A five-judge Constitution Bench of the Supreme Court of India is hearing the 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 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.Live updates from the hearing today feature here..[Watch the hearing live].Matter begins..CJI DY Chandrachud: Mr Bhushan will take 4 hours? Advocate Prashant Bhushan: Because, I have to lay down the facts CJI: Cut it down to 2 hours Bhushan: I shall try, this case goes to the root of our democracy. I am glad a Constitution bench has been set up. I have been in PIL space for many years and I have never seen this kind of public interest which this case has generated..Bhushan: I am appearing for the Association for Democratic Reforms (ADR). We are challenging the amendments brought in FCRA by the Finance Act, 2016 and the issue of whether it can be brought through the Finance Act or not is not what I am pressing.. I want this case to be decided before the elections...Bhushan: First challenge is amendment to FCRA and in essence those.. SG Tushar Mehta: By a judicial order, this court has segregated the issue of FCRA.. He has started with that Bhushan: .. We have challenged amendments to FCRA also.. Earlier to these amendments, foreign contributions were prohibited to political parties and by this amendment they have allowed such contributions and donations through a subsidiary of a foreign company in India is allowedCJI: This has no relevance to the challenge to the electoral bonds scheme..SG: By January 31, 2023 order, this court had segregated the issue.. .Bhushan: The first amendment has now made non-reporting of names who donate more than ₹ 20,000 alright... This was not there before and thus it is anonymous. Earlier, the requirement was to disclose which political party you have donated to.. But now it says company should disclose in profit and loss account the total amount donated.. But to whom remains silent....Bhushan: By the amendment in the Income Tax Act, the political parties are also exempt from disclosing from whom they have received the electoral bonds.. Only the central government knows who has donated to whom because the bearer bonds are issued by the State Bank of India, so SBI has a record of who gave how much to which party... .Bhushan: Electoral bonds scheme says if a law enforcement agency needs details, SBI can disclose it and of course all such agencies are controlled by the government of India and the SBI is also under Centre... Political parties are not obliged to disclose from whom they received it and they can just say that they do not know from where they have got that money..Bhushan: Nothing prevents the foreign companies to open a subsidiary in India and then donate such electoral bonds... These can be shell companies with zero profit and loss and the parent companies can be in tax havens and just get the money to route it to the political parties in India.. The right of citizens to know the source of such funding is a part of fundamental right to information for Indian citizens..Bhushan: This opaque instrument, anonymous instrument, in fact promotes corruption in the country because there is good reason to believe, and I'll show milords why, that these bonds are given as kickbacks to parties in power. Almost all the bonds have been received only by parties in power, more than 50% has been received only by the ruling party in the center and the rest have been received only by the ruling party in the State. Virtually nothing, not even 1%, have been received by opposition parties which are not ruling in the Centre or the State. .These bonds are given as kickbacks to parties in power. Almost all the bonds have been received only by parties in power.Advocate Prashant Bhushan.Bhushan: And virtually all the bonds have been purchased by corporates, by companies - almost all of denomination of 1 crore and above. 95% are in the denomination of 1 crore. And simultaneously you have removed the cap on corporate donations and amended the FCRA!.Bhushan: It violates the level playing field between the ruling party and the ones on the opposition..Justice BR Gavai: What is the maximum to be spent by the candidate?Senior Advocate Adv Kapil Sibal: As per parliamentary standing committee report, it is 70 lakhs.Bhushan: But many candidates are spending even 100 times more than the limit in cash.. ECI says it is a corrupt practice.. but "how to get hold of it?" was the reply..Bhushan: So if you are a subsidiary of a foreign company and you own some shares of that subsidiary then you are not treated as a foreign source.. These were slew of amendments that were brought together in a bouquet format. Now shell companies can donate.. Set up a subsidiary here.. through that, you buy electoral bonds and now a foreign company funds a political party...Bhushan: If at all anybody says that there is some transparency in this because company who purchases has to disclose and the party has to disclose how much is donated and how mix and match can be done to arrive at that conclusion .... common people cannot do it Justice Gavai: Who says mix and match? Bhushan: A court order (laughs) SG: It is not like that.. Bhushan: There are 23 lakh registered companies in India...Bhushan: How will a lay man know from 23 lakh companies who has donated how much? ... But if Centre puts pressure on SBI, then they will come to know about it. SBI is the only authority who can do that mix and match and citizens cannot do it. This defeats the citizens right to know who is funding these political parties. In a recent decision, CIC has ruled the 6 political parties are "public authorities" under the RTI act and these parties