A five-judge Constitution Bench of the Supreme Court of India is hearing a batch of petitions challenging the legal validity of the electoral bonds scheme which facilitates anonymous donations to political parties.The matter is being heard by Chief Justice of India (CJI) DY Chandrachud along with Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra.An electoral bond is an instrument in the nature of a promissory note or bearer bond which can be purchased by any individual, company, firm or association of persons provided the person or body is a citizen of India or incorporated or established in India.The bonds, which are in multiple denominations, are issued specifically for the purpose of contributing funds to political parties in its existing scheme.Electoral bonds were introduced through the Finance Act, 2017, which in turn amended three other statutes - the RBI Act, the Income Tax Act and the Representation of People Act - to enable the introduction of such bonds.The 2017 Finance Act introduced a system by which electoral bonds could be issued by any scheduled bank for the purpose of electoral funding.The Finance Act was passed as a money bill, which meant that it did not require the assent of the Rajya Sabha.Various petitions were filed before the top court challenging at least five amendments made to different statutes through the Finance Act, 2017 on the ground that they have opened doors to unlimited, unchecked funding of political parties.The petitions have also raised the ground that the Finance Act could not have been passed as a money bill.The Central government in its counter-affidavit has maintained that the electoral bonds scheme is transparent.In March 2021, the Court dismissed an application seeking a stay on the scheme.On October 16, the Supreme Court had decided to refer the matter to a Constitution Bench, in view of a legal issue involved relating to the passage of laws as money bills.During the first day of the hearing on Tuesday, the top court remarked that anonymity behind political donations under the Electoral Bonds Scheme could perhaps be aimed at preventing repercussions from parties to which a person or entity has not made donations.The top court yesterday questioned whether the electoral bonds scheme presents a disadvantage for opposition parties since ruling political parties may have ways to unearth confidential information about donors who contribute funds to opposition parties.Live updates from the hearing today feature here. .[Watch the hearing LIVE:].Bench assembles. Hearing begins. Solicitor General Tushar Mehta making submissions..Justice Sanjiv Khanna: I was reading some articles.. very interesting one...How the electoral trust scheme came into force...In fact, in 1996, a corporate group with more than ₹ 100 crores had set up an electoral trust and the money from all the group companies would come to the trust and then they (trust) would distribute it and give it to different parties. The idea was that nobody knows which company has given the money. But what happened was - 2013 scheme of the Election Commission made it mandatory to disclose which company has directed to give the payment. That scheme virtually failed because of that. It had a contrary ... That's the summary's point of view. I am not saying that's the right or wrong point of view.SG Tushar Mehta: The Trust scheme still continues. "Trust" is a misnomer, it's a Section 25 company. But nothing turns on that, nomenclature is "Trust.".SG: But one fact we inadvertently admit - the moment the question of disclosure of the donor comes, the scheme fails, as it failed in Trust. That is the disincentive. The incentive factor for paying by cash is secrecy - the confidentiality. "Secrecy" and "anonymity" is the negative connotation. I am using the expression, "confidentiality. .SG: I have very seriously bound to consider the concerns that your Lordships have shown as custodian of fundamental rights of the citizens. and the government is proud about it, that your Lordships are concerned. But I have some solutions to offer so that those concerns also can be addressed. Your lordships would find the bona fides of the government, we really do not want to know who has donated to whom, or what amount. Let the confidentiality remain complete....Your lordships would find the bona fides of the government, we really do not want to know who has donated to whom.Solicitor General Tushar Mehta.CJI: But that, Mr. Solicitor, you know anyway who has donated what amount. The moment an electoral bond is tendered to a party by a constituent, the party knows it.SG: What the donor doesn't want is, the other party should not know. Kindly appreciate the example, which may be comfortable to Mr. Sibal, on the lighter side. Suppose as a contractor, I donate to, say, Congress party. I don't want the BJP to know because it might form a government in the next election. Senior Advocate Kapil Sibal: My learned friend has forgotten, I am not in the Congress party (anymore).SG: You appear for a Congress person from Madhya Pradesh, and therefore I am saying.Sibal: Maybe so. You are appearing for a government, you are not party of that party (BJP).SG: Absolutely not. Sibal: So I am also not part of the Congress. That example I thought was (baseless) ... (laughs)SG: My learned friend's client is a leader of