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.During the first day of 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.Live updates from the hearing today feature here..The petitioners are expected to conclude arguments today. The Central government to begin arguments thereafter..Senior Advocate Vijay Hansaria: Free and fair elections is part of basic structure of the Constitution and the kickbacks received for anonymous corporate funding strikes at the root of democracy and it demeans transparency and breathes life into opaqueness..Hansaria: Transparency needs accountability which leads to credibility and then it leads to public faith and public faith results in healthy democracy .Hansaria: Opaqueness allows transactions behind iron curtains that leads to improper influence of money power and allows wealthy contributors to influence policy making resulting in loss of public trust in governance..CJI: It's so heartening that everybody is on their iPads and laptops.Solicitor General: ... was, milords, the most technological challenged person. I am also now on the ..Hansaria: All of us, milord. We initially thought, when we were arguing that electricity matter in Court no.2 - lordships insisted that no (physical) files. That's the first time we struggled, we had to get into it (using technology). CJI: See, the books have also gone from the ... We have been able to open so much space for the bar, for the law clerks, for the public.Hansaria: And the interns, they are learning a lot. .CJI: In fact, I just told my staff.. Now court numbers 4 and 5 also - 1, 2, 3, we have already done it - but now 4 and 5 will also ... We're just going slow because we want to see how it is working.Hansaria: Most of the High Courts also, after your Lordships' last order, have started (providing virtual hearings). Gauhati High Court also, my friend was telling, within a week milord, it (VC links) is now in the daily list, all the links are there. They needed a push. It has really worked..Hansaria dealing with earlier position in laws governing companies when it comes to political donations.Hansaria: The substituted section (following amendment) omits the requirement of giving particulars of the amount and the party to which it has been contributed..Hansaria reads newly inserted subsection 3A to Section 182 of Companies Act, 2013: "Notwithstanding anything contained in sub-section (1), the contribution under this section shall not be made except by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account.Provided that a company may make contribution through any instrument, issued pursuant to any scheme notified under any law for the time being in force, for contribution to the political parties.".Justice Khanna: Even if it is deleted, there is no other requirement, no mandate that it (details of political party getting contribution) should not be disclosed.Hansaria: Yes, there was a mandate that it must be disclosed - now that mandate is gone..Justice Khanna: The accounts under the Companies Act are maintained for the purpose of disclosing, the real income. These are different from the income tax accounts. Normally, the tendency is to overstate the profits, because then you get more credibility in the market and more access to credit. Whereas, it is opposite under the Income Tax Act, where the tendency is to (say company has less profits to) save tax..Justice Khanna: But in this case, even if it is deleted, you have to disclose the amount which has to be paid. Two, there is a requirement for the Board of Directors resolution to be passed. The BoD resolution will contain or may not contain the name of the political party. But there is no express bar to not disclose.Hansaria: No. There is no bar but there is no requirement (either). The law has been changed, milord. The requirement has been deleted. The presumption would be there is no requirement to disclose. Otherwise, the substitution of sub-section 3 (under Section 182, Companies Act) is meaningless..CJI: (After amendment) The reference to "political party" has been taken away in Section 182 and it just says "any amount contributed under this Section." Secondly, what is deleted is giving particulars of total amount contributed and the name of the party. Justice Khanna: By inference it can be that the name need not be disclosed. CJI: You (company) merely says that I have contributed a 100 crores for political contribution. But you don't have to give a bifurcation or name the party ... So it becomes an anonymous... Hansaria: And you get a complete tax exemption under Section 80G (Income Tax Act) of whatever you have contributed to a political (party) ... Hansaria continues reading submissions on how company law has evolved when it comes to political contributions. .Hansaria: A company is now only required to disclose in its profit and loss account the total amount contributed by it without being required to disclose the name of the party to which the amount is being contributed..Hansaria: Thus, the companies now only have to declare that “X” amount has been donated without any details which makes it impossible to trace as to which party is being funded by which corporate entity making the corporate