are not appointing information officers - so that people come to know the truth..Bhushan: Let me read the justifications given by the government of India for these bonds... After the scheme was introduced, PIB published an article by the then Finance Minister on the need to have that scheme... .CJI DY Chandrachud: The reason why there could be anonymity for the persons who have donated is because - suppose a person who runs a business donates amount to a party different to the one who is the ruling party of his State. Then, there could be ramifications...Bhushan: Only SBI and the law enforcement agencies would come to know about the source of funding and this completely defeats the right of the citizens. Now on objections of the Election Commission of India (ECI).. They had strongly objected to this scheme. ECI had said it will have serious impact on the transparency aspect of political funding... ECI said that it was a retrograde step as far as transparency was concerned..Bhushan: ECI had itself stated that this (electoral bonds) opens up possibilities for shell companies being used to donate to political parties..Bhushan: This is just black money coming to the political parties through the shell companies and now I will show the RBI letter CJI: Take us directly to your formulations now, Mr Bhushan..Bhushan: I have quoted several letters of the RBI. First ground of challenge is this violates right to information of Indian citizens to know the source of funding for political parties and I have cited Anjali Bhardwaj case here...Bhushan: Political parties are given a common symbol and thus it is a part of the instrumentality of the State and thus they are held to be public authorities..Bhushan: If a citizen have the right to know about candidates, their assets liabilities, their criminal antecedents etc.. citizens have the right to know about who is funding these political parties... The parties have rights under 10th schedule also...Justice Sanjiv Khanna: Your argument is that citizen has the right to know source of political funding since it is in larger public interest and thus it comes under Article 19(1)(a) Bhushan: Government says such a right is subjected to reasonable restrictions... But here the restrictions need to be reasonable in the first place..Bhushan: There was a case where a TATA company wanted to amend its rules to donate to the Congress party. In Jayantilal Ranchhoddas Koticha v. Tata Iron and Steel Co. Ltd, Justice Chagla held that:“...it would appear that any attempt on the part of anyone to finance a political party is likely to contaminate the very springs of democracy. Democracy would be vitiated if results were to be arrived at not on their merits but because money played a part in the bringing about of those decisions. The form and trappings of democracy may continue, but the spirit underlying democratic institutions will disappear.".Bhushan: The Supreme Court of Brazil has prohibited corporate donations to political parties by a judicial order. They said that corporates cannot be permitted to fund political parties. Here, what we are doing is going in exactly the opposite direction. We have removed the limit of 7.5 percent, we have permitted foreign funding ....Advocate Bhushan refers to a chart showing party wise electoral bonds funding received..Bhushan: Central ruling party has got more than 50 percent, almost 60 percent of the total contributions.. others just pale into insignificance..Bhushan: A company which is investing in a particular political party does so with an expectation that the receiver of such enormous funds, which is either already a party in power or a party whenever it ascends to power, will bring about favourable policies, legislation, regulations, and executive orders as also favourable contracts doing to the donor company, their friends and allies..Bhushan: There is circumstantial evidence that electoral bonds is used as kickbacks and by this legal instrument you have legalised kickbacks... .Bhushan: It is also astonishing that if the government’s argument is to be accepted - that no one except the SBI has details about the donors - then that would mean the Election Commission (which conducts entire election process), Government of India (which enforces various laws like FCRA), CBI (which investigates Prevention of Corruption Act), Enforcement Directorate (which inquires into Money Laundering), have no access to the list of donors, unless some alleged criminal offence is already being investigated and they have specific information that money has been routed through electoral bonds. .Bhushan: This means it is brazenly easy for electoral bonds, which are in the nature of bearer bonds, to be used for corruption, money laundering and violations of FCRA, and illicit contributions to political parties. .Bhushan: Such is the effect of the impugned amendments, that even an Indian subsidiary of a foreign company, which had never carried out any legitimate business, can now secretly funnel hundreds of crores to a political party..Bhushan: The corporates also do not have to disclose to whom they made their contribution in their balance sheets and accounts. .Bhushan: The bonds are fashioned in a way that the money could secretly pass several hands to reach the ultimate beneficiary political party, creating further layers of opaqueness and potential for money laundering..Bhushan: According to a report by Business Standard, "Vedanta Limited, a multinational mining company headquartered in Mumbai, donated ₹ 457 crores in the last five years to political parties through these bonds. Vedanta’s donation only in FY23 was ₹.155 crores which was higher