Some Misgivings on the Electoral Bonds Verdict by Supreme Court

In a landmark unanimous judgment, the Supreme Court on 15 Feb 2024 struck down as “unconstitutional and manifestly arbitrary” the electoral bonds scheme, which provides blanket anonymity to political donors. The top court said the scheme violates the constitutional right to freedom of speech and expression as well as the right to information. This judgment was delivered just ahead of the April-May 2024 Lok Sabha polls. 

Electoral Bonds Scheme

The election funding system called the Electoral Bonds Scheme, was introduced by the Government in 2017 to finance political parties. It allowed individuals and companies to make unlimited and anonymous donations to political parties through certificates bought from the State Bank of India (SBI). Any Indian citizen or organization registered in India can buy these bonds after meeting the KYC norms laid down by the Reserve Bank of India. 

Each provision in the 2018 Electoral Bonds Scheme is designed:

1. to ensure legitimacy in political funding by combating the menace of black money 
2. to ensure complete confidentiality of the donor, and 
3. to bring transparency in transactions. 

ECI's Opposition to Electoral Bonds

Despite the government backing, the Election Commission of India (ECI) had consistently opposed the electoral bond scheme right from its inception in 2017, arguing for more transparency in political funding. The poll panel was the first key governmental body to cite concerns about transparency in political funding. Despite ECI's consistent opposition to the electoral bond scheme the Supreme Court did not take any action on the matter. 

Electoral Bond Donors

Santiago Martin’s firm, Future Gaming and Hotel Services purchased and donated a cumulative sum of ₹1,368 crores in electoral bonds during the period April 12, 2019, to January 24, 2024. Megha Engineering and Infrastructures Limited (MEIL), headquartered in Hyderabad, was second on the list in terms of total donations at ₹966 crore. MEIL group’s Western UP Power Transmission Company Limited also donated ₹220 crore. It was followed by Qwik Supply Chain Private Limited - ₹410 crore, Haldia Energy Limited (₹377 crore), Vedanta Limited (₹375.65 crore), Essel Mining and Industries Limited (₹224.45 crore), Bharti Airtel Limited (₹198 crore) and Keventer Foodpark Infra Ltd. (₹195 crore) and MKJ group of companies ₹192 crore) to round up the top 10 donors in this period.

Image Courtesy: Association for Democratic Reforms (ADR)

Electoral Bond Beneficiaries

As per the Disclosure of Electoral Bonds by ECI,  the BJP was the biggest beneficiary of the electoral bonds scheme, with donations worth over Rs 6,000 crore in the last four years. The All India Trinamool Congress (TMC), was the second largest beneficiary of the scheme while the Congress party came third in terms of the benefits of the electoral bonds scheme. In total, electoral bonds worth over ₹12,155 crore were purchased by donors during this period and more than ₹12,769 crore were encashed by all the parties in the period. 

Debatable Ruling of SC

In an earlier post 'Supreme Court Discards Its Own Judgement' (March 05, 2024) I had pointed out that the Supreme Court should strive to provide 'a stable and predictable legal landscape without creating confusion' and that its judgments should not 'erode public trust in the judiciary'. 

Similarly, the Supreme Court's ruling on the Electoral Bonds Scheme raises five key points for discussion.

• SC's Ruling Broke the Assurance

One of the main provisions of the 2018 Electoral Bonds Scheme was that the Government had ensured the complete confidentiality of the donors. Many donors purchased these Bonds based on the assurance of confidentiality provided by the Government.  But SC broke the assurance given by the Government by forcing SBI and ECI to disclose (i) the complete details of the purchase of the Bonds by the donors and (ii) anonymous donations of the same to political parties. 

One would think that the Supreme Court could have mandated revealing only partial information or limited details about the donors, striking a balance between transparency and privacy concerns.

• SC's Verdict Did Not Serve Justice

ECI had expressed, way back in 2017, that anonymous corporate donations could lead to the increased use of black money for political funding through shell companies. EC says it is not against the electoral bonds but opposed to the principle of anonymity of the bond donor and redeemer. 