funding vulnerable to gross misuse and abuse..Hansaria: There is no ceiling on the total contribution that can be made. Thus, contribution can be made dehors any profitability. Thus, shell companies, as well as loss making companies can now make contributions to a political party..CJI: All this has been regulated by a statute, right from 1956. The nature of the regulation has been by statute. The only point is this - absent and enabling provision in the statute, no company can donate for political parties at all. So at first blush, this is regulated by statute. It is conferred by a statute and can be taken away a statute. No implication of a fundamental right can arise. .CJI: So for instance, suppose there was no provision in the 1956 (Companies) Act about political contributions. What would be the consequence? Consequence is not that companies are free to donate for political purposes untrammelled by any other provisions. The 1956 Act, for the first time, when that enabling provision came provided. Initially, there was a complete ban. 1960 - (there was a limit of) 5% of net profits or ₹20,000 rupees. Absent that provision, you could not have contributed at all. Then comes the ban in 1959, ban is lifted in 1985. So though it is a matter or statutory regulation, absent an enabling provision, a company cannot contribute for political purposes. So, if the constraints subject to which those contributions are permissible are lifted by the legislature, they are amendable to be tested under Article 14. .CJI: So it is not just the question of what legislature enacts, it can take away... but when you are making an enabling provision for contributions and taking away of those restraints on companies are amenable to be tested.Hansaria: Yes, milord. They are amendable to be tested on manifestly arbitrariness. Because there are two objects given ....Hansaria reads submissions on changes to Income Tax Act and rules over the years when it comes to political contributions. Justice Khanna: Was there any restriction as to the quantum of the donation to be given to a particular political party? CJI: The point is, could the electoral trust say that we are going to give money only to one political party? SG: There was no restriction. Instead of five people donating, they created a trust. There are some 28 (electoral) trusts and that scheme still continues. It was found to be a non-starter..Justice Khanna: But there was no restriction? That you had to equally distribute or proportionately distributed?SG: No, likeminded persons can come together and create a trust and give...Justice Khanna: I don't know, I got some impression that probably there was some proportion.Hansaria says figures concerning electoral trust are on record. SG: Collectively, they made have given to different parties. But there was no rule or embargo that they have to equally distribute..Hansaria refers to data compiled by ADR on electoral trust figures. There are 18 electoral trusts who have contributed ₹49 crores, roughly, he says. Hansaria: The learned Solicitor said it didn't work, milord, because the route was transparent. CJI: Basically there was only one trust that had substantial ...Hansaria: Satya Electoral Trust. Totally 49 crores, ₹47 crores is by one Trust. To whom maybe five corporate houses may have contributed money. This is for 2015-16. 2018-19, it improves ... There were 25 trusts, and the total figure is at ₹252 crores, Prudent Electoral Trust contributed the major part of it. .Hansaria: This (concerning electoral trusts) is information available with the Election Commission. Election Commission has a very important role. With this scheme (electoral bonds), the Election Commission has been completely shut out from all information. .With this scheme (electoral bonds), the Election Commission has been completely shut out from all information.Senior Advocate Vijay Hansaria.Hansaria reads submissions on changes made to the Representation of Peoples Act, 1951 and the Reserve Bank of India Act. .Hansaria: One more thing, which is important. One of the arguments is that disclosure is required of the "candidates", not of "political parties" ... CJI: Really, our law did not speak of "political party" at all. The Constitution incorporated the concept of a political party when the 10th Schedule came in. Before that, we only spoke of the right to suffrage ... and the individual right to contest or stand for an election..Hansaria: One question which your Lordships felt, what is the manifest arbitrariness? It fell from your Lordship, the Chief Justice yesterday milord. My submission would be two or three things. .Hansaria: The distinction made between a normal bank transfer with disclosure - I can make donation of any amount. Both (electoral bonds and transfers of money through conventional channels) are by bank transfer. Electoral bonds can be purchased from A through the bank - anonymity - but it is by bank transfer. So you are making an artificial distinction between an honest contributor who is making disclosure to all of its funding to a political party, to the shareholder, to the public at large..Hansaria: An artificial distinction is being made between a bank transfer by an honest