Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
INTERLOCUTORY APPLICATION NO.183625 OF 2019
AND
INTERLOCUTORY APPLICATION NO.36653 OF 2021
IN
WRIT PETITION (C) NO.880 OF 2017
ASSOCIATION FOR DEMOCRATIC REFORMS
& ANR. …PETITIONER(S)
Versus
UNION OF INDIA & ORS. …RESPONDENT(S)
O R D E R
1. The Association for Democratic Reforms and Common Cause
have joined together and come up with the above Public Interest
Litigation praying for the:
Signature Not Verified
Digitally signed by
Madhu Bala
Date: 2021.03.26
15:46:20 IST
Reason:
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“(a) Issue a writ of declaration or any other appropriate writ
declaring
(i) Section 135 of the Finance Act 2017 and the corresponding
amendment carried out in Section 31 of the Reserve Bank of India
Act, 1934,
(ii) Section 137 of the Finance Act, 2017, and the corresponding
amendment carried out in Section 29C of the Representation of the
People Act, 1951
(iii) Section 11 of the Finance Act, 2017 and the corresponding
amendment carried out in Section 13A, the Income Tax Act, 1961
(iv) Section 154 of the Finance Act, 2017 and the corresponding
amendment carried out in Section 182 of the Companies Act, 2013
and
(v) Section 236 of Finance Act, 2016 and the corresponding
amendment carried out in Section 2(1)(j)(vi) of the Foreign
Regulations Contribution Act, 2010
as being unconstitutional, illegal and void.
(b ) Issue a writ of mandamus or any other appropriate writ
directing that no political parties would accept any donation in
cash.”
2. On 3.10.2017, notice was ordered in the writ petition and the
writ petition was directed to be tagged along with Writ Petition (C)
No.333 of 2015 and Special Leave Petition (C) No.18190 of 2014.
Though Writ Petition (C) No.333 of 2015 was also by the Association
for Democratic Reforms and another person, the reliefs sought
therein were little different. The prayers made in the said writ
petition were for (i) a declaration that all national and regional
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political parties are public authorities under the Right to
Information Act, 2005; (ii) a direction to the Election Commission of
India to collect all information concerning the finances of political
parties; (iii) a direction to all national and regional political parties
to mandatorily disclose complete details about their income,
expenditure, donations and funding as well as full details of the
donors.
3. On 12.4.2019 this Court passed an interim order in common
in Writ Petition (C) Nos.333 of 2015, 880 of 2017 and two other writ
petitions. Paragraphs 11 to 15 of the said interim order read as
follows:
“xxxx xxxx xxxx
11. We have considered the matter including the amendments
in the different statutes brought in by the Finance Act, 2016 and
2017. We have closely examined the stand taken by the
respective parties including what has been stated by the Election
Commission of India in the affidavit filed, details of which have
been setout. All that we would like to state for the present is that
the rival contentions give rise to weighty issues which have a
tremendous bearing on the sanctity of the electoral process in the
country. Such weighty issues would require an in depth hearing
which cannot be concluded and the issues answered within the
limited time that is available before the process of funding
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through the electoral Bonds comes to a closure, as per the
schedule noted earlier.
12. The court, therefore, has to ensure that any interim
arrangement that may be made would not tilt the balance in
favour of either of the parties but that the same ensures adequate
safeguards against the competing claims of the parties which are
yet to be adjudicated.
13. In the above perspective, according to us, the just and
proper interim direction would be to require all the political
parties who have received donations through electoral Bonds to
submit to the Election Commission of India in sealed cover,
detailed particulars of the donors as against the each Bond; the
amount of each such bond and the full particulars of the credit
received against each bond, namely, the particulars of the bank
account to which the amount has been credited and the date of
each such credit.
14. The above details will be furnished forthwith in respect of
Electoral Bonds received by a political party till date. The details
of such other bonds that may be received by such a political
party upto the date fixed for issuing such bonds as per the Note
of the Ministry of finance dated 28.2.2019, i.e. 15.5.2019 will be
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submitted on or before 30 May, 2019. The sealed covers will
remain in the custody of the Election Commission of India and
will abide by such orders as may be passed by the Court.
