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Saturday, April 17, 2021

Safeguards in, no reason to stop sale of poll bonds: Supreme Court

The applications came even as ADR’s writ petition challenging the Electoral Bond Scheme, 2018, is pending before the court.

Written by Ananthakrishnan G | New Delhi |
March 27, 2021 4:13:02 am
The apex court said it is open to the state to recover the cost from officers who were responsible for this “misadventure.”

Countering arguments made by the petitioner regarding their anonymity and potential misuse, the Supreme Court Friday refused to stay the sale of electoral bonds ahead of the Assembly elections that begin on Saturday.

“It is not as though the operations under the Scheme are behind iron curtains incapable of being pierced,” said a bench headed by Chief Justice S A Bobde as it dismissed applications filed by NGOs Association for Democratic Reforms (ADR) and Common Cause.

The applications came even as ADR’s writ petition challenging the Electoral Bond Scheme, 2018, is pending before the court.

The bench, also comprising Justices A S Bopanna and V Ramasubramanian, cited precedent to argue that there was no reason to stop the sale.

“…in the light of the fact that the Scheme was introduced on 2.1. 2018; that the bonds are released at periodical intervals in January, April, July and October of every year; that they had been so released in the years 2018, 2019 and 2020 without any impediment; and that certain safeguards have already been provided by this Court in its interim order dated 12.4.2019, we do not see any justification for the grant of stay at this stage. Hence both the applications for stay are dismissed”, the bench said.

The court’s reference was to its April 2019 interim order by which it directed political parties that received donations through Electoral Bonds, to “forthwith” submit the details of these bonds to the EC. That order, too, had come on the petition filed by ADR in September 2017.

Early this month, both NGOs had approached the court seeking a stay in view of the forthcoming Assembly polls. ADR argued that the identity of the donors could never be known to the public, and also referred to reservations raised by the Reserve Bank of India (RBI) and Election Commission (EC) to the Scheme.

On anonymity, the court said: “Despite the fact that the Scheme provides anonymity, the Scheme is intended to ensure that everything happens only through banking channels. While the identity of the purchaser of the bond is with-held, it is ensured that unidentified/unidentifiable persons cannot purchase the bonds and give it to the political parties. Under Clause 7 of the Scheme, buyers have to apply in the prescribed form, either physically or online disclosing the particulars specified therein. Though the information furnished by the buyer shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, it is subject to one exception namely when demanded by a competent court or upon registration of criminal case by any law enforcement agency. A non-KYC-compliant application or an application not meeting the requirements of the scheme shall be rejected”.

The bench referred to the Election Commission receiving details of contributions through bonds, in pursuance of its April 2019 order, and said: “We do not know at this stage as to how far the allegation that under the Scheme, there would be complete anonymity in the financing of political parties by corporate houses, both in India and abroad, is sustainable.”

“If the purchase of the bonds as well as their encashment could happen only through banking channels and if purchase of bonds are allowed only to customers who fulfil KYC norms, the information about the purchaser will certainly be available with the SBI which alone is authorised to issue and encash the bonds as per the Scheme,” the bench said.

“Moreover, any expenditure incurred by anyone in purchasing the bonds through banking channels, will have to be accounted as an expenditure in his books of accounts. The trial balance, cash flow statement, profit and loss account and balance sheet of companies which purchase Electoral Bonds will have to necessarily reflect the amount spent by way of expenditure in the purchase of Electoral Bonds.”

Also, under Companies Act, 2013, every company is mandated to prepare and keep books of accounts and statements for every financial year and these statements are to be placed at every Annual General Meeting and then filed with the Registrar of Companies which, in turn, is accessible online on the website of the Ministry of Corporate Affairs for anyone or obtained in physical form from the Registrar of Companies upon payment of prescribed fee, said the order.

“Since the Scheme mandates political parties to file audited statement 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”, it added.

“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”. Therefore, it is not as though the operations under the Scheme are behind iron curtains incapable of being pierced”, the court said.

On the objections of the RBI and EC, the court said “it is true, as seen from the correspondence, that RBI has had some reservations. But it is not correct to say that the RBI and the Election Commission of India opposed the Electoral Bond Scheme itself”.

“RBI’s objection was to the issue of bonds in scrip form rather than in demat form. What RBI wanted to achieve was, in their own words, the twin advantage of (i) providing anonymity to the contributor; and (ii) ensuring that consideration for transfers is through banking channels and not cash or other means. In fact, RBI called Electoral Bonds as “an enduring reform, consistent with the Government’s digitization push”. Therefore, the concerns expressed by RBI, to the form and not to the substance, cannot really advance the case of the petitioners”, the court ruled.

“As a matter of fact, most of the recommendations of the RBI have been accepted and incorporated in the Scheme”, added the bench.

The NGO had argued that though the first purchase may be through banking channels for a consideration paid in white money, someone may repurchase the bonds using black money and hand it over to a political party.

The court said “this contention arises out of ignorance of the Scheme” as “Under Clause 14 of the Scheme, the bonds are not tradeable”.

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