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Legalising Kickbacks

Joseph Maliakan Joseph Maliakan
06 Nov 2023

Money and muscle power play an important role in Indian elections is well-known. The monies spent on campaigns by candidates in Parliament and Assembly elections are invariably many times more than what is legally permitted by the Election Commission of India.

There have been many attempts by successive governments to cleanse the electoral process including banning of donations by companies to political parties. However, political corruption by all accounts only increased as time went by. 

The Union Government in January 2018 with the aim “to cleanse the system of political funding in the country” and to bring about transparency in election funding introduced a scheme of  Electoral Bonds through which individuals or corporate houses can donate money to political parties anonymously.

The scheme was announced on February 1, 2017 by the then Finance Minister Arun Jaitley in his budget speech as interest-free bearer instruments payable to the bearer on demand, like a promisery note.

The Bonds which are available in denominations of Rs. 1000 to Rs. 1 crore could be purchased from authorised branches of the State Bank of India through KYC compliant accounts during 10-day windows in the months of January, April, July and October.

The Electoral Bonds could only be used to donate to political parties registered under Section 29 A of the Representation of the People Act 1951 which have secured at least one percent of the votes polled in the last general election to the Lok Sabha or Legislative Assembly. The political parties which receive the Electoral Bonds must encash the bonds within 15 days of the receipt of the bonds to fund their election expenses.

Jaitley in his Budget speech had said: “Even 70 years after Indipendance, the country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections ... Political parties continue to receive most of donations which are shown in cash.”

The Finance Minister proposed the bonds to correct this situation and brought the ceiling of anonymous donations  to Rs.2000 from Rs. 20,000. The Foreign Contribution (Regulation) Act,2010, The Representation of People Act, 1951, The Income Tax Act,1961 and the Companies Act, 2013 were amended so that the Electoral Bonds scheme could be implemented.

In 2017, two non-governmental organisations -- Common Cause and Association for Democratic Reforms -- sought a stay on the scheme on the ground that it was introduced as “Money Bill bypassing Rajya Sabha where the ruling coalition would have found it difficult to pass the Bill”.

The petitioners submitted that the scheme will open doors to unlimited donations to political parties specially to those ruling at the Union Government and the State governments by businessmen with black money and even foreign companies.

A three-judge Supreme Court Bench on April 12, 2019 after considering the petitions in an interim order directed political parties receiving electoral Bonds to Submit details of the bonds to the Election Commission of India.

In March 2021 a three-judge Bench headed by the then Chief Justice of India S A Bobde dismissed the prayer by the petitioners to stay the sale of fresh bonds ahead of Assembly elections in Kerala, Tamil Nadu, Puducherry, West Bengal and Assam.

On October 16, 2023 Chief Justice of India D. Y. Chandrachud referred the electoral bond case to a five-judge Bench in view of the importance of the matter and having due regard to the provisions of Article 145 (3) of the Constitution of India.

The bench  headed by the Chief Justice of India and comprising Justices Sanjeev Khanna, B. R. Gavai, J.B. Pandiwala, and Manoj Misra started hearing the matter on October 31. The petitioners have challenged the constitutional validity of the electoral bonds scheme and have also prayed the court to declare all political parties as public offices and bring them under the Right to Information Act and direct all parties to disclose their income and expenditure.

On Sunday, the Attorney General of India R.Venkatramini in a written submission to the Supreme Court said that under the Indian Constitution citizens have no general right to know anything and the citizens’ right to know is subject to reasonable restrictions.

The scheme extends the benefit of confidentiality to the contributor and promotes the contribution of  ‘clean’ money, and it violates no existing rights of the citizens or laws the Attorney General pointed out.

Appearing for a petitioner, Senior Counsel Kapil Sibal told the courts that there are grounds to believe that money is being given through electoral bonds as “kickbacks” for favours extended by those in power. The Electoral Bonds will lead to a very dangerous trend in democracy where the voice of the corporate sector will drown the voice of the citizens, he added.

The nature of the scheme, Sibal argued, protects those who have committed a crime. Under Section 7 of the Prevention of Corruption Act, Sibal said, public servants can be prosecuted for accepting or agreeing to accept gratification for a favour. But under electoral bond scheme you give a donation. No questions are asked. You get a favour. You cannot co-relate the two. As one cannot prosecute, this is a scheme designed to prevent criminals from being prosecuted, he argued.

Advocate Prashant Bhushan, appearing for Association of Democratic Reforms (ADR), said the scheme defeats the people's right to be informed about the source of funding of political parties, which is a fundamental right under Article 19 (1a). Further Bhushan said anonymity promotes corruption and there are sufficient grounds to believe that money is being given through electoral bonds as kickbacks and they have nothing to do with elections.

In fact, on Wednesday, responding to Solicitor General Tushar Mehta's submission on the introduction of the Bill in Parliament, the CJI said “the Finance Minister in his speech says when cash is given, the source of money, the donor and where it is spent is not known. Therefore, at least now it will be known.” 

“Suppose an electoral bond is purchased, the source of the money is not known. The donor is not known. Where it is spent is not known. All these are not known” the CJI said and wondered, “Is it not liable to say that it will give rise to kickbacks or legalising kickbacks.”

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