than ₹123 crores donated in FY22, according to stock exchange disclosures by the company. It is interesting to note that in FY23, Vedanta Limited has been declared as the preferred bidder for various mining licences, namely Bicholim iron ore block in Goa, Sijimali bauxite and Ghogharpalli coal blocks in Odisha, and Kelwar Dabri in Chhattisgarh.".Bhushan: While various newspaper portals have reported that Vedanta is facing a severe financial crisis as it is under lot of debts, it is still donating hundreds of crores in donations. The same raises severe concerns regarding the fact as to why the such high donations are being made when the said company is under huge debts..Why the such high donations are being made when the said company (Vedanta) is under huge debts?Advocate Prashant Bhushan.Bhushan: An investigative report by an International Investigative Group ‘Organized Crime and Corruption Reporting Project’ (OCCRP); a global network of investigative journalists titled “Inside Indian Energy and Mining Giant Vedanta’s Campaign to Weaken Key Environmental Regulations” revealed backroom lobbying between Vedanta and the Union government where key environmental regulations were modified in favour of Vedanta who has been an important donor to BJP..Hearing to resume after lunch..Hearing resumes..Bhushan: There are a number of mining contracts that Vedanta has been getting. It is also one of the largest donors of political bonds to political parties. So that much, we know. Now just see this case of this IFB Agro case ... there is substantial indication that these bonds are being given by way of kickbacks to influence government decision or government policy. .Bhushan refers to disclosures by IFB Agro under the SEBI's LODR regulations.Bhushan: This is a somewhat direct indication that one company has give that it has subscribed and given electoral bonds because it was facing excise related issues...CJI: Perhaps, Mr Bhushan, we will keep individual cases out of reckoning because those companies are not before us. Also, any observations we make in regard to those companies may implicate them in criminal wrongdoing. We will take it as sort of like an illustration to buttress your argument, in no way a bearing on a constitutional court. The argument can rest on that. Also on the basis of first principles, they are not before us..We will keep individual cases out of reckoning because those companies are not before us.CJI Chandrachud.CJI: Please elaborate the point of subversion of democracy. Bhushan: Almost 99 percent of the funds have gone to the ruling parties. CPI(M) has consciously refused to take the electoral bonds. So even though they are the ruling party in one State, they have not received any electoral bonds. Otherwise, almost all the electoral bonds have gone only to ruling parties. Electoral bonds cannot even be taken my smaller parties which receive less than 1 percent votes. And they cannot be taken by individual candidates. .Bhushan: What this instrument is doing it, by privileging the ruling parties - because it is an easy way of getting you policy, decisions changed, other favours from the ruling parties.. Therefore, it is further skewing the level playing field in elections. It was already skewed, but instead of setting that right ... they are doing the opposite, the electoral bonds. .CJI: In erstwhile regime, prior to the electoral bonds, a corporate entity could make contributions as well, 7.5 percent of profits..Bhushan: But they had to disclose.CJI: Yes, so the difference there was that you had a duty to disclose, so by your disclosure there could be public scrutiny into whether there was a qui pro quo for any benefits like government contracts, licences, policies, concessions. Bhushan: This is promoting corruption, this instrument of anonymised donations is promoting corruption ... Corruption free society is part of Article 21. The other argument is, that it is actually eroding democracy itself since it is skewing level playing field between ruling parties and opposition parties on the one hand, and between parties and candidates on the other hand. CJI: So, another point is, this is anonymous donation for everyone else but the donee (who receives the fund) ....Justice Sanjiv Khanna: Investigation agencies will get to know it but the general public is not aware of that. Bhushan: Yes, yes ... so it is promoting corruption .. and it is skewing the electoral system in favour of the ruling parties .. Justice Khanna: Even in earlier regime, donation to ruling party would always be more sizeable in number than the non-ruling parties Bhushan: But here, you are giving kickbacks ... and earlier ... if you had given donations to a political party who in turn gave you some favour, you could be prosecuted for corruption. But now, because no body will come to know as to how has donated, whether you have received some qui pro quo, it is promoting corruption ... .CJI: So now, even shareholders have no access to know for whom you have contributed the amount (in electoral bonds).. so just shows ₹ 250 crores donated.. and that is all..Bhushan: Elections have become a game of money because the perception that a party has a chance of winning is created with visibility and this visibility is because of money credit to rallies, paid workers...Senior Advocate Kapil Sibal begins: Your lordships must assume, as a given, that capital and influence go hand in hand.. In fact, under the very concept of market economy, capital symbolises power. It may be in any sector of the economy, as in politics. The more capital you have, the more power. .Sibal: The non disclosure is without consent and