15. As per Clause 8 of the Electoral Bond Scheme, 2018,
electoral bonds are to be issued for a period of 10 days in the
months of January, April, July and October and additional 30
days is provided during an election year. As per the Schedule
contained in the Note of the finance Ministry dated 28.2.2019,
extracted above, a total period of 45 days has been fixed for
issuing the bonds in the month of March, April and May. This,
we are told, is in addition to the period of 10 days during which
the Bonds were made available in the month of January, 2019.
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In view of Clause 8 of the electoral bond Scheme the days fixed
for issuing the bonds in the month of March and May will
necessary have to be related to the period of 30 days allowed for
an election year. The total period, therefore, allowable for the
month of January (10 days), April (10 days) and 30 days for the
election year would be 50 whereas the Schedule contemplates
issuance of bonds for a total period of 55 days i.e. 45 days plus
10 days of January. A period of 5 days, therefore, have to be
deleted from the Schedule contained in the Note of the Ministry of
Finance dated 28.2.2019. such deletion will be made by the
Ministry of Finance who will be free to decide the days of
deletion/exclusion.”
4. As can be seen from the last line of paragraph 11 of the
aforesaid order, this Court thought fit to make an interim
arrangement as it was not possible to decide all the issues within
the limited time available before the process of funding through
Electoral Bonds came to a closure. At the time when the aforesaid
interim order was passed, the schedule for the issuance of Electoral
Bonds for the months of March, April and May, 2019 had been
announced to be 1.3.2019 to 15.3.2019; 1.4.2019 to
(i) (ii)
20.4.2019; and (iii) 6.5.2019 to 15.5.2019.
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5. Thereafter, the Association for Democratic Reforms filed the
above application I.A. No.183625 of 2019 seeking a stay of the
Electoral Bond Scheme, 2018 notified by the Central Government
vide notification dated 2.1.2018. It is mentioned in paragraph 6 of
this application that after this Court passed the interim order dated
12.4.2019 certain vital documents having a strong bearing on the
case surfaced. However, the above application filed on 29.11.2019
could not be taken up for hearing.
6. Therefore, the writ petitioners have come up with a fresh
application in I.A. No.36653 of 2021 seeking an interim direction to
the respondents not to open any further window for sale of Electoral
Bonds under the Electoral Bond Scheme, 2018 and to prevent the
respondents from any further sale of Electoral Bonds. This
application is filed on the premise that the window for the sale of
fresh bonds is likely to be opened at present on April 1, 2021.
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7. Since the reliefs sought in both the applications, though filed
in a gap of two years, are one and the same, they were taken up
together.
8. At the outset, learned Attorney General submitted that the
copy of the latest application was received only three days ago and
that however he will advance arguments without seeking time for
counter if no fresh material other than those found in I.A.
No.183625 of 2019 is relied upon. This was agreed to.
9. We have heard Shri Prashant Bhushan, learned counsel for
the applicants/writ petitioners, Shri K.K. Venugopal, learned
Attorney General for the Union of India and Shri Rakesh Dwivedi,
learned Senior Counsel appearing for the Election Commission of
India.
10. We should point out at the threshold that there cannot be
repeated applications seeking the same relief, merely because the
interim reliefs sought, relates to something that is to happen at
periodical intervals of time. Under Clause 8(1) of the Electoral
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Bonds Scheme, 2018 the bonds under the Scheme are made
available for purchase, for a period of 10 days each in the months of
January, April, July and October. Therefore, once this Court has
passed an Order on 12.4.2019 directing some interim arrangement,
thereafter applications for the same interim relief cannot be made,
every time the window for the purchase under the Scheme is
opened.
