Electoral bonds buyers’ list to be uploaded on EC website by 15 Mar

While striking down the electoral bond scheme as unconstitutional, the Supreme Court on Thursday, 15 February also struck down the controversial changes to the Companies Act, the Income Tax Act, the FCRA, and the RBI Act introduced by the Union government in 2017, once again as unconstitutional.

The SC’s directive to the State Bank of India and the Election Commission of India is also likely to cause much unease to the corporate sector. The court directed SBI to share with the ECI a list of all buyers of electoral bonds since April 2019, amounts paid for the bonds, and the names of political parties which encashed them. It allowed SBI time until 6 March to share the list and directed ECI to put up the list on its website within a week.

Encouraged by the anonymity assured by the scheme and emboldened by the SC dragging its feet for the past seven years on petitions challenging the electoral bond scheme, companies had been withholding the information from not just ECI and the voters, but also from its own shareholders. The disclosure now may well lead to uncomfortable questions.

The disclosure will also show how many loss-making companies bought the bonds and reveal names of possible shell companies and companies with major shareholding by foreigners. It will also reveal if there were shell companies that conducted no legitimate business, but existed solely to funnel money to political parties.

In defence of the scheme, the BJP-led Union government had advanced the argument that since the bonds were traded through banking channels and not for cash, they were ‘clean’.

This is also the refrain among BJP supporters after the SC struck down the scheme as unconstitutional. The scheme may have been faulty and may have required improvement, but should the court have thrown out the baby with the bathwater, they have been wailing. Will we not return to the days of black money funding political parties, secret suitcases, and hawala (illegal money transfer), they wonder in anguish.

The ‘black money’ argument however, as the apex court pointed out, is outweighed by far-reaching and inexplicable changes made by the government through the Finance Act 2017 to remove all restraints on corporate donations and ensure unlimited private donation to political parties.

Before 2017, companies could donate up to 7.5 per cent of their average profit in the preceding three years. They were required to disclose the names of the parties to which contributions were made in their profit and loss accounts. The Finance Act of 2017 removed the ceiling and the requirement, allowing for unlimited funding and no requirement to share information even with shareholders.

The logic drawn was that since individuals donating less than Rs 20,000 to political parties remained largely anonymous, companies donating to political parties could do the same. 

The constitution bench headed by the chief justice of India, however, held that “the ability of a company to influence the electoral process through political contributions is much higher when compared to that of an individual. A company has a much graver influence in the political process, both in terms of the quantum of money contributed to political parties and the purpose of making such contributions… contributions made by companies are purely business transactions made with the intent of securing benefits in return”.

The law was tweaked to allow even loss-making companies to donate to political parties, noted the SC. Why would a government make such a provision and allow losing concerns to divert money for political donations? What would happen if a loss-making concern shut down or declared bankruptcy after making donations to the ruling party?

The government also amended the Foreign Contributions Registration Act (FCRA) in 2017. Under the earlier FCRA, companies that were more than 50 per cent foreign-owned were prohibited from donating to political parties. The amendment removed this 50 per cent threshold, permitting 100 per cent foreign-owned companies to contribute to political parties.

Prior to the amendments by the government, political parties were required to report all contributions over Rs 20,000 (under Section 29C of the RPA) and keep a record of the names and addressed of all such contributors (under Section 13A of the Income Tax Act). Under the government’s amendments, both these reporting requirements were removed in the case of contributions made through electoral bonds.

As former Union minister P. Chidambaram posted on X, “The fact that the BJP cornered nearly 90 per cent of the donations by corporates and high net worth individuals will be exposed now. Let the world know who gave money, when the money was given, and to which party it was given. The people will ask why the money was given to a political party. And the people will draw their own conclusions.”