the Congress party in Madhya Pradesh. Therefore, I am giving the example. A contractor who wants to donate to Congress might have an apprehension that BJP might continue to be in power or vice versa. That if he gives to ruling party in Madhya Pradesh, he might have an element of fear that Congress might form government. That confidentiality, the donor wants to ensure. That is not for me to judge. That is for lawmakers to judge and they felt this is the most incentivised way of black money generation and payment in the political process..Justice Gavai: But voter's right, as Justice Chagla has pointed out long years back?SG: That is a wider choice, that would be separate debate. Voter's right is to know what party gets what information ... Purity of elections is supreme over right to know. Voter votes not based on which party is funded by whom. Voter votes based on ideology, principles, leadership, efficiency of the party and whether this party is giving a sufficiently good environment to secure my investment. It is not always quid pro quo. As a businessman, (I may find) whenever a party forms a government there is red tapism, interference by government etc... I would like a government (that gives a business friendly environment instead)..Purity of elections is supreme over right to know. Voter votes not based on which party is funded by whom.Solicitor General Tushar Mehta.SG: From one or two suggestions I will make, your lordships' conscience would be satisfied... that ruling party should not know any of the details that others are not knowing. CJI: Is it your contention that under this scheme, the ruling party does not know who its donors are?SG: No. Every party knows who their respective donors are. Confidentiality is from other party. If I donate to Congress, the Congress knows Tushar Mehta has donated. My worry is, BJP should not know so that I don't get victimised. That's the purpose of confidentiality. .Justice Khanna: Tushar Mehta, why not make everything open?SG: Then the purpose is defeated.Justice Khanna: As it is, everybody knows about it (donor details). Party knows about it ... only person who is being deprived is the voter. Your contention that the voter does not have a right to know about it... is slightly difficult... SG: Then we have to go back to earlier policy. CJI: It's not like that. There are three or four considerations. One, the need to reduce the cash element in the electoral process. Second, the need to encourage the use of authorised banking channels. Third is incentivising the use of banking channels, which should therefore result in greater confidentiality. But there is a fourth consideration, which is the need for transparency. And a fifth consideration, which is that this should not become a legitimisation of kickbacks or quid pro quo between the power centres, whether in the State or the Centre, and the people who are really in that sense who are benefactors or supplicants. .CJI: Of course the balance has to be drawn by the legislature and the executive, and not by us (judiciary). We are quite conscious of that. But, it's not, therefore an "either/or" - that either we go by this or go back to a cash system. You can design another system which does not have the flaws of this system, which really puts a premium on opacity. You can still devise a system which balances out in a proportional way. How it is to be done is for you to decide. We will not step into this arena..You can design another system which does not have the flaws of this system, which really puts a premium on opacity.CJI Chandrachud.CJI (on removing cap on corporate donations): Now what have we done? Now we say, it has nothing to do with whether you have net profits or not. In other words, the company may have zero profits, it may have zero turnover, but it gets certain revenue only for the purpose of the donation.SG: I will immediately say, and your Lordships may clarify. So far as the condition with regard to the 'profit making' company, that percentage of net profit, a non profit making company cannot do it. I understand. Because then it would be used a shell company. We have removed 2.3 lakh shell companies from the system..CJI: So what will you do then? You will bring an amendment to the Companies Act?CJI: Is the government making a statement that the Companies Act to bring back the position what it was, that this will be only a percentage of net profits?SG: No, no.. I am saying only profit making company can donate.. CJI: But if a company shows it has one rupee profit, if you don't have a percentage, why would a company - for what conceivable reason would a company - donate 100 percent of its profits? That's why I gave you the example, that a ₹1 company passes the threshold that 'I am a profit making company.' I have a ₹1 profit so I will donate ₹100 crores, why would a company do that? ... The reason why these caps were introduced and stood the test of time was for a very legitimate reason, namely - you're a company, your purpose is to carry out business. Your purpose is not to donate to political parties. And if your purpose is not to donate to political parties, you must only donate a small proportion, assuming that it's an altruistic model - which is not so, but we are not going into it. .If a company shows it has one rupee profit, why would a company - for