corporator who wants to say, "yes, I have made this contribution" and another who wants anonymity. There is no intelligible differentia between these two, because both are bank transfers. .Hansaria: Earlier one, it was with transparency and second one (electoral bonds) with opaqueness. .CJI: The actual contributory, is not necessarily the person who is purchasing the electoral bond through banking channels at all.Hansaria: Not, not at all. So if I want to pay and avoid ED, I want to pay a government which is opposite to Central government - let me put it that way - to a government in a State and I don't want to show the government to whom it is paid, I want to keep an anonymity - I can pay in crores, purchase it (electoral bonds) and pay it. Hansaria adds that electoral bonds have an infra red number, which cannot be seen by naked eye. .Court shown how an electoral bond looks like, lawyers pass it on to the bench. CJI (lighter vein): How did you acquire so many electoral bonds?.Senior Advocate Sanjay Hegde (appearing for an applicant, a shareholder in a public listed company): Most of by submissions have been covered. I, most respectfully, adopt them and endorse them. What I propose to do is buttress some of the submissions. I won't take very long. .Hegde: Your lordships were shown the electoral bond. As your lordships were shown that electoral bonds, the figure that came into my mind was of the late Mr. Ram Jethmalani who really brought political corruption to the fore when he demonstrated to a press conference in 1993 how ₹1 crore was fitted into a suit case. When I spoke to my younger colleagues, he said he saw it in a Netflix series. Today, whether it is a sum of ₹1 core of ₹100 crores, all that it requires is that one piece of paper which your Lordships have been presented. Suitcases are not required. One brief envelope suffices. That brief envelope is time-limited. .Ram Jethmalani brought political corruption to fore in 1993 and showed how ₹1 crore fit into a suitcase. Today, all it requires is one piece of paper, suitcases are not requiredSenior Advocate Sanjay Hegde.Hegde: What has been created is a time denominated, anonymous currency. This is the currency of power. I make this submissions simply because, it was a British Chancellor who said, "Corporations are neither bodies to be punished, nor souls to be condemned. They, therefore, do as they like.".Hegde: A corporation is a juristic entity consisting of various shareholders and those shareholders who are in management takes a decision on the behalf of other shareholders or the juristic person that they will contribute, buy electoral bonds. Then, they are given the further assurance that their contribution to X political party or Y political party need not be reported to anyone..Hegde: Each time that there is a purchase of an electoral bond by a company, there has to be a resolution of the board of directors, which is not normally open to the public ... These bonds are election specific.. CJI: No, no, not necessarily. These bonds are sold at certain stipulated times during the year and 30 days before general elections ...The argument of Mr Sibal is this is not election-related at all. When you purchase the electoral bond in, say, January, there may not be an election on the anvil at that point at all. And you have to expend it within 15 days, otherwise it ceases to be valid in the sense that the contribution is made to the PM's relief fund.Hegde: It has to be "cashed" within 15 days. Therefore, the political party can take it into its accounts. As to when the political party uses the money, there is no limit on that. .Court: That is what Sibal's argument was, that it can be used for any purpose.Hegde: Any purpose, you can create a huge political party office, you can have residences there for the leaders... And that can be done at any point of time ... The point here is, each tranche of issue of electoral bonds is, subject to correction, is often linked with the declaration of elections. Justice Khanna: There are specific times. Hegde: Those times are often matched (with declaration of elections) ... It also happens that almost every quarter, there is an election. Not a general election, but every few months, there is a series of elections. Court: Mr. Sibal is nodding his head "no". And his experience is greater. Hegde: That, I concede. My respectful point is this. That even with the changes in law, there are compliances, those compliances can be further enhanced as far as the Election Commission is concerned. .Justice Khanna: You have broadly argued, but on question of relief ...Hegde: I am an intervenor. I can't ...Justice Khanna: You're right, it is wrong question to you.Is the petitioner seeking to set aside the electoral bonds scheme totally or only the anonymity part? Court asks. Senior Advocate Kapil Sibal (for petitioner): We are seeking that the scheme itself is struck down and the amendments are held to be arbitrary and violative of the constitution.Hegde: I support the petitioner and I am making a further case that even under the law as it stands, your Lordships can impose further directions which would possibly reduce the opacity. .Even under the law as it stands, your