Poll panel feared that scheme will allow foreign firms to influence policies. (Illustration by Manali Ghosh)COUNTERING THE Election Commission’s “concerns” over the Electoral Bond Scheme, the Centre told the Supreme Court on Wednesday that it was “introduced, as a pioneer step in bringing electoral reforms, to ensure that the spirit of transparency and accountability in political funding is maintained”.
In a rejoinder affidavit, the Union Finance Ministry also termed as “without any legal or factual merit” the EC’s apprehension that the scheme — which allows donations to be received from foreign companies having majority stake in Indian companies — will enable foreign companies to influence Indian policies.
This, it explained, was because the donations were subject to fulfilling KYC norms which require disclosing source of funds to buy bonds and accounting thereof in the book of accounts and FEMA guidelines pertaining to foreign investment. “Therefore, the electoral bonds attempt at bringing greater transparency, ensuring KYC compliance and keeping an audit trail in comparison to the earlier opaque system of cash donations,” the Centre stated.
Introduction of the bonds “has brought in a marked shift from the old electoral system which suffered from many lacunas”, the government said.
On the non-disclosure of the identity of the donor under the scheme, the government said this was “to safeguard the donor from political victimization”.
This was done to address concerns among donors that, if their identity is revealed, there would be competitive pressure from different political parties receiving the donation.
“That in these circumstances and considering the need to impart greater accountability in funding of political parties as well as to maintain the anonymity of the donor, a mechanism of political funding by way of electoral bonds was introduced,” it said.
“To protect the identity, privacy and personal details of the buyer, the information furnished by the buyer is treated as confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency,” the affidavit added. “However, the records of the purchaser are always available in the banking channel and may be retrieved as and when required by enforcement agencies.”
Red flagging the scheme, the EC in an affidavit had told the court that it had conveyed to the government in 2017 that changes in the law enabling this “will have repercussions/impact on the transparency aspect of political finance/funding of political parties”.
The affidavit was submitted in response to petitions by Association for Democratic Reforms and CPI(M) challenging the constitutional validity of the scheme.
Responding to this, the Centre said that under the earlier system, “massive amounts of political donations were being made in cash, by individuals/corporates, using illicit means of funding” which “ensured that unaccounted criminal money/black money was pumped in for financing elections”.
The old system “was wholly opaque and ensured complete anonymity” as the identity of the donor and recipient remained anonymous.
This “unaccounted-for monies received by political parties were also spent without being accounted for, thus creating/enabling a parallel economy, as it were, through the use of unaccounted for cash”, the rejoinder affidavit said. “It was also observed that political parties were floated, without any serious intention of contesting elections, merely for the purpose of being utilised as vehicles for generating/handling large amounts of tainted cash.”
There was also no limit on the amount of contribution or donation made in cash to the political parties under the old system.
Explaining the merits of the bonds, the government said they can be issued only by the State Bank of India. “All payments made for the issuance of the electoral bonds are accepted only by means of a demand draft, cheque or through the Electronic Clearing System or direct debit to the buyers’ account. No black money can, therefore, be used for the purchase of these bonds.”