what conceivable reason would a company - donate 100 percent of its profits?CJI Chandrachud.CJI: We do not want to go back to a cash only system. All that we are saying do it in a proportionate, tailor made system which takes care of the serious deficiencies of this electoral bond system..All that we are saying do it in a proportionate, tailor made system which takes care of the serious deficiencies of electoral bond system.CJI Chandrachud.Justice Khanna: There are two conflicting rights. One is confidentiality and one is kickbacks or quid pro quo.. SG: I would earnestly urge, dealing with a subject that is bothering everyone. To start with a presumption that every contribution should necessarily be a part of corruption would perhaps be a wrong way to look at it. In some cases, it may be quid pro quo. But experience has suggested that in most cases, whoever donates, they donate depending on which government they want. .SG on the electoral bonds policy: A person being an individual can buy bonds, either singly or jointly with other individuals. Only the political parties registered under section 29A of the Representation of the People Act, 1951 (43 of 1951) and secured not less than one per cent of the votes polled in the last general election to the House of the People or the Legislative Assembly, as the case may be, shall be eligible to receive the bond. The bond shall be encashed by an eligible political party only through a bank account with the authorised bank.SG: So this is because this provision ensures that the ghost political parties which exist on only paper solely for the purposes of tax evasion are barred from seeking/receiving any political funding..SG: If anyone tries to breach into the confidentiality, it leaves its footprints, and will not go unpunished. As a law officer, I spoke to the chairman of the State Bank of India. I have a letter signed by him saying three things: (a) except for the contingency contemplated in Section 7 (4), that is the court's order, no body can get, even ruling party or the central government, will not to know (confidential information)..If anyone tries to breach into the confidentiality, it leaves its footprints, and will not go unpunished.Solicitor General Tushar Mehta.SG Mehta reads letter by Chairman of SBI that the bank has a foolproof mechanism for maintaining complete secrecy of purchaser of electoral bond and also the political party which deposits the bond, that this information cannot be shared with anyone including the Central government. .CJI: This is not a scheme only for elections.SG: No, this is also for running the party. I am not feeling shy of saying that, this is party of the scheme. My learned friend is saying "hah!" as if he trapped me into it. I am saying it consciously. Sibal: Milords, I am an independent member of Parliament, I don't know why you are associating me with a party (Congress). Don't victimise me by my history.SG (laughs): Let's not get into itAdvocate Shadan Farasat (in lighter vein): He (Sibal) is not entitled to get an electoral bond under the scheme. He does not have 1% of national vote share. .SG on validity of bond under the electoral bonds scheme: (1) The bond shall be valid for fifteen days from the date of issue and no payment shall be made to any payee political party if the bond is deposited after expiry of the validity period. (2) The bond deposited by any political party to its account shall be credited on the same day.SG: In order to ensure that the bonds are not used as parallel currency, the limited time period also ensures that possibility of quid pro quo in minimised as the bond would have to be honoured within the time limit otherwise the same would expire..SG: Level playing field can only be there when all parties have similar kind of trust and faith ... It is not as if I go and deposit some amount in the bank and someone calls the bank and gets to know Tushar Mehta has deposited it ... It cannot be that simple when we are ensuring confidentiality and confidentiality is the heart and soul of the scheme! ... How we maintain secrecy cannot be a public debate. By definition, it has to be confidential..SG: Statutory amendments have been done so that the scheme operates and it can be implemented. CJI: Why was it necessary to amend the RBI act to bring the scheme ? To understand the legal point...SG: With a view to empower the Central government to come out with this scheme...SG: If I go and buy a bond of 1 crores.. it will only show a bond of 1 crore bought.. the only person who would temporarily come to know would be the cashier when I go with my KYC documents. CJI: Issuing bank will have all the data? SG: No, the only person who first knows my name is the person to whom KYC is given. Then KYC is sealed. Sealed cover is maintained elsewhere. .SG: This court devised informational privacy in KS Puttuswamy judgment and was examining two competent interests, that is the right to know and informational privacy. Your lordships have accepted informational privacy to be a fundamental right. If I am the person donating and if your Lordships' conscience is satisfied that the system is in public interest, your Lordships can accept my right to informational privacy as against public's general right to know. .SG: If there is genuine public interest in disclosure, you go to court, but