Electoral Bond Case: Arguments of Adv. Prashant Bhushan
CHIEF JUSTICE DY CHANDRACHUD
HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE
MR. JUSTICE B.R. GAVAI
HON'BLE MR. JUSTICE JB PARDIWALA
HON'BLE MR. JUSTICE MANOJ MISRA
Writ Petition (Civil) No.880/2017
ASSOCIATION FOR DEMOCRATICS REFORMS & ANR. (Petitioner)
UNION OF INDIA & ORS. (Respondent)
PRASHANT BHUSHAN: May I, please Your Lordships?
CHIEF JUSTICE DY CHANDRACHUD: Now, we've got the lineup. Mr. Prashant Bhushan has 4 hours, Mr. Sibal 4 hours...
PRASHANT BHUSHAN: That's because My Lord, I have to lay out the factual details also, that's why I will take...
KAPIL SIBAL: I will take 4 hours.
CHIEF JUSTICE DY CHANDRACHUD: Mr. Bhushan, you'll also 4 hours would be too long because we have to cut short the...
PRASHANT BHUSHAN: Because the laying out of factual details itself will take over an hour. Otherwise, my argument should not take more than two and a half hours max.
CHIEF JUSTICE DY CHANDRACHUD: You can cut it down to about hours so that we will...
PRASHANT BHUSHAN: I'll try. I'll try.
CHIEF JUSTICE DY CHANDRACHUD: Within two hours just supplement it.
PRASHANT BHUSHAN: I'll try. First of all, My Lord, I wish to say that this is a case which goes to the very root of our Democracy. And I'm glad, My Lord, that the Court has finally fixed it for hearing and constituted a Constitutional Bench given the importance of the case. My Lord, I have been in the PIL space for many years, but I have never seen this kind of public interest involved in any PIL that I have ever done. The amount of interest that this has aroused is absolutely astounding. My Lord, there are... I'll just show Your Lordship what the Electoral Bond scheme is. By this petition My Lord... I am appearing for ADR and we have filed written submissions, which are in Volume and start at page 1. We have, in our written submissions My Lord mentioned that we are challenging in our petition, also, we are challenging the amendments brought in FCRA by the Finance Act of 2016. So, first, My Lord in 2016 and the issue about whether they could have been brought through the Finance Act or not, I am not pressing right now. Though we have taken that issue in our petition, but I am not pressing it for the reason that I want this case to be decided before the elections. I don't want because, I know that Your Lordship has issued the Finance Bill issue to a Judge Bench. And I don't want this to await that. So I am restricting myself to the other grounds of challenge. So first My Lord, we have challenged the finance, the amendments brought to the Foreign Contribution Regulation Act by the Finance Act of 2016, and in essence, My Lord, those amendments were that prior to that amendment, we have actually in our written submissions My Lord we have given a chart of the amendments and the amendment regarding the FCRA is at page 10.
TUSHAR MEHTA:I'm sorry. Generally, we don't interrupt, but by a judicial order, My Lords have been pleased to separate and de-tag the issue regarding FCRA. There is a judicial order passed by Your Lordships. Because he has started with that, My Lord...
PRASHANT BHUSHAN: I was pointing out what we have challenged in this petition. If Your Lordship just sees, in this petition, which is before Your Lordship today we have challenged the amendments made to the FCRA also, by way of the Finance Bill of 2016. And the amendment was that prior to that the foreign contributions were prohibited to political parties and candidates and public servants. By this amendment they have effectively permitted foreign contributions by saying that any contribution made by way of donation through a subsidiary of a foreign company which is registered in India, will not be treated as a foreign source. So by this amendment effectively you have allowed... So, for example, My Lord, suppose I'm just giving an example, a foreign company wanted to donate money to a political party. It was earlier, totally prohibited from doing so. And in fact, one of these cases went to the... in fact, this amendment was, in a way brought in order to overcome a judgment of the Delhi High Court by which the Delhi High Court held that both the BJP and the Congress Party had received foreign contributions through a subsidiary of a foreign company. At that time it was Sterlite, which was a subsidiary of Vedanta Resources, which was a UK based company. And they said that therefore, appropriate action should be taken against these political parties. To overcome that, My Lord, a retrospective amendment was brought through the Finance Act into FCRA, by saying that if the donation is made by a subsidiary of a foreign company... in that case, also, that was a subsidiary. Sterlite was a subsidiary of Vedanta Resources UK. Then that will not be treated to be a foreign source. So this is the amendment which has been brought and we have mentioned this My Lord at page of our written submissions.
