SC dismisses plea to stay sale of electoral bonds

SC dismisses plea to stay sale of electoral bonds ahead of Assembly polls

The Centre had earlier told the bench that the bonds would be issued from April 1 to April 10

Representative Image. Credit: iStock Photo

The Supreme Court on Friday refused to stay the sale of fresh set of electoral bonds from April 1, amid state Assembly elections in West Bengal, Tamil Nadu, Kerala, Assam and Union Territory Puducherry.

"Since the electoral bonds were allowed to be released in 2018 and 2019 and 2020 without interruption, and sufficient safeguards are there, we do not see any justification to stay the electoral bonds at present," a bench presided over by Chief Justice S A Bobde said.

The bench, also comprising Justices A S Bopanna and V Ramasubramanian dismissed the application filed by advocate Prashant Bhushan on behalf of NGO 'Association of Democratic Reforms' to restrain the authorities from release fresh tranche of bonds.

Also read: Is there a mechanism to check use of Electoral Bonds for illegal purposes, SC asks Centre

The court had on March 24 reserved the order in the case after hearing arguments from all the parties.

Attorney General of India K K Venugopal had then assured the Court that funds received through electoral bonds were white money that could only be issued through cheque and demand draft, and for which Know Your Customer (KYC) norms had to be followed.

He said that the Electoral Bonds scheme will be open from April 1 to 10 after permission was granted by the Election Commission.

Advocate Prashant Bhushan appearing for ADR, had argued that the Governor of the Reserve Bank of India (RBI) has written a letter in which it was stated that the electoral bond scheme was fraught with risk and would impact India's financial system.

He also claimed the RBI raised the apprehension that this would facilitate money laundering through shell company.
 
The Finance Ministry on January 02, 2018 notified the Electoral Bond Scheme, 2018. As per the scheme, an electoral bond is a bond issued in the nature of promissory note, it may be purchased by a person who is a citizen of India or entities incorporated or established in India. The bonds are issued in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakhs and Rs 1 crore. 

The petitioner asked the court to restrain the authorities from further selling of Electoral Bonds during pendency of the petition against its validity. It maintained that the Electoral Bonds Scheme has opened the floodgates to unlimited corporate donations to political parties and anonymous financing by Indian as well as foreign companies, which can have serious repercussions on Indian democracy.

SC rejects charge that bonds are opaque

The Supreme Court on Friday rejected the charge that the scheme of Electoral Bonds, introduced on January 2, 2018, was totally opaque, allowing even foreign firms to pay donations to the political parties for favours.

The bench said the apprehension that foreign corporate houses may buy the bonds and attempt to influence the electoral process in the country, was misconceived as under Clause 3 of the Scheme, the Bonds may be purchased only by a person, who is a citizen of India or a company incorporated or established here.

With regard to a charge of bonds being opaque with no details of donors in public domain, the bench said, "it is not as though the operations under the Scheme are behind iron curtains incapable of being pierced."

The court said since the scheme mandated political parties to file audited statements of accounts and also since the Companies Act requires financial statements of registered companies to be filed with the Registrar of Companies, the purchase as well as encashment of the bonds, happening only through banking channels, is always reflected in documents that eventually come to the public domain.

"All that is required is a little more effort to cull out such information from both sides (purchaser of bond and political party) and do some “match the following," the bench added.

It said despite the fact that the Scheme provided anonymity, it was intended to ensure that everything happened only through banking channels.  

Bhushan claimed the first purchase may be through banking channels, someone may repurchase the bonds from the first buyer by using black money and hand it over to a political party. 

"This contention arises out of ignorance of the scheme. Under Clause 14, the Bonds are not tradable. Moreover, the first buyer will not stand to gain anything out of such sale except losing white money for the black," the bench added.

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