merely for your curiosity, you cannot invade someone's privacy if that privacy serves larger public interest. .SG: There can be no system ever that is so foolproof that it cannot be ever misused. Every system can be misused. (Refers to the Shirur Mutt case, reads observations that merely because power or a law may be abused, it is not by itself grounds to strike down that power or law) .SG: Average Indian voter - whether he is from corporate background or an illiterate voter - we should accept and be proud of that fact - is a very intelligent decision maker. A ruling party in 2013, though ruling party, may not get maximum political contribution because the voter knows that the win is somewhere is. You have to trust his discretion. SG: So ruling party is not getting maximum because of the scheme. That's my scheme. Court: According to you, even otherwise, the ruling party would get (maximum donations)?SG: Always! Even before this scheme, I have shown, from 2005-2014 - whoever was ruling party, BJD, which is a ruling party in one State which is Orissa - they have maximum political contributions. That's the trend. That is how the people of India contribute. It is not as if because of the scheme the ruling party is getting any benefit and there is no level playing field. .Average Indian voter is a very intelligent decision maker. A ruling party in 2013, though ruling party, may not get maximum political contribution because the voter knows that the win is somewhere is.Solicitor General Tushar Mehta.SG: Secrecy, per se, is not antithetical to free and fair elections. Sometimes, it enhances free and fair elections, like, in my respectful submission, the present case. .Secrecy, per se, is not antithetical to free and fair elections.Solicitor General Tushar Mehta.SG: Legislature has a right of trial and error. This was accepted by our court. Recently, when IBC was challenged, there were several issues in IBC. There were several lacunae pointed out in IBC. But the Court said that the freeplay in the joints will have to be given, even trial and error, unless it is so abhorrently, atrociously arbitrary that it can never satisfy the court's conscience, the court would defer to the wisdom of the legislative action ... We have (also) quoted your Lordships' judgment in the demonetisation judgment..Advocate Kanu Agrawal gives court details of pre and post electoral bonds figures. .Legislature has a right of trial and error.Solicitor General Tushar Mehta.Attorney General (AG) for India R Venkataramani begins submissions..AG: I will address on Constitutional issues. It is stated that this scheme violates basic structure of the constitution and violates articles 14,19 and 21 of the Constitution. Such broad sweeping arguments need close examination..Attorney General R Venkataramani: This scheme at hand is not concerned with political contributions per se. We are not into the debate of purer system or not... .Hearing to resume at 2 PM..Hearing resumes. .SG Tushar Mehta: SBI officers are here on my request... The bench can ask them (about measures to ensure confidentiality of donor data) in chambers.. CJI DY Chandrachud: I do not think we can do that.. we have to ask other side also.. I got it that there are coding etc. required also.. SG: Else they can leave. CJI: Yes, we wont be hearing them..Attorney General: Anything that has a bearing on a citizen's expression of participation in democracy is an important value ... The other value which the scheme seeks to promote is confidentiality of the contributors, which is an enabling part of the scheme itself. It doesn't make a difference between corporate contributor or any other contributor. .The scheme seeks to promote confidentiality of contributors. It doesn't make a difference between corporate contributor or any other contributorAttorney General R Venkataramani.AG: The more important value that the learned Solicitor pointed out - moving away from a cash, black money, unknown sources scheme - this is a relatively regulated scheme, which serves the public interest of taking the first, second or third step - whatever one may call - towards ensuring a greater credibility in the funding process. .AG: The question of whether a there is a nexus or a quid pro quo, have an influence that is hostile or adverse to fundamental rights of democracy is a different issue altogether. That issue, in my understanding, which may go into a political party funding equality of opportunity, or whether there should be no political party funding at all - these are all larger debates. .AG: All those concerns, in my understanding, would require an analysis and evaluation which brings in new norms for consideration and acceptance by the community and through Parliamentary debates. Therefore, I don't think that aspect would probably be even invoked for the purpose of looking into the three values which are (apparently) in competition in the scheme - the public interest value, the confidentiality of the contributor's value and the citizens need to know the information regarding who contributes to whom. .AG: Like any reporting, the Bar and Bench report says the Attorney says, citizens do not have a right to know (laughs). I don't know where I said it in my submissions, let me read it. .Electoral Bonds: Attorney General tells Supreme Court citizens don't have right