Lordships can impose further directions which would possibly reduce the opacity (of electoral bonds scheme).Senior Advocate Sanjay Hegde.Advocate appears for Dalit Panthers party: Issue here is, as a political party that espouses the cause of Dalits and other marginalised people, this scheme is structured in such a way that it has a desperate and more severe effect on us than other political parties. That way, there is a very hostile discrimination as far as our party is concerned, which espouses the cause of these marginalised sections. .Counsel for Dalit Panthers: The rule that electoral bonds is for parties which 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 of the State is discriminatory ... When people don't want to come out to give money to political parties on the basis of their ideologies, people will definitely not come to me on the basis of my ideology. Because they want to be anonymous ... It affects me directly..CJI DY Chandrachud to counsel for Dalit Panthers: Your issue is not with electoral bonds, we are not belittling your issue, but you can file a substantive plea later on this particular aspect of grievances with the election law which has disparate impact on the parties who are espousing the causes of Bahujan parties.. But this has to be framed differently and not in this case without adequate data... We will not make any observations which goes against you... but perhaps this issue can be agitated in some other case..Attorney General R Venkataramani: On the larger questions of 19(1)(a), I will address, on factual aspects and about the scheme the Solicitor will address. Let him commence the arguments. Justice Khanna: There is a larger issue of election funding which are not into.. But there is another issue which dovetails into this issue is of corporate funding and whether it should be open, transparent ... The other issue which arises, which they (petitioner) have referred to is, kickbacks or bribes or quid pro quo ... The issue which may come up is because we have this opacity with regard to who is funding etc., if there is any quid pro quo, how do we establish it?SG Tushar Mehta: We have an answer. I'll answer that. But please, milord, bear one thing in mind. Please, for the time-being, for appreciating my arguments, please remove the two expressions repeatedly used: "anonymity" and "opacity." It is a restricted, limited confidentiality, which can be opened. The veil can be lifted by judicial directions. I'll point that out. CJI: We'll resume after lunch. .Please remove the two expressions repeatedly used: "anonymity" and "opacity." It is a restricted, limited confidentiality, which can be opened.Solicitor General Tushar Mehta.Hearing to resume at 2 PM..Hearing resumes. Solicitor General (SG) Tushar Mehta making submissions..SG: The use of black money in elections and politics in general, elections in particular - every country is grappling with this problem. Country specific issues are being dealt with by every country, depending on the circumstances existing. India is also grappling with this problem. Bombay High Court took note in late 60s, but the real effort started by every government of the day. Every government did its bit so that there is some methodology which eradicates the power of black money or unclean money in the electoral process. My attempt would be to show some history on that, milords. .SG: Having tried several mechanisms and modes, the menace of black money was not being dealt with as effectively because of the systemic failures. Therefore, the present scheme (electoral bonds) is a conscious and deliberate attempt (a) to ensure clean money coming into the banking system, and the elections and the political parties' functioning, and (b) so far as possible, to eradicate the menace of unclean money or non-accounted money or black money in the elections. .Electoral bonds scheme is a conscious and deliberate attempt to ensure clean money comes into elections and to eradicate menace of black money in elections.Solicitor General Tushar Mehta.SG: Lordships may not take this particular scheme as a standalone attempt in the direction of dealing with the menace of black money. There are several steps taken, one of which is this particular scheme, which is confined to the political governance of this political party-culture. .SG: The first step was digitisation drive.. As citizens, we would be really proud to know how our country has fared. Digitisation necessarily results into all transactions passing through the banking channels or official channels - what is called the "information highway" - where I cannot hide anything, I will leave my traces in digital footprints, somewhere or the other. .SG: When the digitisation drive started, the government was at times being mocked, saying 'what is this, this is a utopian idea, would a vegetable vendor accept by digital payment?' Now, a vegetable vendor sending vegetables in a gunny bag is accepting digital payment. .SG: As citizens, we should be proud. Our digital payments in India is seven times more than the United States and the European Union, put together and three times that of China. Meaning, more money is now available in the official channels and