11. Despite the aforesaid normal rule of procedure and practice,
we heard the learned counsel on both sides on the present
applications, due to the seriousness of the issues raised. The main
attack of Shri Prashant Bhushan, to the Electoral Bonds Scheme is
that it allows the donors of political parties to maintain anonymity
which is not healthy for a democracy. Though technically the
Government may be in a position to find out the names of the
donors, as the Scheme operates through the State Bank of India via
banking channels, the members of the public and political parties
not in power, will not be able to find out. Moreover, the amount of
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funds received by a party in power will normally be more, as it will
be reciprocated with favours. The learned counsel also drew our
attention to the various letters written by the Reserve Bank of India
(for short “RBI”) as well as the Election Commission to contend that
they had serious reservations about the Scheme.
12. Opposing the prayer for stay, it is contended by the learned
Attorney General that this Scheme was intended to prevent
unaccounted money having a sway in the elections and that under
the Scheme the donors are obliged to operate only through banking
channels. This, according to the learned Attorney General, curbed
the menace of black money playing a huge part in the elections.
Shri Rakesh Dwivedi, learned Senior Counsel for the Election
Commission of India supported the Scheme.
13. 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. The Electoral Bond Scheme, 2018 was issued by the Central
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Government by a notification dated 2.1.2018 in exercise of the
power conferred by Section 31(3) of the Reserve Bank of India Act,
1934. Before the issue of the said Scheme, there were discussions
in which RBI participated. In their letter dated 4.8.2017 RBI
recommended only certain safeguards. The relevant portion of the
letter of the RBI dated 4.8.2017 reads as follows:
“xxxx xxxx xxxx
We recommend, the following safeguards may be incorporated to
minimize the inherent scope of misuse of such bonds for undesirable
activities.
(a). The EBBs may have a tenor of maximum 15 days.
(b) The EBBs can be purchased for any value in multiples of
Rs.1,000, Rs.10,000 or Rs.100,000.
(c) The purchase of EBBs would be allowed from a fully KYC
compliant bank account of the purchaser.
(d) The EBBs can be redeemed only by way of deposit into the
designated bank account of an eligible political party.
(e) The sale of EBBs will be open for a limited period, may be
twice in a year, for 7 days each.
(f) The EBBs will be issued at RBI, Mumbai only”
14. Even in his letter dated 14.9.2017 the then Governor of RBI
stated that the major objective of the Scheme is to provide
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anonymity and that the same can be achieved if the bonds are
issued in electronic form with RBI as the depository rather than as
a physical scrip. On 27.9.2017 the matter was placed before the
Committee of the Central Board of RBI and the Committee flagged
serious reservations. These reservations, incorporated in the next
letter of the RBI dated 27.9.2017 were read out to us by Shri
Prashant Bhushan, in support of his contention that the Scheme,
as proposed by the Government will not only be seen as facilitating
money laundering, but also projected as intended to enable it.
15. However, paragraph 5 of the same letter dated 27.9.2017 of
the then Governor of RBI to the Finance Minister makes their final
position clear and it reads as follows:
“If the government is aggreable to revisit its stance on issuing EBs in
scrip form, we can discuss the modalities of issuance of EB in
demat form, including the facility for multiple transfers before the
proceeds are eventually credited to a political party’s designated
bank account, and with the Reserve Bank being the sole custodian
of the information of the initial subscriber and the subsequent
transferees. You would kindly appreciate that this would give us
the twin advantage of providing anonymity to the contributor and at
the same time ensuring that consideration for transfers between
persons and entities, before the value of bond is credited to the
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political party, is through bank transfers and not cash or other
means. This will be an enduring reform, consistent with the
government’s digitisation push, which can segue into an even more
transparent process of electoral funding when the system is ready
for it.”
16. Therefore, it is not correct to say that the RBI was opposed to
the Scheme in principle. 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 providing
(i)
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.