CHIEF JUSTICE DY CHANDRACHUD: That is, strictly speaking, no relevance to the challenge on the Electoral Bond Scheme.
PRASHANT BHUSHAN: True, true. But I am only saying that...
CHIEF JUSTICE DY CHANDRACHUD: Which is perhaps why the Solicitor mentioned that. That is being...
PRASHANT BHUSHAN: Yes, but that Electoral Bond Scheme...
TUSHAR MEHTA: 31st January '23 order, Your Lordships please to segregate...
PRASHANT BHUSHAN: In this My Lord, the original amendment brought in by the Finance Bill of 2016 to the FCRA has been challenged.
CHIEF JUSTICE DY CHANDRACHUD: What is the next challenge in your petition? We'll just at least have a broad purview and then we can go on to the...
PRASHANT BHUSHAN: Yes. So the challenges are all in this chart, if Your Lordship just sees. Page 7. Volume 1, page in our written submission. Yes. So first is the amendment made to the Representation of People Act. Earlier, My Lord, the Act said, 29C. On the left side is the original, and the right side is the amendment, amended. Earlier My Lord the Act said, RP Act said - 'The Treasurer of a political party or any other person authorized by the political party in this behalf, shall each, in each financial year, prepare a report in respect of the following namely. A) The contributions in excess of Rs. 20,000 received by such political party from any person in that financial year. B) The contribution in excess of Rs. 20,000 received by such political party from companies other than Government companies in that financial year.
JUSTICE SANJIV KHANNA: Mr. Bhushan, you are at page 10?
PRASHANT BHUSHAN: Pardon My Lord?
JUSTICE SANJIV KHANNA: You are at page 10?
PRASHANT BHUSHAN: Page 10. At the bottom. 7...7. Sorry. I'm sorry. Page 7. Page was that FCRA. Page 7. So left side is the original provision and then My Lord said - 'Where the Treasurer...' on the left side original. 'Where the Treasurer of any political party or any other person authorized by the political party in this behalf fails to submit a report under Sub37 Section 3, then, notwithstanding anything contained in the Income Tax Act, such political party shall not be entitled to any tax relief under that Act.' Because contributions to political parties are exempted at both ends. That is it is exempted at the end of the party which receives the donations from tax and it is also exempted at the end of the donor that is, the donor can claim an exemption by way of the donations that they have given to a political party. Now, Your Lordship will see the amendment. I have highlighted the relevant part, provided... on the right side... 'Provided that nothing in this sub-section shall apply to contributions received by way of Electoral Bonds.' So therefore, the reporting requirement as to who has donated to you in excess of 20,000, which was earlier there, has been removed for donations received through Electoral Bonds. This is the first amendment to the Representation of People Act. Then they amended simultaneously the Companies Act. All these amendments were brought in through the Finance Bill of 2017. Finance Act of 2017. Now the Companies Act. 182 originally prescribed 'Notwithstanding anything contained in any other provision, a company other than a Government company, and a company which has been in existence for less than three financial years, may contribute any amount, directly or indirectly to any political party provided that the amount referred to in Sub-Section as the case may be the aggregate of the amounts that may be so contributed by the company in any financial year shall not exceed...' - this is important -'shall not exceed 7.5% of its average net profits during three immediately preceding financial years.' So there was a limit. There was a cap of 7.5% of last three years average profit on the amount of corporate donations that any company could give to a political party. That proviso, has been omitted by this amendment. So, this is another thing, other than Electoral Bond. Simultaneously, My Lord, a slew of changes were made. One was... and all these have been challenged in our petition. Then, My Lord, 182(3), every company shall disclose in its annual profit and loss account, any amount or amounts contributed by its to any political party during the financial year to which the account relates, giving particulars of the total amount contributed, and the name of the party which has... to which, such amount has been contributed. So, earlier the requirement was, that you have to disclose which political party, you have donated to. Now, My Lord in the amendment, they say provided, now they say, every company shall disclose in its