clean money ....SG: I would not say that black money or unaccounted cash is completely eradicated. But we do whatever the best we can under the circumstances. The first step was digitisation. The second step was de-registration of shell companies. .SG: Between 2018 and 2021, Government of India identified more than 2,80,000 shell companies, because this is one of the vehicles through which unclean money passes hands. I am trying to point out the scheme which is before your Lordships for consideration is not an isolated attempt, it is a part of series of attempts, whereby now more clean money available because of digitised payments. We have approximately 750 million mobile internet users in India ... Now, we are adding one new internet user every three seconds!.SG: Each and every word used in the scheme is very consciously used and what they called anonymity or opaqueness, is neither but a confidentiality by design. What is the rationale behind it? I will be able to explain. .SG: Legality of the scheme is entirely for your Lordship to decide with whatever best assistance we can provide. But one thing, if the element of confidentiality goes from the scheme, the scheme goes and we are back to 2018 regime. Your lordships may want to ask the petitioners what benefit you would get if the country were to go ten steps backward. I have the facts and figures with me. .SG: Unfortunately, one of the petitioners, ADR, has placed all reports on record except one that is the most crucial. A passing remark, without making an issue out of it. Generally, when you approach the Court in public interest, you place everything which assists the Court. You don't place something on which you wish to argue. Anyway, my written submissions - please see the position - if this scheme is to be interfered with, as prayed for by the petitioners. This is a report prepared by ADR based on figures published by the Election Commission of India. .SG: My worry, the worry of the government and the worry of every citizen is that if this scheme goes, we go back to this regime (referring the report). What would be the transparency, the national benefit - it is for the petitioner to explain. Please see the highlights (refers to ADR's report on funding of political parties). .SG: This would also meet one of the arguments raised that, 'look, the ruling party gets the maximum benefit.' That has always been the trend from the beginning. You can't help it. 2004 to 2015, there was another political party..SG: As per a Report of the Petitioner ADR itself tiled as “Analysis of Sources of Funding of National and Regional Parties of India FY 2004-05 to 2014-15 (11 years)” it says ... Black money was in vogue during that period for all political parties. .Black money was in vogue during that period for all political parties.Solicitor General on pre-electoral bonds regime.SG: Every political party needs clean money also? How do they do that? Some shocking details will come. I deposit ₹100 crores as a political party, saying, so many 1000 people donated ₹ 19,000 to me, each. If it is less than ₹20,000, I am not supposed to disclose his identity. So, the cash I received, I am showing as unknown source of income ... This is the amount which is 69% (under the earlier regime, as per ADR report)..CJI: Why is it that ruling party gets the substantial part of the donation?SG: I cannot hazard a guess but this is always seen that whoever was ruling party has always garnered the maximum donations or contributions..SG: In my business, suppose I get only clean money and the practicality now requires I contribute money to political purposes but then confidentiality was needed to protect them, else white money was being converted to black money. .CJI: The problem with the scheme, Mr Solicitor, is that it provides selective anonymity and it is not completely anonymous. It provides selective anonymity -SG: Confidentiality.CJI: - or selective confidentiality. It is not confidential qua the State Bank of India, one. It is not confidential qua the law enforcement agencies. So a large donor would never take the risk of buying an electoral bond for the purpose of tendering it to the political party. All that the large donor has to do is to disaggregate the donation, get people who would purchase the electoral bonds in small amounts which would be then be purchased through the official banking channels, not through cash. SG: Provided they have ₹ 10 crores, I would have to find people who have 10 crores and who are ready to risk that. CJI: What will really happen is this. A large donor will never really put his or her head on the line by being in the books of account of the State Bank of India for having purchased...SG: They are doing. .The problem with the scheme, Mr Solicitor, is it provides selective confidentiality.CJI Chandrachud.CJI: What would really happen is this, and this is what the scheme is capable of because of selective anonymity, selective confidentiality. SG: I need not tell your Lordships, a possible or potential abuse may not be the ground. But let me explain the entire scheme. CJI: Second, Solicitor, your argument that if we were to strike down this scheme, you will go to a situation that existed