In Din of Strong Words, Has SC Provided a Breather to SBI and Ruling Party?

The Supreme Court executed a hearty rebuke against the State Bank of India (SBI) today for the delay in divulging information regarding electoral bonds, but by issuing a ‘clarification’ that information linking the donor and receiving political party through each bond was not needed, did it provide a breather to the SBI and the ruling political party at the Union level?

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Today, the Supreme Court of India dismissed a plea filed by the State Bank of India (SBI) for an extension to furnish details of electoral bonds as directed under the court’s February 15, 2024 judgment.

In the judgment, the court had held that the 2018 electoral bond scheme was unconstitutional, violative of citizens’ right to know about political funding under Article 19 (which it said trumps the need for donor anonymity) and for being “manifestly arbitrary” under Article 14 of the Constitution of India.

SBI, the issuing bank under the scheme, was directed to immediately stop issuing fresh bonds.

The court had also directed the SBI to supply the Election Commission of India (ECI) with the details of every electoral bond purchased on or after April 12, 2019, the names of the purchaser of the bond, the political party receiving it, the date of encashment and the denomination of the bond by March 6.

The said details were to be published by the ECI on its website by March 13, 2023.

In its February 15 judgment, the court had held that the 2018 electoral bond scheme was unconstitutional, and violative of citizens’ right to know about political funding under Article 19, which it said trumps the need for donor anonymity.

On March 4, 2024, two days before the deadline, the SBI filed an application seeking an extension till June 30 to comply with the directions of the court.

In its application, the bank contended that in order to ensure donor anonymity, the information about the donors and the beneficiary political parties had been stored in separate “silos”, and the procedure to match the information contained in one silo with the information contained in the other silo was complex and would take time.

“It is submitted that donor details were kept in a sealed cover at the designated branches and all such sealed covers were deposited in the main branch of the applicant bank, which is located in Mumbai,” the application read.

The general elections in India are expected to be held in April or May this year, so the SBI application immediately came under attack from critics as an attempt to stall the revelation of details about electoral bonds, in particular, the question of which party had received money from whom, till after the elections.

The Association for Democratic Reforms (ADR), the original petitioner, and the Communist Party of India (Marxist) filed contempt of court petitions against the SBI for not complying with the February 15, 2024 judgment.

In its petition, the ADR asserted that electoral bonds are completely traceable as the SBI maintains a secret number-based record of donors who buy bonds and the political parties to which they donate.

Quoting experts on the software used to store information about the bonds, the ADR petition contended that since each bond has a unique number, a simple query on the database can generate a report in a particular format that does not require manual verification.

The petition also contended that the “sealed envelopes” mentioned in the SBI petition are only physical instruments like cheques, and just like the actual transaction of the cheque being deposited can be easily extracted by generating a software query, the details of the transaction behind an electoral bond are not hard to trace.

Today, the court stopped short of holding the SBI in contempt but dismissed its petition seeking an extension to furnish details of electoral bonds.

The SBI has been asked to furnish the requisite details before 5 p.m. tomorrow.

However, on the urging of the SBI’s counsel senior advocate Harish Salve, the court has clarified that the details to be furnished do not include matching a donation made by a particular donor to the political party receiving it.

What is the electoral bond scheme and why was it held unconstitutional?

The electoral bond scheme was introduced through the Finance Bill, 2017, which brought amendments to the Representation of the People Act, (RPA)1951; Income Tax Act, 1961; the Companies Act, 2013 and the Foreign Contribution (Regulation) Act, (FCRA) 2010.

The scheme was notified by amending Section 31 (issue of demand bills and notes) of the Reserve Bank of India Act, 1934 on January 2, 2018. It allowed individuals and domestic companies to issue electoral bonds in the donimations of ₹1,000; ₹10,000; ₹1 lakh; ₹10 lakh and ₹1 crore to political parties.

On March 4, 2024, two days before the deadline, the SBI filed an application seeking an extension till June 30 to comply with the directions of the court.

The bonds could be redeemed by political parties within 15 days. The scheme provided no cap on the number of bonds that could be purchased by individuals or groups. If a bond is not encashed within 15 days, the scheme provided that the amount shall be deposited by the SBI to the Prime Minister Relief Fund. 

Several petitions were filed challenging the amendments for violating fundamental rights guaranteed under the Constitution of India under Articles 14, 19(1)(a), 21.

The ADR, a non-profit organisation working for electoral and political reforms, was one of the petitioners.

The petitioners argued that the electoral bonds scheme gnaws at the “very root of our democracy.” The respondents defended the scheme stating that it was crucial for “eradicating unclean and black money in elections”.

In the unamended RPA, under Section 29C (declaration of donation received by the political parties), if a political party received contributions in excess of twenty thousand rupees from a single person in a financial year, they were required to report such donations to the ECI.

