Supreme Court to hear election bond case on September 19
The petitions were filed in 2017 challenging provisions of the 2017 finance law that paved the way for anonymous electoral bonds. The Finance Act 2017 introduced amendments in the Reserve Bank of India Act, Companies Act, Income Tax Act, Peoples Representation Act and regulation of foreign contributions to accommodate electoral obligations.
The petitions were filed by the Communist Party of India (Marxist) political party and the NGOs Common Cause and Association for Democratic Reforms (ADR), which challenge the program as “a murky funding system that is not controlled by any authority”. The petitioners expressed concern that the 2013 Companies Act amendments would lead to “private corporate interests taking precedence over the needs and rights of the people of the state in political considerations”.
However, the deal only came to life in March 2019, when most of the election bonds were purchased.
On April 12, 2019, after several court sessions held during the run-up to the 2019 Lok Sabha elections, a panel of three SC judges comprising CJI Ranjan Gogoi, Justice Deepak Gupta and Sanjiv Khanna ordered the political parties to submit the details of the donations received to the ECI in a sealed envelope before May 30.
The Election Commission of India has already filed a counter affidavit in the case expressing concerns about the anonymous nature of the bonds. The ECI called this a “step backwards in terms of transparency of donations” and called for its withdrawal.
Under the 2017 amendment to Section 29C of the Peoples Representation Act 1951 (RPA), political parties are not required to report donations received through bonds to the ECI elections. The ECI described this as a “retrograde step in terms of donation transparency” and called for the amendment to be withdrawn.
The ECI said that if contributions are not declared, it will not be possible to determine whether political parties have received donations from government companies and foreign sources, which is prohibited under Article 29B of the RPA.
Changes to the Companies Act 2013 have also been flagged by the ECI. The amendment to Article 182 of the law removed the restriction that the contribution can only be made up to 7.5% of the average net profit of the previous three years, allowing even newly incorporated companies to make a donation through campaign bonds.
“This opens up the possibility that front companies are created for the sole purpose of donating to political parties, without any other commercial consequence of having disbursable profits,” ECI said.
In addition, the amendment to Article 182(3) removed the provision that companies must declare their political contributions in their profit and loss accounts. Now this requirement is diluted to show only the total expenses under the head. This would “undermine transparency” and could lead to “increased use of black money for political funding through shell companies”, the ECI said.
ECI had urged the ministry to ensure that only profitable businesses with a proven track record were allowed to make political donations.
ECI had informed the ministry that these amendments will have “serious repercussions/impact on the transparency aspect of political financing/political party financing”.
He also took a stand against the amendment to the Foreign Contributions Regulation Act which allows the acceptance of donations from foreign companies with retroactive effect. “This would allow unchecked foreign funding of political parties in India, which could lead to influence of Indian policies by foreign companies,” the ECI said.
The ECI added that it has suggested amendments to the RPA Act to make reporting mandatory even for cash donations below the existing limit of Rs 20,000, if the total cash contributions exceed 20 crores or 20 percent. of the total contributions, whichever is lower. He further suggested that reports on political party contributions be uploaded to the CIS website. He had also suggested that anonymous contributions of Rs.2000 or more should be banned, instead of the current limit of Rs.20,000.
But the scheme was implemented without taking into account the concerns expressed by the polling body.
The petitions also raise the claim that the scheme was brought into force through amendments to the PR Act, the IT Act and the RBI Act through a Finance Bill – the Act of finance. This would be a disguised exercise of the Finance Bills provision to circumvent the scrutiny of the Rajya Sabha.
Bonds can be bought for any value, in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh or Rs 1 crore. The name of the donor will not be there in the link. The deposit will be valid for 15 days from the date of issue, within which time it must be cashed by the beneficiary political party. The face value of the bonds will be treated as income in respect of voluntary contributions received by an eligible political party, for the purposes of exemption from income tax under section 13A of the income tax.
The Center says the programs will bring more transparency in political funding. The system’s anonymity was intended to protect the privacy of the donor, the center said.