Violating the law, at least 20 companies bought electoral bonds within 3 years of incorporation: Report

The electoral bonds data show that at least 20 newly incorporated firms bought bonds worth around Rs 103 crore, The Hindu reported.

Companies existing for less than three years are not allowed to make political contributions, even through the electoral bonds route.

When these companies first purchased the bonds, five firms had been in existence for less than a year, seven were a year old, and eight had completed two years, the publication noted.

These firms were reportedly set up in 2019 when the Indian economy was going through a recession, or during the pandemic, which also wasn't a great time economically or otherwise. However, they managed to buy bonds worth crores within months of incorporation.

What does the law say?

The law banning companies from contributing to political parties within three years of incorporation has been around for almost four decades. The Parliament, in 1985, amended Section 293A, lifting the blanket ban on political contributions by firms, but made it subject to some conditions.

The firms should not be government owned, and shouldn't be less than three years old.

This was retained under Section 182 of the Companies Act, 2013, which states "Notwithstanding anything contained in any other provision of this Act, a company, other than a Government company and a company which has been in existence for less than three financial year, may contribute any amount directly or indirectly to any political party".

With the amendment to Section 182 with Section 154 of the Finance Act, 2017, the proviso which capped the amount a company could donate at 7.5 per cent of its average net profit of the previous three financial years, was removed.

Notably, this change came right before the electoral bonds scheme was introduced.

However, the prohibition on companies being able to donate to political parties in the first three years of being incorporated continued.

According to the law, "If a company makes any contribution in contravention of the provisions of this section, the company shall be punishable with fine which may extend to five times the amount so contributed and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months and with fine which may extend to five times the amount so contributed."

When the 7.5 per cent cap was removed in 2017, the Election Commission had warned that it might lead to use of 'black money through shell companies' and the RBI had flagged the chance that firms may misuse bearer bonds for money laundering.

Breakdown of companies

Tsharks Overseas Education Consultancy was incorporated on May 29, 2023, and bought the first electoral bond on July 12 the same year. It bought four bonds (in Rs crore).

Vasavi Avenues LLP was incorporated on April 6, 2023 and bought its first bond on July 12.

Tsharks Infra Developers Private Limited incorporated on March 26, 2023, bought its first bond on July 12 as well.

Bain Global Resources LLP incorporated on May 26, 2023, bought the first bond on October 9 that year, while Kiriti Ventures Private Limited incorporated on May 21, 2022, bought the first bond on April 5, 2023.

Eficens Software Services Private Limited incorporated on November 10, 2021, bought its first bond on January 27, 2023, and Danika Traders Private Limited, incorporated on March 30, 2021, bought its first bond on July 7, 2022.

Askus Logistics Private Limited was incorporated on November 25, 2021, and bought its first bond on April 12, 2023, while Vamsirams Jyothi Lorven was incorporated on October 28, 2021, and made its first bond purchase on April 11, 2023.

SLRV Homes LLP was incorporated on November 26, 2021, and bought its first bond on July 12, 2023, and Happytat Villas Private Limited was incorporated on December 20, 2021, with its first bond purchase coming on November 15, 2023.

Bluestone Commodities LLP incorporated on October 26, 2021, saw its first bond purchase on October 12, 2023, while MTC Ispat Private Limited was incorporated on April 5, 2021, and had its first bond purchase on April 10, 2023. Descent Buildwell LLP was incorporated on March 14, 2019 and bought the first bond on April 9, 2021.

Rajapushpa Asset Management LLP, Piramal Pharma Limited, Akshat Greentech Private Limited, Srivay Industries Limited, Besseggen Infotech LLP, and HH Iron And Steel Private Limited all bought bonds a little after two years of incorporation, as per data analysed by The Hindu.

Twelve of these companies are based out of Hyderabad, while one is based out of Bengaluru. The rest are based out of Coimbatore, Faridabad, Kamrup, Kanpur, Mumbai, Kolkata, and Ranchi.

Breakdown of money

Of the bonds purchased by these companies, BRS encashed bonds worth Rs 31.5 crore, while BJP encashed bonds worth Rs 26 crore.

TMC encashed bonds worth Rs 9.5 crore, and RJD got Rs 9 crore from such encashments.

Congress managed to get Rs 8 crore encashing bonds of such companies, while DMK got Rs 7 crore. TDP got Rs 6 crore, and BJD Rs 5 crroe. AAP got Rs 1 crore encashing bonds bought by such companies, The Hindu reported.