[Breaking] Supreme Court asks Central Govt to look into potential misuse of Electoral bonds funds, reserves order on stay application

The Supreme Court today asked the Central government to look into the potential misuse of funds received through the Electoral Bonds scheme..The Bench of Chief Justice of India SA Bobde, AS Bopanna and V Ramasubramanian reserved its order in an application filed by NGO Association for Democratic Reforms (ADR) seeking an interim direction to bar the sale of Electoral Bonds in view of the upcoming State Assembly elections in West Bengal, Assam, Kerala, Tamil Nadu and Union Territory of Puducherry. .CJI Bobde asked Attorney General for India KK Venugopal,"Mr Attorney, we are not sure of what we are saying. But this angle of misuse of funds for illegal purposes for purposes of terrorism we would like you as a government to look into. It is not to suggest that political parties have violence on their agenda.".Advocate Prashant Bhushan, appearing for ADR today, brought the attention of the Court to a letter written by the Governor of the Reserve Bank of India (RBI) in which it was stated that the Electoral Bond scheme was fraught with risk and would impact India's financial system."RBI said there may be use of these electoral bonds to fund shell companies etc. RBI said this will put them at reputational risk. Here, bribing has been made through government channels. Apart from the bank, no one will know who is the donor, not even ECI," he added. .Bhushan went on to state that the scheme can be used for cross-border counterfeiting.CJI Bobde then said,"RBI said they are willing to do it in certain way. They say it's okay to do it in a demat form."Bhushan replied,"But they say there is a serious risk of money laundering.".When CJI Bobde said that such contributions can be anonymous even if they are in demat form, Bhushan said,"If it's anonymous, then it will be direct bribery. This can be given to political parties as quid pro quo.".Bhushan went on to point out how the Finance Bill, 2017, which paved the way for introduction of the electoral bond scheme, was passed as a money bill even though it wasn't.The CJI said in response,"If your argument is correct, we have to strike down the law in full. How do we decide this in an interim application?".When the Court said that it had previously issued directions for the sale of these bonds, Bhushan pointed out that the directions were not followed..After Bhushan asked the Court to grant a stay on the scheme, CJI Bobde asked Attorney General for India KK Venugopal if the government was going to issue Electoral Bonds.AG Venugopal replied that the scheme will be open from April 1-10, after permission was granted by the Election Commission..Addressing the Court's queries, AG Venugopal submitted that such contributions were white money which go through banks and are paid through cheque or demand draft.On the question of anonymity of contributors, the AG said,"The bond on its face does not have name of the donor or the beneficiary. This is only a document and does not disclose who received it or purchased it...Mr Arun Jaitley (former Union Finance Minister) decided that black money is a tremendous menace...".CJI Bobde then queried,"We are sure there are political parties who have violence on their agenda. Can not a political party fund terrorist operations?...Can't a party receive bonds and then fund a protest which turns violent? If a party buys Electoral Bonds worth ₹100 crore, what is the assurance that it won't be used for illegal purposes or fund violence?"The AG replied,"Every party has to file their income tax returns. Apart from Communist party and one national party, no one had declared this. Even Congress did not file. It was after your judgment that all started filing. So now question of such misuse cannot arise.".AG Venugopal and Solicitor General Tushar Mehta then assured the Court that funds received through Electoral Bonds were white money that could only be issued through cheque and demand draft, and for which Know Your Customer (KYC) norms had to be followed..Bhushan then retorted,"Original purchaser cannot purchase in cash, but thereafter there is nothing to prevent them to selling them to others in cash. There is anonymity at so many levels.".Towards the end of the hearing, counsel for the Election Commission then stated on record that the body does not oppose the Electoral Bond scheme..The Bench ultimately asked the Centre to look into the likelihood of misuse of the scheme, while reserving its order in the application filed by ADR..Through its application filed on March 9 this year, ADR had sought urgent listing of its 2017 writ petition challenging the Electoral Bonds scheme..The application by the NGO stated that there is a serious apprehension that any further sale of Electoral Bonds before the upcoming State Assembly elections in West Bengal, Tamil Nadu, Kerala and Assam, "would further increase illegal and illicit funding of political parties through shell companies.""The petitioner seeks that no further opening of window for the sale of EBs be allowed during the pendency of the instant writ petition," the application stated.ADR also informed the top court that the case was last heard in January 2020 and even after a similar application was filed on December 27, 2020 seeking urgent hearing of the case, the matter was not listed..Electoral bonds were introduced through Finance Act 2017, which in turn amended three other statutes - the RBI Act, the Income Tax Act and the Representation of People Act - for enabling introduction of such bonds..The Finance Act, 2017 introduced a system of electoral bonds to 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 Rajya Sabha. This, the petitioner submitted in the 2017 petition, was done in order to bypass the Rajya Sabha, where the ruling BJP government does not have a majority..The petitioners also submitted that the consequence of the amendments was that annual contribution reports of political parties to be furnished to the Election Commission of India need not mention names and addresses of those contributing by way of electoral bonds, thereby killing transparency in political funding.The removal of the cap on donations by the amendment to the Companies Act, 2013 and the amendments made in Section 236 of the Foreign Contribution (Regulation) Act, 2010 were also challenged as opening the avenues of foreign contribution to Indian political parties.