The 2017 amendment removed the reporting requirements if the contributions were made through electoral bonds.

The electoral bond scheme provided that only those political parties registered under Section 29A of the RPA, and who have secured not less than 1 percent of the votes polled in the last general elections to the House of the People or the legislative assembly shall be eligible to receive the bonds.

Under the Companies Act, contribution to a political party by a corporation could not exceed the ceiling limit of 7.5 percent of the average net profit during the three immediately preceding financial years.

The 2017 amendment removed a proviso under Section 182 (prohibition and restrictions regarding political contributions) of the Companies Act which mandated this requirement.

Another amendment to the Companies Act was a challenge to Section 182(3), whereby earlier the name of the political party to which a donation was made along with the particulars of the amount had to be disclosed.

After the amendment, the name of the political party to which the contribution was made need not be disclosed. Only the total amount of the donation had to be disclosed.

Under the Income Tax Act, 1961, before the amendment, Section 13A provided that any income by way of voluntary contributions to a political party was not included in the total income of an individual in the calculation of the income tax provided that the political party maintained a record of such contributions, including the names and addresses of the persons who made such contributions.

In its petition, the ADR asserted that electoral bonds are completely traceable as the SBI maintains a secret number-based record of donors who buy bonds and the political parties to which they donate.

After the amendment, political parties did not have to record such contributions if they were received in the form of electoral bonds.

Under the FCRA, foreign contributions were prohibited to political parties and public servants. After the amendment, the government had “effectively” allowed foreign donations.

Notably, the ECI had opposed the 2018 electoral bond scheme.

The Supreme Court struck down all the amendments made in the legislation for introducing electoral bonds for being arbitrary. 

It held that the non-disclosure of voluntary political contributions was violative of Article 19(1)(a) of the Indian Constitution. It reasoned that in a democracy, citizens have a right to information which includes the right to know the source of political funding.

The court further held that the right to information could only be restricted based on “reasonable restrictions” provided under Article 19(2). However, the ground of curbing black money, as argued by the defendants, is not “traceable” under Article 19(2).

It also held that unlimited political funding by corporations violates the fundamental right to free and fair elections. Therefore, it is manifestly arbitrary under Article 14.

What are the likely consequences of today’s Order?

Today, Salve, appearing for the SBI, said that the bank will have “no difficulty” in furnishing information about the amount of money received by each political party. He added that the bank will also have no difficulty in furnishing information on which donor had donated how much.

He argued that the only area where the bank will struggle to provide the information is linking the donor to the receiving political party via the donation.

The Bench, particularly the CJI and Justice Khanna, grilled Salve on this last point. They wanted to know how much progress the SBI has made since the February 15 judgment in this regard.

When Salve said that the SBI will file “a detailed affidavit” in this regard, the CJI chastised the counsel for not having made the information available already.

Today, the court stopped short of holding the SBI in contempt but dismissed its petition seeking an extension to furnish details of electoral bonds.

“It should have been disclosed in the application. It is the State Bank of India that is coming to us. We expect a little bit of candour on the part of the State Bank of India, that this is work we have done, this is the stage at which the work is and we need an extension of time to carry out the balance of the exercise,” was the CJI’s rebuke.

To the substance of Salve’s argument, that the information was in two “different silos”, one silo being of the information on donors and the other on the receivers, and the time-consuming process of matching, the court clarified that its February 15, 2024 Order only asks for a “plain disclosure” of information and there is no “matching exercise” that the SBI is supposed to perform.

Therefore, tomorrow’s disclosure will only reveal the names of the donors and the sum of money each of them has donated and the sum of money each political party has received.

However, the ADR has already disclosed the amount of contributions political parties have received through electoral bonds.

Of the ₹12,979.0977 crore-worth electoral bonds purchased, the Bharatiya Janata Party (BJP) has received the lion’s share of ₹6,566.12 crore. This constitutes more than 50 percent. The updated figures from January 2018 to January 2024 were ₹16,518 crore.

When Salve said that the SBI will file “a detailed affidavit” in this regard, the CJI chastised the counsel for not having made the information available already.

The ADR’s data indicates, for instance, that between 2017–18 and 2019–20, recognised political parties received a total of ₹6,201.53 crore through electoral bonds. Of this amount, 67.98 percent or ₹4,215.89 crore was received by a single party, the BJP.

 So essentially, tomorrow’s disclosure will only reveal the names of the donors and the denominations they have purchased. However, without a linkage between the donor and the receiving political party, voters will have to play the guessing game of ‘where does the buck stop?

Arif Ayaz Parrey is Editor, The Leaflet and Gursimran Kaur Bakshi is a staff writer at The Leaflet