In contradistinction to debentures, bonds have a longer tenure and are secured. Yet, the now demonetised, as it were, electoral bonds (EB) with its ephemeral (15 days shelf life) character had the audacity to call themselves bonds! Bonds are generally issued by large corporations and municipalities to raise long-term funds carrying attractive interest. They are secured on the assets of the company issuing it or its parent.
Ebs, ushered in by the Narendra Modi government in 2018, have had the mortification of being struck down as unconstitutional by the apex court. They were issued by the State Bank of India (SBI) in the run-up to elections for anyone to buy and present them to any registered political party of the buyer’s choice within 15 days of their purchase. They were neither secured nor carried any interest, which was understandable as it was never posited as an investment tool but a tool for political donation. Come to think of it, SBI didn’t issue them for its own use but for the use of the political parties. Strictly speaking therefore EB had no accoutrement or trappings of a bond whatsoever, so much so that its buyer couldn’t redeem them with SBI but perforce had to donate. Everything happened in a tearing hurry. The donation had to be made almost back-to-back with the purchase so as to enable the donee political party to cash in the bonds within 15 days of their purchase. For, failure to do so meant the SBI handing over the proceeds to the Prime Minister’s National Relief Fund!
EB granted anonymity to both the donor and the donee political party which is the primary reason why they were struck down on February 15 by the Apex Court as being violative of article 19(1) (a) of the Constitution guaranteeing right to information. To be sure, internationally bearer bonds and bearer shares with implications of understated stealth bordering on mutual back scratching aren’t uncommon but in the electoral arena they had a sinister ring. As Chief Justice Chandrachud pointed out, they had the most deleterious potential as being used as an instrument of quid pro quo by donors for a pound of flesh from the ruling dispensation. Indeed, it was a scheme waiting to be struck down. It stank from a distance, and had mala fide written all over it. To be sure, the ruling BJP’s principal the Congress also got a good sliver of the donations through EB but the opposition’s guilt was at best one of acquiescing in the act. After all, BJP was the architect of EB, the law on which was not allowed to be voted in the Rajya Sabha through the expedient of classifying it as money bill. That over the years the upper house of the Parliament has come to be slighted repeatedly through this expedient is of course another story.
Simultaneously the cognate amendments to the Companies Act, 2013 permitting a company to make limitless political donations as against the hitherto limit of 7.5% of the last three years’ average profits and to Income tax Act, 1961 granting 100% deduction of such donations from one’s income were also struck down as unconstitutional by the SC which must be lauded for taking a holistic view of things. The Election Commission had long ago bemoaned the mushrooming growth of political parties in India as an instrument of money laundering sanctified by law. Political parties have a touch-me-not quality with immunity from tax liability. The regime of unfettered political donations both by companies and others with complete tax deductibility beckoned crooks more than ever before. One-man or one-woman political parties mushroomed in its wake to take advantage of this rather licentious money laundering scheme. The Enforcement Directorate obviously never bestirred itself to gun after them.
The only debatable issue in the laudable SC verdict is its retrospectivity insofar as disclosures are concerned. The EC and SBI have been ordained by the SC to collaborate. SBI will have to compile a list of purchasers of the EB and the political parties which cashed them in right from the inception. Thereafter EC will have to put up the information on its website for public consumption. So far so good but will not this facet of the SC verdict open the proverbial Pandora’s box? What if the donors demand refund of the donations on the ground that they gave them on the condition of anonymity? Will it not trigger a fresh wave of litigation ending up before the Supreme Court? While it is true that the doctrine of promissory estoppel doesn’t apply to legislations, the Supreme Court has itself on numerous occasions frowned on retrospective amendments to fiscal laws. There is another criticism of the SC verdict---why didn’t suggest an alternative lest cash donations returned with vengeance and lest there was a vacuum left by EB. This criticism is unfounded as it is not the job of the SC to suggest an alternative. It is for the government of the day to ponder over.
The government’s defence of the EB as being necessary to curb cash donations was both specious and duplicitous. It is a myth that all transactions done through banking channels are clean. If this were so, why did the government in 2016 freeze as many as two lakh banks accounts suspected to be belonging to shell companies floated for money laundering?
The SC however has perhaps unwittingly watered down its own verdict with the 11th March order on the SBI — it needs to furnish only two lists to the EC namely list of purchasers of the bonds and a separate list of political parties encashing them without establishing a one-to-one relationship between each bond, its original buyer and the ultimate beneficiary-political party. Such lists published by the EC on its website would at best fortify and reiterate what is already in the public domain — that the BJP and the Congress had received Rs 6,565 crore and Rs 1,123 crore via bonds respectively between 2019 and 2023. What the SC intended vide its February 15 order was the minutiae of each bond — who bought it and who benefited from it — to know if there was quid pro quo or mutual back-scratching. Sadly, the SC has diluted the rigour of its own order by its March 11 order which the SBI would happily comply with. The political parties especially the BJP would laugh up their sleeves at the unintended reprieve. The donors would heave a sigh of relief that while their names figure in the list of donors, mercifully they have not been linked to a political party. Voters at the end of the day would be bemused and left guessing who gave how much to a political party. The electoral bonds scheme might have been scrapped but its skeletons might well remain buried.
The author is a freelance columnist and writes on economics, business, legal and taxation issues