profit and loss account, the total amount contributed to it under this section during the financial year to which the account relates. Provided that the Company may make contribution through any instrument issued pursuant to the scheme notified under the Act, for the time being enforced for contribution to political party. So, therefore, now, after the amendment, all that they have to disclose is, that total amount, not the donee political party. They don't have to disclose which is the political party, to whom they have given these Electoral Bonds. Earlier, there was a requirement to disclose that. Then, Income Tax Act. This has also been amended by this. Then My Lord, Income Tax Act. So earlier 13-A said, any income of a political party, which is chargeable under the head income from house, property, income from other sources or income by way of voluntary contributions received by a political party from any person shall not be included, in the total income of the previous year of such political party. And then proviso said, provided that...
CHIEF JUSTICE DY CHANDRACHUD: Yes.
PRASHANT BHUSHAN: Such party, such political party keeps and maintains such books of account or other documents, as would enable the assessing officer to properly deduce its income therefrom. b) in respect of each such voluntary contribution in excess of Rs. 10,000. Such political party keeps and maintains a record of such contributions and names and addresses of the person who have made the contribution. So therefore, therefore, the requirement in the Income Tax Act, that every political party should maintain accounts of where they have received the donations from, who has given them the donation. Now by the amendment, it says... proviso says, provided that b) in respect of each such voluntary contribution, other than contribution by way of Electoral Bond in excess of 10,000, such party keeps and maintains record of such contribution and the name, address and address of the person who has made such contribution. So, again, the requirement of keeping a record is omitted for Electoral Bonds. And then, My Lord, d) no donation exceeding Rs. 2000 is received by such political party otherwise, than by account payee cheque drawn on a bank or an account payee draft or use of electronic clearing system through a bank account or through Electoral Bond. So, everywhere, My Lord, Electoral Bonds, have been not only introduced, they have been exempt from disclosure under the Companies Act, under the Income Tax Act, under the Representation of Peoples Act, etc. And then My Lord at page 10...This is, of course, the Reserve Bank Reserve Bank Act only says, that this will be a new financial instrument which has been introduced, issue of Demand Bills and Notes. And here it says the amendment at says, notwithstanding anything contained in the section, the Central Bank may authorize any scheduled bank to issue Electoral Bonds. At the bottom of page towards. And then, as I said, My Lord, in the FCRA which has also been challenged in this petition. Now prior to the amendment of 2016, this is important for the reason that when I make my argument as to what this slew of amendments has done, it has, on the one hand, My Lord, introduced an opaque instrument by which nobody can come to know, other than the Government. It is only the Government who may be able to come to know as to who has contributed to whom, because under the scheme State Bank has to issue the Electoral Bond, so State Bank has a record of who has purchased which Electoral Bond. Now, of course, the bonds are Bearer Bonds. They are freely transferable. So suppose I purchase the bond, State Bank will know that yes, I have purchased this form, but I can hand it over to somebody else. And that somebody else can give it to a political party. The political party also may not come to know who has donated. Political party, it's open for a political party to say that well, we opened our office in the morning and we saw these 100 crores of Electoral Bonds lying under our, under our door. We deposited these Electoral Bonds. We don't know who has given them, but these are Bearer Bonds. So, therefore, all that the political party will disclose in their accounts would be that out of the total contributions that they have received, donations that they have received. They have received 500 crores by way of Electoral Bonds. That they have received total 700 crores, out of which 500 crores are from Electoral Bonds, that's all. But that match of who purchased this Electoral Bond and which party encashed this particular Electoral Bonds, that match if at all, it can only