donations via the electoral bond scheme received by the political parties through the corporate sector.

Sibal said the shareholders put in their money to ensure that the corporation functions within the framework of MoU, and now the power is given through an amendment of this nature allowing shareholders money to be used in a way, which is inconsistent with the MoU. Sibal stressed that the corporate sector isn't the voter, the citizen is the voter.

The Chief Justice observed, "We are not here on the challenge to a law providing corporate donation, that wider issue is not before the court…. and there is an element of quid pro quo the moment you have a corporation...", and added that a large public limited company doesn't give it for charity.

Sibal said through electoral bonds "there is no information for the shareholders regarding how their money is being spent, and this is a serious issue because the shareholder invested in the company, not for purposes of donating to x or y". Sibal said this has nothing to do with electoral bonds "if you ask me and it is a donation to a political party to use the funds as they like".

He argued that the nomenclature suggests that electoral bonds are meant for the purpose of elections, there is nothing in the scheme which connects the donations made to the participation in the electoral process and it is meant for political parties to be enriched. Citing an example, Sibal said" "I make a donation of Rs 10 crores to a political party through electoral bonds and the political party can give it to a mainstream media channel and say propagate my ideology or give a present to someone."

The Chief Justice queried, “There is no spending requirement?” Sibal said “None! You can spend this money anywhere you like… You can build your office. You can set up a whole internet network throughout the country. You can use an advertising campaign - show your face 20 times a day….. see the nexus, the corporate sector gives money to the political party. The corporate sector owns a media house. Just look at the nexus. The political party uses the media house. No question asked”.

Solicitor General Tushar Mehta, representing the Centre, asked Sibal not to bring such instances. Sibal replied that he was not talking about any instance but rather talking about the scheme, and emphasized that the electoral bond scheme should be struck down, as it is arbitrary.

“I can understand the corporate sector being told that we impose a cess like education cess…with that cess you have capital, and capital you distribute in accordance with representation in Lok Sabha, so everyone has the same amount. This isn't that," he said. The bench asked Sibal if "it is money for enriching (political parties), no spending requirement, and no accountability?" To which Sibal said "Yes!"

He further argued that the nature of the scheme protects those who have committed a crime and added that under Section 7 of the Prevention of Corruption Act, one gives money to a public servant and MPs are public servants, and under this Section a person can be prosecuted in anticipation of a favour.

Sibal stressed that "this is a scheme to protect criminals from being prosecuted and this is also true under the Prevention of Money Laundering Act, because a predicate offence has been committed but no proceeds of crime - you'll never get to know -- rather than furthering rule of law, it stymies the law". “You never know who bribed whom, how much was the bribe, what quid pro quo was there - you never get to know”, he said, adding that if it is less than Rs 2000, the payment is cash, if it is more than Rs 20,000 the donors' name would be given but if it is electoral bonds then nothing?

The Chief Justice said: "Suppose A purchases the bond worth Rs 100 crores and A is only the person who is being put up to purchase the bond because A has KYC etc, and A has to only physically hand over the bond to B then B gives to C who will, in turn, give to a political party". The Chief Justice further added: "Now there is no control over the transaction between A and B, so B can trade on that bond for cash or for other considerations. B acquires that bond. B gives to C who hands it to a political party."

“So the person who has satisfied the requirement of the transaction being through normal banking channels is A. But this doesn't obviate the fact that people behind it...all they have to say is that they used authorised banking channels," the CJI remarked.

During the hearing, Justice Khanna observed that election funding is a "complicated issue". “It is not something very simple," Justice Khanna remarked. Advocate Nizam Pasha, representing one of the petitioners, said the electoral bonds scheme is "manifestly arbitrary" and emphasized that "if the security of the state is impacted if a foreign entity invests in the manufacturing sector in India, is it not impacted if Chinese investment is coming into a political party".

The Chief Justice said, “It is a matter of policy. You are saying that a company in China, since China shares a land border, they cannot bid for a contract but your case here is that they may have invested in electoral bonds”.

Justice Sanjiv Khanna said that buying bonds through KYC account holders maintains a curtain of anonymity about the actual donor, and with no questions asked about any quid pro quo. The Chief Justice observed that the source of the donation is anonymised not for the political party, but only for the public.

Sibal and advocate Prashant Bhushan stressed that the scheme promoted corruption. Advocate Shadan Farasat, representing another petitioner, argued that such corporate donations violated the right to conscience, under Article 25, of the shareholders, who may not support the political party which benefited from the contribution.

The bench, also comprising Justices Sanjiv Khanna, B R Gavai, J B Pardiwala, and Manoj Misra, is hearing a clutch of petitions challenging the validity of the Centre's electoral bonds scheme as a source of political funding. The hearing in the matter will continue on Wednesday.

On October 16, the Supreme Court had said that it would refer the challenge to the electoral bonds scheme to at least a five-judge bench of the apex court. Petitions have been filed against the scheme by the Association for Democratic Reforms, Communist Party of India (Marxist), Dr Jaya Thakur (Congress leader), Spandan Biswal, and others.