Electoral Bonds case: SC grills govt on selective confidentiality, legalising kickbacks

NEW DELHI: The Supreme Court on Tuesday posed several tough questions to Solicitor General Tushar Mehta as it heard the pleas challenging the electoral bonds scheme.

A constitutional bench, headed by CJI D.Y. Chandrachud and comprising Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala, and Manoj Misra, is hearing the case.

The bench posed many questioned SG Mehta based on submissions made by the petitioners against the constitutional validity of the electoral bond scheme.

While raising the issue of selective anonymity, CJI Chandrachud remarked that the scheme is not completely anonymous. He also questioned the SG as to whether there was any statuary obligation on the State Bank of India (SBI) to not reveal the details of the donations made through electoral bonds to the government or any law enforcement agency.

"The problem with the scheme is that it provides selective anonymity. It's not completely anonymous. It's not confidential qua the SBI. It's not confidential qua the law enforcement agency. So a large donor would never take the risk of buying the Electoral Bonds," he said.

The CJI further pointed out that under the scheme, a large donor might disaggregate the donation by getting people who will purchase electoral bonds with small amounts which will be then purchased by official banking channels, not through cash.

"...a large donor will never put his/her head on the line by being in the books of account of the SBI," the CJI observed.

To this, the SG replied that large donors are doing it, and a possible or potential abuse may not perhaps be the ground on which the scheme can be declared unconstitutional.

Mehta maintained the government stance that the scheme was brought in as a deliberate attempt to ensure clean money coming through banking channels to political parties.

"After going through the history, I will attempt to satisfy your lords that each and every word is used very consciously. And what they call anonymity and opacity is confidentiality by design. And why, how, what is the rationale, I will explain, he said.

Taking the court through the shortcomings of the previous regime, SG Mehta further emphasised that if the element of confidentiality goes from the scheme, the scheme goes and we are back to the 2018 regime.

The CJI, however, said that the argument that striking down the current scheme will send us back to the previous situation is not valid as the court is not precluding the government from coming out with a transparent scheme or a scheme with a level playing field.

He also told the SG that as per the other side's arguments, the scheme doesn't provide a level playing field to political parties and suffers from opacity.

The CJI remarked that in an effort to bring white money in the process, "essentially, we're providing for a complete information hole!"

"That is the problem. The motive may be laudable. But the question is have you adopted proportional means?" he asked the SG.

The SG however maintained that confidentiality is important to address the problem of victimisation of the donor. "...anything else other than keeping it confidential will not be able to address the problem of victimisation. And victimisation incentivises payment in cash."

At this, Justice Khanna pointed out that victimisation and retribution is normally by a party in power, not by a party in opposition.

"So the figures which you're saying - that maximum donations are to party in power- may not be logically flowing from the argument," he said.

Justice Khanna also raised concern on the issue of selective confidentiality saying that it may be easier for the party in power to get information on donors of the opposition party.

"Because of this selective confidentiality, the opposition party may not know who are your donors. But donors to the opposition party can be ascertained, at least by the investigative agencies. So they're at a disadvantage to question you on your donations."

To this, Mehta replied that they have to trust, at some stage, someone as the final fiduciary authority. He further asserted that he can show the court through the scheme that nobody can get to know including the Centre.

However, the CJI replied that retribution is not avoided by the scheme. "Under the Companies Act, now modified, a company doesn't have to disclose to which political party it has contributed. But it has to show how much it has contributed...So a company says I've contributed Rs 400 cr this FY. But the party in power knows how much has come to it in terms of electoral bonds from that company."

As the SG said: "It can never be known", the CJI said: "No, the party of course knows."

CJI Chandrachud noted that if a party ABC knows how much donations it has received from a company, it can always add up from the company's balance sheet that how much money has been donated in total.

And thus this mismatch might be sufficient to know.

"For us, it is not whether the ruling political party presently will be the beneficiary or not. We are testing a question of constitutionality," the CJI said.

Raising the problem of aggregators, he said that the person who buys the bond may not be the donor, and how will be the source, the donor and where the money is spent will be known?

SG Mehta however said that out of 100, 5 people may misuse the scheme. But it can't be the grounds to decide the validity of the scheme.

However, the CJI maintained that the bench is not on the question of misuse, but on what the scheme is capable of.

Mehta argued that the scheme says that only someone who is KYC-compliant can buy an electoral bond. He emphasised that the scheme ensures that money that is coming in is clean money which was not possible with cash in the earlier regime.

At this, the CJI said: "Your case is that this is the political system whether you like it or not. We're at least trying to improve it. The fact that we succeed or not doesn't reach out to the constitutional validity of it."

The SG responsed: "If this scheme didn't come, I had to pay kickback. I will pay the kickback by way of cash. Even considering the case to be worst case, the amount will now come in white money in channels."

The bench, however, continued to question the SG on the issue of legalising kickbacks by this scheme.

Earlier in the day, the petitioners concluded their arguments challenging the scheme, arguing that the electoral bonds violates the citizen's fundamental right to information under Article 19 (1); enables backdoor lobbying and quid pro quo, is an opaque instrument that is not entirely anonymous, promotes corruption and eliminates level playing field for political parties in opposition, and is unfair to shareholder of the companies.

The hearing will continue hearing on Thursday.