to know about funding of political parties.AG: We are talking about moving from an unregulated system to a regulated system. .CJI: We have read the submissions.. do you want to highlight something in particular? AG: Just will just take the bench through the notes.. This is all by a common thread of confidentiality... .Justice BR Gavai: We have carefully gone through your written submissions.AG: As I read a couple of them, I want to make some explanations about them..AG reads through written submissions.CJI: Your last point is that, when the Court proceeds to declare an aspect as part of a right, it will be in tune with the separation of powers but the subject of reviewing or testing a law should be relegated to public and parliamentary debates. Declaring an aspect as a part of a declared right does not impinge on the separation of powers. For instance, we have said that sexual orientation is implicit in Article 15. That does not impinge on separation of powers. If the Court were to lay down a legislative remedy, the impinges on separation. Finding a right in the Constitution...We have said the right to education (is a fundamental right) before it became a part of Part III..Declaring an aspect as a part of a declared right does not impinge on the separation of powers. For instance, we have said that sexual orientation is implicit in Article 15.CJI Chandrachud.AG: But when you lay down a norm which probably would require an analytical framework and weighing in fine scales, the variety of concerns and interests.CJI: We have an analytical framework today. We are not creating the framework, we are testing the validity of the framework.AG: The only fulcrum is regarding Article 19 (1)(a)...CJI: I think we have understood the submissions, should we close here? So that we give a little time... AG: I know, I understand, rejoinder time is important. Just a few more propositions on how you test the law, generally. These are well known statements of law. .AG: Much was said that the ruling party has an advantage. That is not the consequence of the scheme. Even if this was an unintended consequence, courts will not struck down a law on the basis of (unintended consequence). .Much was said that the ruling party has an advantage. That is not the consequence of this scheme.Attorney General R Venkataramani.Advocate Amit Sharma makes submissions for Election Commission of India (ECI)..CJI: Mr. Sharma, how much have you (ECI) collected? Of course you are not the SBI but in terms of the records you have, what is the extent of the total quantum of electoral bonds?Advocate Sharma: It is in a sealed cover. Justice Khanna: The quantum of bonds is available with you? Sharma: It is there.Justice Khanna: Do we get any particular data? Sharma: We don't have that... CJI: This Court had not freezed the data which was to be maintained. You were to continue collecting the data. Justice Khanna: Mr. Sharma you should have asked us. Sharma: There was a subsequent order which was passed.. We receive a contribution report and we see how much has been contributed to these parties..CJI: File the data as of the latest.. as of 31st of March, 2023 and submit it to us. You can even give it us, say, upto the 30th of September, if there is data.Sharma: Till the latest, whatever we have ... Court: You won't be having ... Either you get it from the political parties or the State Bank of India. CJI: We'll not ask SBI to reveal the identity of the donors at this stage, nobody is interested in that at the present stage, but we would like ...(Judges discuss).CJI: Let the order be said... A just and interim direction would be to require all political parties who have received donations through electoral bonds to submit to the Election Commission of India in a sealed cover, detailed particulars of the donors as against each bond, the amount of each such bond and the full particulars of the credit received against each said bond. So you give us the data that you have up to 30th September. Sharma: Details of donor can be in sealed cover.CJI: Just show us what you have got upto ... .Justice Khanna: Does ECI also how any idea what was the total expenditure incurred in the last elections?Sharma: That, we'll have. There are three heads, that we receive the accounts.Justice Khanna: As far as political party expenditure is concerned, do you get data with regard to that also, separately?Sharma: We get data of every candidate who-Justice Khanna: Candidate (details) will not suffice, because-Sharma: As far as political party is concerned, we don't get the expenditure of a political party or how much they have spent. It is candidate specific. Justice Khanna: Then your data is incomplete. .SG: To answer your Lordship's query, the political party's expenditure is part of their annual accounts, which is filed with Election Commission.Sharma: I stand corrected, we have the details of the parties also. .Advocate Prashant Bhushan begins rejoinder submissions.Bhushan: The first argument of the Solicitor was that because of these amendments, the volume of cash which is coming to political parties, which may be black money or is likely to be black money, that has gone down. CJI: No, he does not make a quantitative statement. His contention was this was an effort which was made to bring into the accountable channels what was otherwise