Disagreeing with the version of the Central Government, the ECI has told the Supreme Court that the 'Electoral Bonds Scheme' has a serious impact on transparency in political funding. The counter-affidavit filed by the ECI on 27 March 2019 in the Supreme Court in response to the PILs challenging electoral bonds reveals that it had expressed concerns way back in May 2017.

Finally, it took 7 years for the SC to deliver this judgment despite ECI's consistent opposition to the electoral bond scheme right from its inception in 2017. Therefore, if we go by the legal maxim "Justice delayed is justice denied" then we can conclude that SC, by not serving justice promptly, did not serve justice at all. 

• SC's Intention Was Not Met

The Government had declared Electoral Bonds to be a bearer instrument like a Promissory Note and an interest-free banking instrument. That is, the electoral bonds were meant to be bearer bonds in the sense that the bonds may change hands several times before being handed over to a registered political party by the last bearer.

Let us consider one example that does not disclose the complete facts about the EB. 

The electoral bonds data released by the Election Commission, on receipt from the SBI, revealed that the lottery magnate Santiago Martin’s firm, Future Gaming and Hotel Services, is the largest donor to political parties with a cumulative sum of ₹1,368 crore in electoral bonds. Here is where the ₹1368 cr. total donations went:

• TMC ₹542 cr.
• DMK ₹509 cr.
• YSRCP ₹154 cr.
• BJP         ₹100 cr.
• INC         ₹50 cr.

New Hypothesis

This gives the impression that Santiago Martin paid huge amounts to the two political parties of TMC and DMK. However, is it not a possibility that the political parties coerced Santiago Martin by force and threats to purchase the Bonds on their behalf? That is, it is the political parties that used huge amounts of black money to purchase the Bonds and used a company as a shield to suppress the source of money. 

This theory easily answers the question of how two regional parties TMC and DMK, each confined to a single State viz West Bengal and Tamil Nadu, benefitted maximum compared to the pan-India parties like BJP and INC. This hypothesis also answers the question - can companies like Future Gaming generate such huge amounts of black money.

In short, SC's action did not reveal the actual donors and beneficiaries of the Electoral Bonds, the formidable intention that it started with.

• SC's 'Modus Operandi' Was Amateurish

The pattern of behavior that SC employed in executing its business in the matter of the Electoral Bonds scheme gave the impression that its standard operating procedure was not entirely professional. SBI had informed SC that its data on Electoral Bonds purchase and encashment were kept in different forms of storage (digital and paper forms) and in different structures or silos that are not easily relatable. Yet, in repeated hearings, the Supreme Court bulldozed SBI by asking it to reveal "all details" or "everything" about electoral bonds, without clearly saying what exactly "all details" meant. 

This created confusion for the SC judges, agitation among the lawyers representing different parties, and tension in the public (since the proceedings were live-streamed), which were palpable in the courtroom.  If the Court had employed a specialist advisor (amicus curiae) who understands databases, the proceedings would have been more professional and without difficulties. This advisor could explain how SBI had stored data in different forms and tables, how the tables could be linked with unique identifiers (keys), and clarify the consequent effort involved in relating these tables to get the full picture of what SC was looking for.

• SC's Approach Was Not Progressive 

Political parties depend on funds to operate, and without financial resources, they cannot sustain themselves. It's crucial for all parties, especially during the lead-up to general elections, to address the main issue of financing. That is why the Government chose this Electoral Bonds system for financing political parties.

Rather than completely rejecting the Electoral Bonds scheme, the Supreme Court should have intervened to improve any flaws in the system, considering that, unlike certain other nations, India lacks a mechanism for government funding of political parties.

Judges of the Supreme Court can interpret laws with a progressive lens keeping pace with changing social norms while promoting social justice and economic development. 

Conclusion

An independent, progressive, and active judiciary is crucial for a well-functioning democracy. The judiciary acts as an impartial check to ensure everyone, including the government, operates within the law, fostering trust in the government and protecting citizens' rights. The judiciary provides checks and balances by reviewing the actions of the legislature and executive branches and preventing any one branch from becoming too powerful. This helps maintain a healthy balance of power.

These are some ways the judiciary can be a stronger pillar for good governance. A strong judiciary can contribute to better governance. By fulfilling these roles, the judiciary can ensure a just and equitable society for all.