be done by the State Bank, which is a Government of India institution. Of course, State Bank is also effectively prohibited from disclosing it. But the scheme says that if a law enforcement agency needs to know this, get this information. It may ask the State Bank to disclose this. So, if at all only a law enforcement agency, which are all essentially controlled by the Government or the Government itself, because it controls the State Bank can come to know only this much. That this particular bond was purchased by this company and this was encashed by this party, but nobody else can come to know this information under the scheme of Electoral Bonds. Nobody else. They are... not even the Election Commission because the only account that is submitted to the Election Commission by the political party is that we receive so much by way of Electoral Bonds. They are not obliged to disclose who gave them. In fact, they may even say we don't know who gave it. We opened our office. It was lying under the door, we encashed it. So therefore they may even turn around and say that in fact, there is an interim order of this Court in this very case by which this court said that all political parties should disclose the donors of these Electoral Bonds to the Election Commission. Pending the hearing of this case, there is an interim order to that effect. But when that information is finally seen I daresay My Lord, that some of these political parties would have said we don't know... we don't know.
JUSTICE SANJIV KHANNA: ...on the SBI issuing bonds to persons who are not residents in India?
PRASHANT BHUSHAN: Yes, the requirement is that they have to give a KYC, whoever purchases Electoral Bonds. So the identity of the person who purchases Electoral Bonds will be known to the State Bank of India. But, but because they have now opened the route by making this amendment that the limit of 7.5% of the annual profits has been totally removed. So, even if you are a loss making company, or even if you are a company which does no business just a pure shell company... let's say, My Lord, Your Lordship is aware that in that Adani- SEBI matter, they are saying SEBI is saying - we don't know who are... whether these companies who have invested in the Adani companies from Mauritius, and from these tax havens, whether they are in fact owned by Adani or not, or whether they are related to Adani or not. Now, it is open to any of these companies to set up a subsidiary in India and donate to any political party of their choice, any amount, even if it's a pure shell company, which means no business, no profits, just an amount is received from its parent company, which is registered in a tax haven and that amount is given to a political party. So, one of my arguments, My Lord, I have three main arguments, which I am going to argue before Your Lordship against these Electoral Bonds. The first is that it defeats the people's right to be informed about the sources of funding of political parties which, in my respectful submission and in the light of several judgments of this Court, is a fundamental right of citizens under Article 19(1)(a). That's the first argument. Because Right to Information has been held to be a fundamental right under Article 19(1)(a). In fact, in that ADR judgment, and then in the follow up PUCL judgment, this Court said that every citizen has a fundamental right to know about the assets and liabilities of every candidate, about the criminal antecedents. And when that was sought to be overcome by means of an amendment, that amendment was struck down on this precise ground.
CHIEF JUSTICE DY CHANDRACHUD: Alright, that's the first submission. What is the second?
PRASHANT BHUSHAN: That's the first. Second is that this opaque instrument, anonymous instrument in fact promotes corruption in the country because there is good reason to believe and I'll show, My Lord, why, that these bonds are being given by way of kickbacks. Kickbacks to parties in power. Almost all the bonds have been received only by parties in power. More than 50% have been received only by the ruling party at the Centre and the rest have been received only by the ruling party in the States. Virtually nothing, not even 1% has been received by opposition parties which are not ruling in the Centre or at the States. And virtually, all the bonds have been purchased by corporates, by companies because they are almost all of denomination of Crore and above. 95% are in the denomination of Crore. Crore. Therefore, My Lord, and you have simultaneously amended the... you have removed the cap on corporate donations and amended FCRA.