17. As a matter of fact, most of the recommendations of the RBI
have been accepted and incorporated in the Scheme. The
following features of the Scheme demonstrate this: (i) only
political parties registered under Section 29A of the
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Representation of the People Act, 1951 and secured not less than
1% of the votes polled in the last general election to the House of
the people or the legislative assembly shall be entitled to receive
the bond; the bond can be encashed by an eligible political
(ii)
party only through a bank account with the authorized bank;
(iii) the extant instructions issued by RBI regarding KYC norms
and the bank’s customer shall apply for the buyers of the bond
and the authorized bank may also call for any additional KYC
document; (iv) the bond shall be valid for 15 days from the date
of issue and no payment will be made to any payee political party
if the bond is deposited after the expiry of the validity period;
(v)
all payments for the issue of the bonds shall be accepted in
Indian rupees, through demand draft or cheque or through
electronic clearance system or direct debit of the buyers’ account;
the bond can be encashed only by depositing the same in the
(vi)
designated bank account of the eligible political party; (vii) the
face value of the bonds shall be counted as income by way of
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voluntary contribution received by an eligible political party for
the purpose of exemption from income tax under Section 13A of
the Income Tax Act, 1961.
18. 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 withheld, 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 nonKYC compliant application or an application not
meeting the requirements of the scheme shall be rejected.
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19. As far as the information to the Election Commission is
concerned, the interim order passed by this Court on 12.4.2019
takes care of the same. In the reply filed by the Election
Commission of India on 3.2.2020 to I.A. No.183625 of 2019, it is
stated by them that the Election Commission of India has received
sealed covers from various political parties (National, State and
registered & unregistered parties). In Annexure C/1, to the reply
filed by the Election Commission of India the Election Commission
has provided a list of the political parties who have filed necessary
details as per the order of this Court dated 12.4.2019. The dates on
which the Election Commission of India received the necessary
information in sealed covers is also indicated in Annexure C/1.
20. In Annexure C/2 to the reply, the Election Commission has
also furnished details of submission of audited annual accounts of
the political parties.
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21. The fact that some of the parties have not yet submitted their
audited annual accounts is a different matter and the same is not
the subject matter of the present applications.
22. 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 fulfill 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. 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
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Bonds will have to necessarily reflect the amount spent by way of
expenditure in the purchase of Electoral Bonds.
23. Under Section 128 (1) of the Companies Act, 2013 every
company shall prepare and keep books of accounts and financial
statement for every financial year. ‘Financial statement’ is defined
under Section 2(40) as follows:
“ 2 .
( 40 ) "financial statement" in relation to a company, includes—
( i ) a balance sheet as at the end of the financial year;
( ii ) a profit and loss account, or in the case of a company
carrying on any activity not for profit, an income and
expenditure account for the financial year;
( iii ) cash flow statement for the financial year;
( iv ) a statement of changes in equity, if applicable ; and
( v ) any explanatory note annexed to, or forming part of, any
document referred to in subclause (i) to subclause (iv):
Provided that the financial statement, with respect to One
Person Company, small company and dormant company,
may not include the cash flow statement;”
24. Under Section 129(1), such financial statements should give a
true and fair view of the state of affairs of the company and comply
with the accounting standards notified under Section 133. These
financial statements are to be placed at every Annual General
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Meeting of the company. Under Section 137, a copy of the financial
statement, along with all the documents duly adopted at the Annual
General Meeting shall be filed with the Registrar of Companies.
25. The financial statements of companies registered under the
Companies Act, 2013 which are filed with the Registrar of
Companies, are accessible online on the website of the Ministry of
Corporate Affairs for anyone. They can also be obtained in physical
form from the Registrar of Companies upon payment of prescribed
fee. 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
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under the Scheme are behind iron curtains incapable of being
pierced.
26. One of the contentions of the petitioners is that though the
first purchase may be through banking channels for a consideration
paid in white money, someone may repurchase the bonds from the
first buyer by using black money and hand it over to a political
party. But this contention arises out of ignorance of the Scheme.
Under Clause 14 of the Scheme, 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.
27. The apprehension that foreign corporate houses may buy the
bonds and attempt to influence the electoral process in the country,
is also misconceived. Under Clause 3 of the Scheme, the Bonds may
be purchased only by a person, who is a citizen of India or
incorporated or established in India.
28. Therefore, in the light of the fact that the Scheme was
introduced on 2.1.2018; that the bonds are released at periodical
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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.
…………....................CJI.
(S. A. Bobde)
....…………....................J.
(A. S. Bopanna)
…..………......................J.
(V. Ramasubramanian)
MARCH 26 , 2021
NEW DELHI
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