concurrence of shareholders. Under which law can this be allowed? .CJI: We are not here hearing the challenge to corporate donations itself.. Justice Chagla said there cannot be corporate donations, but we are not on that.. There is an element of quid pro quo the moment you have corporate donations..Sibal: I understand, if the corporate sector was told - you (government) are imposing a cess - like education cess - on the corporate functioning of companies. With that cess, you have capital. And capital you can distribute with representation in the Lok Sabha. So everybody has the same amount. The same money can be used for that. What you are doing now, is entirely different. You are saying, give me as much money as you want to,CJI: Your submission is that this is not money for electoral participation but money for a political party. Sibal: Just for enriching the political party. CJI: There is no spending requirement.Sibal: No accountability. .Sibal: In fact, the nature of the scheme is such that it protects those who have committed a crime.. Sibal: Ultimately, the Constitution is for the citizens to participate in elections. The corporate sector is not a voter. The citizen is the voter. The citizen should be entitled, is entitled to contribute. If he gives more than ₹20,000, his name will be there (disclosed). But the corporate sector, which is not a citizen, can donate ₹10 crores, ₹100 crores, his name will not be there (disclosed). What is the rationale for that? .Sibal: So, is the corporate sector being granted a privilege over a citizen of this country? That privilege of anonymity? How is he (corporate entity) more privileged than a citizen, who is at the heart of the Constitution of India? How is he (corporate) being given a preferential treatment? Why? Because you want to enrich yourself through this scheme .. The opposition may also be in power in a State, they will also enrich themselves. This (the petition) is not political. .Is the corporate sector being granted a privilege over a citizen of this country?Senior Advocate Kapil Sibal.Sibal: If people donate, milords, we know who is donating... All this anonymity that we are talking about is really not anonymous (to the donee). Because the person who donates will go an tell him (donee) orally that, "I gave you such and such money." ... Let's talk practical politics, we don't have to go to the State Bank of India to find out. The person who gave it will disclose it, because he knows why he gave it. So what is anonymous about it? This is protecting the rich. .CJI: Suppose A buys bonds for ₹ 100 crores and suppose A has to physically hand this over to B and B gives it to C the political party...the person who satisfies the condition of being as purchaser is A... and no one knows who is behind A and who is actually donating the bond..Sibal: The Indian mind in ingenious in this case and the RBI has cited this repeatedly..Sibal: If I dont get to know the name of the donor... If I don't get to know the possible direct or indirect quid pro quo, I can't participate in democracy. It is also a matter of participation in democracy. I would then be sued for defamation, that 'you made this allegation (about there being quid pro quo) without the facts.' How will we get to know the facts if you hid the facts through an electoral scheme like this? I can't raise questions in Parliament or outside Parliament. .Sibal: The scheme has no definite objective. If it were definite objective of funding through the corporate sector the process of election without funding a political party, I can understand. You can have electoral bonds to fund the electoral process. But what you're doing here, is you are funding a political party. It is different. The object is different. You call it "electoral bonds" but these are not electoral bonds..You call it "electoral bonds" but these are not electoral bonds.Senior Advocate Kapil Sibal.Sibal: The larger issue is, this is no participatory democracy at all. Every scheme must have a legitimate object which is constitutional. The scheme must be proportionate to the object sought to be achieved. .Sibal: The underlying principle under the Constitution is free and fair elections. How are you serving these purposes? You are not. No legitimate object because it is not limited to the elections, no proportionality because it is unlimited, and no free and fair elections because of how heavily it is loaded towards the political parties..Sibal: Funding the electoral process is fine but not the party. The voice of the corporate sector drowning the voice of people is a dangerous trend..Advocate Shadan Farasat appears for CPI(M): We have taken a principled stance not to accept any electoral bonds, we have not taken a single rupee in electoral bonds in the last five and a half years, if I may say so, at much cost to us. Court: The (chart) of the ADR seems to say you have got some electoral bonds also. Farasat: No milord, we have just given the details. We would have just responded saying we have not taken any electoral bonds. There is no question of taking any, it is a principled stance. .Farasat: Architecture and effect of electoral bonds scheme is not to reduce black money funding of political parties but to reroute non-anonymous banking channel funding (conventional banking channels) to anonymous electoral bonds. .Farasat: The second submission is, the legally ordained informational blackhole which the electoral bonds scheme creates goes against the concept of informed electorate under Article 19 (1)(a) read with Article 326..Farast: The third submission is, it (electoral bonds) violates the "right to conscience" under Article 