prior - that will not be valid in itself for the reason that we are not precluding the government from coming out with a transparent scheme or a scheme which has a level playing field. The purpose of ensuring electoral funding relies less and less on the cash component and more and more on the accountable component, it is a work in progress, we are completely with you, there is no difficulty. We are completely with you that this is a problem which economies, democratic societies are grappling with..CJI: But the point is that, it's not an all or nothing approach. The problem of the scheme is that if it does not provide level playing field to political parties or if it suffers from opacity (as argued by petitioners). This is not to prevent the legislature from coming out with a scheme which deals with these deficiencies. SG: The confidentiality goes-CJI: We are not saying what it should be, that is not part of our function. But, two very important things. Maybe the earlier scheme failed, maybe it did not get you as much white money into electoral funding ... but look at the safeguards in the scheme in the earlier provisions. A cap on how much of your net profits you can contribute -SG: I have an answer to that.CJI: -Two, there was a disclosure within your (company's) own accounts, therefore the shareholders know that this is the political party to whom we are contributing. .CJI: What we are now doing is, in the effort to bring in white money into the political process, we are providing for, essentially, an information hole. That is the problem. The motive may be perfectly laudable. Question is whether you have adopted means that are proportional. Or if the means meet the test of Article 14. .To bring in white money into political process, we are providing for an information hole. That is the problem. The motive may be perfectly laudable.CJI Chandrachud.SG: I take it, so that I am not discouraged, if your Lordships are just putting to me their (petitioners') contention. CJI (lighter vein): Obviously ... Our views are never final until the last word in the case. SG: We know that, at 3 o clock, it's too much of seriousness, I wanted to break that seriousness. CJI: Our word is the final word only when the judgment comes. Even after arguments conclude, we are all involved in parlays. SG: This was just to break the aura of seriousness. Justice Khanna: Us putting questions is just to get the answers. SG: I bow down, I understand, I have appeared before your Lordships hundreds of times, just on the lighter side. .Justice Sanjiv Khanna: Victimisation and retribution is normally by the party in power. Not the opposition. The figures which you are saying ... are to the party in power, not the opposition. SG: I am just trying to show that there is a trend, whether it is this scheme (electoral bonds) or prior scheme. .Justice Khanna: There are ways and means to get (confidential) information. And it is easier for the party in power to get that information. Let's put it very frankly. The fear is, because of this selective confidentiality, the opposition parties do not know who are your (ruling party's) donors, but donors to opposition parties can be ascertained at least by investigating agencies. So they (opposition) are put at a disadvantage to question you (ruling part) on your donations. Whereas, their donations get questioned. .SG: Nobody has taken your Lordships through how the scheme operates. That is what I intend to do. Possibly, this may not be a 100% foolproof scheme. There may be, out of 100, 5 people who (as CJI indicated), they might misuse it. But suppose I am a genuine person who wants to contribute without any retribution. .SG refers to certain data concerning money stated to be from unknown sources for various political parties under earlier regime.SG: Please see the last party, for whom Mr Farasat appeared (CPI (M))₹471 crores. They say that we don't buy electoral bonds. They better start buying electoral bonds! ... (money from) known sources was ₹15.04 crores - they are running a government. And other known sources, ₹406 crores .. I have their balance sheets. "Other known source" means membership fees. And membership fees is more than double both the national parties, BJP and Congress. They have kind of a bucket collection. The best thing to do is to ensure that they get an electoral bond. .Advocate Prashant Bhushan rises to respond.SG: (Lawyer for) CPI (M) is every much here. You can rest assured, he will competently defend. Milord, I didn't name the party. I didn't want to politicise, but it was necessary to give these figures. .CJI: The malaise is agnostic to political parties. Malaise affects the entire spectrum. So we are not here, saying that a political party is holier than the other. We have a problem. And this figure, we will not say more than that, this is 2004-05 to 2014-15..We are not here to say that one political party is holier than the other.CJI Chandrachud.SG Mehta: In 1969, following the recommendations of Santhanam Committee, the Government introduced an amendment which prohibited any contribution by a company ‘to any political party’, or ‘for any political purpose to any individual or body’.1 Note: “…..since corporate