Electoral Bonds: The great fraud

That electoral bonds – a legalised route for donors to secretly provide limitless funds to political parties – are principally antithetical to a healthy electoral democracy and fundamentally designed to tilt money power in favour of the governing political party has been proven conclusively.

A six-part series of investigative reportage that this author did for HuffPost India, translated into many languages through a unique regional media collaboration, has put out facts confirming some of the worst fears about the electoral bond scheme which the entire political opposition and most transparency activists and experts of electoral processes have expressed since the scheme was first announced in 2017.

The series was based on government records that transparency activist Commodore (retired) Lokesh Batra brought out using the Right to Information over the last two years. The series was followed by another set of reports that several newspapers published based on RTI responses that transparency activist Anjali Bhardwaj also secured from the government.

The series of stories revealed that the bonds had been launched against the staunch and fundamental concerns of the RBI and the Election Commission. Till date, bonds worth more than Rs 6,000 crore have been sold. The ruling BJP has cornered a majority of the bonds for which data is available in the public domain. To pretend the two had eventually agreed to the bonds, the government lied on its records and then lied repeatedly to Parliament. Prime Minister Narendra Modi’s office later ordered that rules be broken to collect extra funds through bonds prior to state elections when it was only allowed for parliamentary elections. During this illegal sale of bonds, the finance ministry ordered expired bonds worth Rs 10 crore, which some political party had pocketed, to be encashed by the State Bank of India. Through documents obtained by RTI activist Venkatesh Nayak, it eventually also emerged in the investigative series that contrary to the claims of the government from the beginning, no donor had ever asked for a secret route to fund political parties. The revelations were followed by others showing 90% of the electoral bonds were bought in denominations above Rs 1 crore – a clear indicator that only the rich donate to political parties through this secretive route.

Not that we had a very transparent and honest system of electoral funding to begin with. The system held the use of unaccounted money illegal but did so only notionally. In practice, it permitted political parties to fill their coffers with unaccounted cash. But the Narendra Modi government has done one worse. In the name of transparency, the government has instead created a legally sanctioned route to flush politics with unaccounted money not only from within India but also from abroad and for the party in power to harvest most of the fruits of this new dispensation.

After the revelations, Prime Minister Narendra Modi has defended the scheme saying that those opposed to electoral bonds were opposed to transparency. Minister Piyush Goyal, too, has defended the bonds, saying they bring transparency to campaign financing in India.

But perhaps they know that this is not true. For this is not the line of defence the government has drawn in its internal records or before the Supreme Court where public interest litigations (PILs) are being heard since 2017 questioning the legality of electoral bonds. On its records and before the Supreme Court, the BJP government has claimed that secrecy is the ‘core objective’ behind electoral bonds.

Documents reveal that the government has even tried to defend this ‘core objective’ using a spectacularly flawed interpretation of the Constitution. It has claimed that the secrecy of donations made by corporates to political parties through electoral bonds is protected under the fundamental Right to Life under Article 21 of the Constitution.

The Right to Life under Article 21 of the Constitution is meant only to protect the life and liberty of citizens against acts of the government. But the Union finance ministry sought to extend the cover of the fundamental right to corporates against Indian citizens who may ask for information on such secret political donations made via electoral bonds.

This argument was made by the finance ministry mandarins while preparing to defend the Electoral Bonds Scheme in a PIL filed by the Communist Party of India (Marxist) and its general secretary Sitaram Yechuri before the Supreme Court in January 2018. The arguments are recorded in a cache of documents accessed by Cmde (r) Lokesh Batra under the RTI Act.

Internal notes of the ministry show the Department of Economic Affairs (DEA) preparing a response to the concerns its own appointed lawyer had about the secrecy electoral bonds provide to donors.

Ministry officials recorded that its lawyer had stated, “There is a provision of not disclosing the name of the donor making donation to the political party through Electoral Bond. It is the fundamental right of a citizen to know the identity of the donor and the volume of donation.”

Stating this, the lawyer had asked, “How the present system of donation through electoral bond is superior than the earlier one?”

The DEA wrote a response to these queries in its files on March 3, 2019, “The secrecy of donor is the core objective of the scheme of Electoral Bonds to safeguard the donor from political victimisation. However, the records of the purchasers are always available in the banking channel and may be retrieved as and when required by enforcement agencies.”

This internal statement reconfirmed that the secrecy of the donor was always intended to be maintained against everyone else but the government’s enforcement agencies.

Yet, the DEA went on to state, “The purpose is to safeguard the donor against political victimisation ensuring his Right to Life as ensured by Article 21 of the Constitution.”

The Right to Life under the Constitution extends only to individual citizens. How can it be extended to corporate entities, NGOs, trusts, Hindu Undivided Families and other artificial entities created by law only so that they can make secret donations to political parties, especially the ruling party which has so far been the dominant beneficiary of the scheme? And is that Right to Life of secret donors being construed against acts of the government or are they being construed against citizens who might rightfully want to know which corporations and rich individuals are funding political parties?   

Justifying the provisions of secrecy and anonymity for all buyers of electoral bonds, the DEA further said, “The Right to Information is not the absolute right and therefore certain exemptions are given in Section 8(1) of the Right to Information Act, including right to life.”

Again, this exemption is available when the life of an Indian citizen, a human being and not a corporate or an artificial entity created under law, such as a company, is physically under threat.

Provision 8(1) provides circumstances under which the government can deny information under the RTI Act. Sub-section (g) of this provision says information can be withheld if “information, the disclosure of which would endanger the life or physical safety of any person or identify the source of information or assistance given in confidence for law enforcement or security purposes.”

Eventually, this line of argument was dropped in the final counter-affidavit which the finance ministry submitted before the Supreme Court on March 15, 2019.

Before the Supreme Court, the government instead took the argument of protecting the privacy of the donors. In its affidavit it said, “keeping the identity of the buyer of the bonds anonymous is also an extension to his right to vote in secret ballot.”

That, too, is a specious argument because again, it is individual citizens who vote and thus have the right to vote in secret ballot, not corporates, NGOs and trusts which donate money to political parties by electoral bonds.  

The internal records of the finance ministry also show that the Union government tried to coordinate its response in the Supreme Court with the Election Commission. The Commission had steadfastly opposed the electoral bonds scheme from May 2017 onwards. The government could not convince the Election Commission on the legality and desirability of electoral bonds. Eventually, the government ignored the advice of the Election Commission to do away with the bonds, just as it had ignored the RBI’s concerns on the issue.

Now facing a legal challenge to the bonds, on February 16, 2018, then secretary of economic affairs, Subash Chandra Garg, talking of how to prepare a defence, wrote, “Meeting with Election Commission will need to be on the level of EC. I will request for it later.” Starting March 2018, repeated reminders were sent to the Election Commission asking it for inputs to defend electoral bonds in the Supreme Court case. Reminders went out in April and then again June. The Election Commission did not respond with inputs and the finance ministry began preparing a defence along with the Ministry of Law.

Records are not clear if the Election Commission or the commissioners did meet the ministry mandarins in the coming months. But by March 2019, the Election Commission had filed an affidavit in the Supreme Court that ran completely contrary to the Union government’s defence of the bonds. The Election Commission reiterated its views that the bonds in their current shape should be scrapped.

In April 2019, the apex court ordered the Election Commission to collect information from political parties about who had donated what sums to them via electoral bonds so far.

It asked the commission to hold the information secretly. Since then the court has not heard the matter which impacts the very kernel of democratic politics in India. The recent revelations only reinforce how critical this delay in hearings and the final judgement in this case might be to the very nature of democracy India has to live with in the future.

(The writer is a Delhi-based journalist)

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