SC rejects plea to stay sale of electoral bonds ahead of state polls

The Supreme Court Friday dismissed pleas seeking stay on further sale of electoral bonds ahead of assembly elections, saying the scheme was in place since 2018, the bonds were released at periodical intervals without any impediment and safeguards were in place to prevent their misuse.

A bench headed by Chief Justice S A Bobde said it saw no justification to grant stay at this stage and dismissed the two applications moved by NGOs to put on hold any further sale of the electoral bonds ahead of the upcoming assembly elections in Tamil Nadu, West Bengal, Assam, Kerala and Union territory of Puducherry from March 27 to April 29.

"In light of the fact that the (electoral bond) scheme was introduced on January 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 April 12, 2019, we do not see any justification for grant of stay at this stage," the apex court said.

The NGOs -- Association for Democratic Reforms and Common Cause -- had also sought stay on sale of the electoral bonds during the pendency of the PIL filed pertaining to funding of political parties and alleged lack of transparency in their accounts.

The bench, also comprising Justices A S Bopanna and V Ramasubramanian, observed that there may not be complete anonymity in financing of political parties by corporate houses, as apprehended by the NGOs.

It said as the purchase of the bonds and their encashment can only happen through banking channels and only those customers who fulfil KYC norms can engage in such transactions details of which would be with the State Bank of India as it was the sole authority for issuance and encashing of the bonds.

"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," the apex court said in its order.

It further said that the financial statements of companies registered under the Companies Act 2013 are filed with the Registrar of Companies and were accessible online on the website of the Ministry of Corporate Affairs for anyone.

The NGOs had claimed that there was a serious apprehension that any further sale of electoral bonds before the upcoming assembly elections, including in West Bengal and Assam, would further “increase illegal and illicit funding of political parties through shell companies”.

"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.

"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 bench said.

The court also termed as misconceived the apprehension of the NGOs that foreign corporate houses may buy the bonds and attempt to influence the electoral process in the country, saying that under the scheme, the bonds can be purchased only by a person who is a citizen of India or incorporated or established here.

The bench also rejected the NGO's contention that the Reserve Bank of India was opposed to the scheme, saying that the central bank of the country was concerned with the issue of the 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 the 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 petitioner(s)," it said.

The court also said in its order that repeated applications for the same relief cannot be filed merely because the bonds are being issued at periodical intervals of time.

The bench said that under the electoral bonds scheme of 2018 they available for purchase for 10 days each in January, April, July and October and once the apex court put in place an interim arrangement in April 2019, applications for stay of sale of the bonds cannot be moved every time a window is opened for issuing them.

In April 2019, the apex court had passed an interim direction which required all the political parties which received donations through electoral bonds to submit to the Election Commission, in a sealed cover, detailed particulars of the donors, amount, bank account and the date of each such credit.

While reserving its order on the NGOs' applications, the apex court on March 24 had flagged the issue of possible misuse of funds received through electoral bonds by political parties for illegal purposes like terrorism.