funding was illegal, the corporates and politicians created several backdoor routes of channelling the money into the Congress Party, facilitated by large sums of cash holding with businesses….SG: In 1985 Corporate funding was re-introduced by the Government by making necessary amendments in Section 293A of the Companies Act, 1956. All companies, except Government companies, were allowed to contribute to political parties or to any person for political purposes subject to approval by the board of directors, and disclosure in the profit and loss statement. These donations were restricted to five per cent of the company’s average net profits of previous three years.SG: The Finance Minister in 2017-18 stated that electoral trust existed even then but it could not achieve the objective it had to ... Any 5 companies could form it and put their money into the common pool ... But there also, this confidentiality was not there and thus many did not go through the electoral trust.. Even now, I can pay by cheque or cash to a political party or by RTGS and this discloses my identity.. And then comes this electoral bonds scheme..SG Tushar Mehta: When this discussion used to take place, the then Honourable Finance Minister - Mr (Arun) Jaitley- was very unwell. He was in the last phase. And he used to carry some liquid which he used to continue sipping, as adviced by the doctors. He had lost 25 kgs. I can remember those days. .SG: The Finance Minister, in January 2018, said, "Electoral bonds substantially seek to cleanse that system. Any person seeking to donate money to a political party during that specified period can buy electoral bonds from the specified branch of the State Bank of India. Those bonds can be given only to a registered political party and only such parties, so that fake parties are not registered, which secured at least one per cent vote in the last election. Those parties will have to announce one designated account, that is the Congress or the BJP or... will have one account given to the Election Commission in advance. These bonds can be encashed within 15 days of purchase by the donor to the political party.".CJI: There is a problem in the speech... The donors does not have to buy the bond. The person who buys the bonds, need not be the donor to the political party. SG: Out of 100, 2 can be such. Not all.CJI: We are not on how many.. The point is, the donor does not necessarily have to be the person who buys the bond at all.SG: I will answer. CJI: Secondly, obviously, their balance sheets will reflect that they've bought a certain amount of bonds. It is the financial statements of only the purchaser will reflect this and not the donor... So how will this (the source, donor, and where it is spent) be known (as claimed in Finance Minister's speech)? SG: Out of 100, 5 people may misuse the scheme. That perhaps may not be the ground for judging the validity of the scheme. Rest 95-CJI: We are on what the scheme is really capable of.SG: Your Lordships have not seen the scheme, nobody has taken your Lordships through the entire-CJI: We'll see the whole scheme together. .CJI: Balance sheet does not reflect which bond is bought. It only reflects the total amount which has been spent on contributions. SG: It need not. Otherwise also, it is never ... If I buy, say, Kisan Vikas Patra - not a comparable thing - but the balance sheet would not show it is gifted to my daughter. It shows only buying of Kisan Vikas Patra. Now, when it is given to political party, the party will deposit in a designated account... The Election Commission will at least know that ₹500 crores (or whatever amount) has come as clean money. .SG: Late Shri Arun Jaitely stated, "I do believe that donations made online or through cheques remain an ideal method of donating to political parties. However, these have not become very popular in India since they involve disclosure of donor’s identity. However, the electoral bond scheme, which I placed before the Parliament a few days ago, envisages total clean money and substantial transparency coming into the system of political funding.".Justice Sanjiv Khanna: First issue is selective confidentiality and if confidentiality is given, then how do we ensure that quid pro quo does not take place? SG: Suppose this scheme is not existence, then how will kickback be paid.. by cash.. CJI: But it is legalising the kickbacks, by giving the money to the political party as opposed to the individual.. that is what the contention is... Justice Khanna: It is stated that this is all being protected under the umbrella of confidentiality... SG: That is the heart and soul of the scheme.CJI: We get it that confidentiality is desgined to ensure that people are not victimised for contributing... But if you really want to have that scheme at a level playing field, then all these donations should be given to the Election Commission of India which will then distribute it on an equitable basis. You'll realise, no donations will come. SG: Then milord, nothing will come, and everything will be by cash. CJI (smiling): You're absolutely right, that is exactly what we're saying! Which shows us the motivation for the same..Hearing to resume tomorrow morning.