completely beyond the hold of accountability...Bhushan: Let me just deal with that. First of all, it did not close the cash channel. The amendment has left open the cash channels. The only change that has been made is that for getting income tax exemptions, that ₹20,000 has been brought down to ₹2,000. Otherwise, cash donations upto ₹20,000 can be given to political parties and they are not required to be reported. Actually, ₹20,000 or ₹2,000 does not make any practical difference because all that the political party declares is 'I have received X crores as cash donations.' Now if they want to avail income tax exemptions, they say it is under ₹2,000. Earlier petty (cash) was ₹20,000, now it is 2,000. .Bhushan: Practically, it (electoral bonds) makes no difference, in my respectful, submission to the availability of cash to political parties or the ability of individuals to give cash to political parties. CJI: That will not impinge on the validity of the scheme.Bhushan: Yes, yes, I know. But they are saying that this whole exercise was to bring down the element of cash in the economy. They say cash is equivalent to black money. The object was to make political funding of parties to come more through banking channels rather than cash, is what they say is one of the stated purpose..Bhushan: Cash did come down, but it is important to understand why cash came down. .Bhushan: A subsidiary of a foreign tax haven based company can be created here.. That route was opened up... and thereby they donated to political parties and black money can still flow through electoral bonds this way..Bhushan: Right to privacy does not extend to companies and it is an individual human right.. So all amendments which anonymise donations of companies to political parties is wrong and thus this right cannot be invoked for companies..Bhushan: Even if your lordship does not stay the issue of electoral bonds after today, at least one thing your Lordship should say. It should be made clear to the parties who are purchasing electoral bonds that these may be subject to disclosure. This Court has the power, under the scheme also, to seek information from the State Bank of India. Bhushan: At the end of this, if your Lordships agrees that this electoral bonds is unconstitutional etc., then your Lordship should close as to which companies to which party etc., even if that information has to be obtained from the State Bank of India. .Bhushan: At least today, last time the same thing happened in that Election Commission case. I had an interim application, I mentioned it on Thursday saying that there is one post vacant of that Election Commission ...CJI: Except for the fact that after the 12th of April, 19 order, when you moved a fresh IA for stay, that stay was declined...Justice Khanna: That is why we are asking - are you asking for quashing of the scheme? What kind of disclosure should we make?.Bhushan: I am asking for quashing of the scheme, but if your Lordship ...Justice Khanna: The scheme has one advantage, the scheme has KYC. You will accept that there is an advantage in that.Bhushan: That is alright. If the anonymity is removed, I have no problem!Justice Khanna: Therefore, you argue on that!Bhushan: Remove the anonymity, I have no problem with electoral bonds. I am challenging the anonymity.. that is violating the right to know.CJI: You are saying that the entire scheme should be set aside but you are also saying that the amendment must be ...Livestreaming of court proceedings halted..Streaming resumes.Kapil Sibal: As far as persecuting the person is concerned, why will they be persecuted if they have donated to someone else. A big industrialist will always give to all political parties. The ruling party never gets back as it gives enormous capital to the centre and small donations to others. So there is no retribution.. no retribution since ruling party gets a maximum. If I get ₹100 crores and he (the donor) has paid ₹500 crores (in total), then we know that ₹400 crore went to others. And there is no going to court of law also. This scheme is putting a cloak on corrupt practices..Sibal: This is only the surest way to political perpetuity. In politics, it is impossible to get rid of black money. Everywhere it has failed. All that the court can tell this government is that 'this is not the way'. There needs to be scheme which is transparent for the way forward..Shadan Farasat: Right to privacy of individuals cannot extend to shadow the entire political system and affect the public interest. Thus, your right to exercise confidentiality does not extend therein.Vijay Hansaria: Confidentiality of thousands of corporates are taken care of but the right to know of citizens being trampled with..CJI: We would like the ECI to get the data upto September 30, 2023. We have heard arguments. Judgment reserved. On April 2019 there was an interim direction to ECI and as per that a sealed cover document was produced and the order of court was not restricted to that date and a clarification could have been sought. Now ECI to submit updated data till Sep 30, 2023 in a sealed cover to the registrar judicial of this court within 2 weeks. SG: I am not that pessimistic about eradicating black money and with rise of digital payments, there is a strong chance of eradicating black money..Judgment reserved. Bench rises.