25 of individual shareholders, because they do not know what their money is being used for. .Farasat: This matter is essentially about democracy and disclosure. Those are the two fundamentals. This matter is not about contribution limit or expenditure limit or expenditure timeline ... This is about something which pervades all of those aspects, which is disclosure.. it is about disclosure to authorities and to the public at large..Farasat: This scheme is an alternate white money channel. There was already a disclosure based channel - the RTGS, the bank draft, the cheque - this is a new white money channel, what they have added is anonymity to it. By definition, therefore, it cannot be including money which would otherwise be black money. It can only deal with money which will anyway be white money, which a person can disclose as white money. .Farasat: By definition, what this (electoral bonds) will do is that the existing white money in the system, which was being donated by the non-anonymous, fully declare route, it will shift that to anonymous electoral bonds. That's the architecture of the electoral bonds scheme itself. .Farasat: I am trying to meet the argument which is in support of this scheme by the Union, right since the beginning, including in their affidavits, that "we are trying to transfer what is there in the cash economy into this." My submission is, that is just not possible, given the nature of this scheme! It is not possible unless, even if you prohibit it, you possibly can't do it unless the cash economy itself ceases to exist, independent of political parties. That is really a red herring argument. Court: The argument of the other side is, "we are trying to experiment, if it is possible, we can do it." We can't say that this attempt or experiment should not be made..Farasat: There was earlier a black channel, a cash channel which needn't be disclosed, etc. Now you have created a white channel. So both are anonymous! At the cost of only one thing, which is the disclosure of white channel. I'll try to make that (argument) good. We have the benefit of five years of operation of this scheme. So what is the impact? Parties which were getting 70-75% of their political disclosed contributions from cheque, bank, RTGS (disclosed white channels) are now getting 20%, 15%. The electoral anonymous scheme has taken over! At the cost of white channels. .Farasat: It (electoral bonds) is not to attack black money, it is actually to attack the white, disclosed channel. That is the actual impact of the scheme as well. .It (electoral bonds) is not to attack black money, it is actually attacks the white, disclosed money channel.Advocate Shadan Farasat.Farasat: Now the entire political funding is substantially anonymous. Because the black channel continues. If the objective is to have some kind of disclosure, if at the cost of 'disclose white money', you are increasing 'non-disclosed' white money ...Justice Khanna: Bearer bonds are bearer as such...so that is creating the problem...we understand that argument. Farasat: I am making the argument solely to meet the Union's justification of this scheme, which is that is meant to bring the black money into the white system. My respectful submission is that it actually does the opposite. It takes away the non-anonymous money and puts it in the anonymous kitty. I am saying, to that extent, the justification is not valid and it is arbitrary as well. It does not meet even the stated justification. .Farasat: Shareholders are the ones only who are excluded from the knowledge of where the money is going ... My (shareholder's) property is being used for a certain purpose ... I don't even know who my money is being used to fund for. A person with A conscience may not like a right wing party, a person with B conscience may not like a left wing party. It may infringe upon the conscience to use his property to support or to fund that party. At least, I should have a right to exit. I (shareholder) may not have a right to manage that company being a single shareholder, but I must have a right to an informed exit. I am even denied that by blackholing the information from me. .Advocate Nizam Pasha: My primary argument is that this electoral bond scheme is manifestly arbitrary..Pasha: In all other financial regulations, there is a concept of beneficial ownership where, beyond a certain percentage, if there is foreign ownership in that entity, it is treated as a foreign source. But here, in purchase of electoral bonds, as long as the company is incorporated in India, it is an eligible purchaser. .Pasha: What this results in is the absurdity that while we do not permit investment by an entity which has 51% foreign shareholding, we don't permit that entity to invest in a company which, say, deals with media - because we don't want foreign control of our media. But we have no problem in allowing such a company to purchase bonds and transfer it to political parties and, therefore, invest in an entity that runs the country!.We have no problem allowing a foreign entity to purchase bonds and invest in an entity that runs the country?Advocate Nizam Pasha.Pasha: Security of the State is now impacted if a foreign entity invests in the manufacturing sector in India. Is it not impacted if a Chinese investment is coming into a political party? ... Presumably on principle of quid pro quo. SG: Earlier it used to come but it has stopped now, because of this. CJI: This all in the realm of policy. Pasha: Policy is subject to the doctrine of manifest arbitrariness if it is so absurd, when it is contrary to public interest ....CJI: We will resume tomorrow.Hearing adjourned.