CHIEF JUSTICE DY CHANDRACHUD: All right. That's the second submission. The third?
PRASHANT BHUSHAN: That's the second submission. Third submission is My Lord that it disturbs and indeed destroys democracy in this country because it does not allow a level playing field between political parties which are ruling versus political parties, which are in opposition or between political parties and independent candidates. It will have, in fact, just to give Your Lordships, a small figure, in the last five years of which, since the Electoral Bonds were introduced, 2017, they were introduced 1017-18 to 2021-22. years? years. The contribution to political parties by way of Electoral Bonds, has far exceeded any other method of contributing to political parties. Not only that, the amounts are so large... just take one party, the ruling party at the centre, the contributions by way of Electoral Bonds to just this one part ruling at the Centre, is more than 5000 crores, in just a period of less than five years. Now, just look at that figure. The limit for spending on each candidate fixed by the Legislature, is less than crore, per Lok Sabha constituency. Less than crore. If you set up candidates in all the constituencies in the country, the total amount that can be spent by the political.... by the candidates of any political party is less than 500 crores in a Lok Sabha election. In just these years, one party which has received the bulk of the political funding by way of Electoral Bonds, is getting more than ten times, more than ten times, the maximum permissible expenditure on elections by its candidates. More than ten times. So, just see, My Lord, what this is doing to our democracy.
JUSTICE B.R. GAVAI: What is the maximum permissible limit for a candidate?
PRASHANT BHUSHAN: 70 lakhs or so.
KAPIL SIBAL: Parliamentary constituency...
CHIEF JUSTICE DY CHANDRACHUD: 70 lakhs?
PRASHANT BHUSHAN: Of course, My Lord, this limit is not adhered to, we all know that, because candidates are spending ten times, sometimes 100 times, 100 times, the amount in cash. Now, Election Commission says, though it's a corrupt practice, spending more than the limit is a corrupt practice, but Election Commission says, look, we can't catch them. Everybody knows, that many candidates are spending many times by cash. One of the arguments in this for introducing Electoral Bonds was... the stated argument of the government was that, well, this goes through the bank. These Electoral Bonds can only be purchased through bank transactions by cheque, draft, or direct transfer. Therefore, it will reduce cash. That was their argument. But, very simple if you wanted to curb, the role of cash in elections, all that you had to do was to pass a simple amendment, saying no political party or candidate shall be allowed to spend or take any money, through non-banking channels. Everything will have to go through banking channels. And if you do that, it will be a corrupt practice. Suppose such an amendment, when this note ban was brought My Lord, one of the objectives given, stated objectives of the government was, that we want to make a cashless economy, because we want role of cash to be reduced. Now, I can understand that ordinary person on the streets can't be made cashless. He can't be expected to do all his transactions through cheque and banking channel, but, political parties and candidates contesting elections, they could have been made cashless, by the simple law saying, that you have to... if you are a candidate or if you are a political party, all your transactions have to be through banking channels. But that was not done.
CHIEF JUSTICE DY CHANDRACHUD: Alright. Now, Mr. Bhushan, let's do this. Let's forget the scheme of the Electoral Bond.
PRASHANT BHUSHAN: Yes.
CHIEF JUSTICE DY CHANDRACHUD: And then you can make your submission. We've seen the amendments, which have been made.
KAPIL SIBAL: I fought the elections in 2014 and it was 70 today when I did 95 or 75 for a Parliamentary Constituency.
CHIEF JUSTICE DY CHANDRACHUD: How much? 95?
KAPIL SIBAL: 95 or 75, depending on the State. For example Andhra Pradesh is 95 , Arunachal is 75 and for State Elections it's 40 and 28.
JUSTICE SANJIV KHANNA: Do you have to maintain a separate account for all this? Open a...
PRASHANT BHUSHAN: Every candidate has to do that.
KAPIL SIBAL: My Lord, we have to submit what we have spent every day,
JUSTICE B.R. GAVAI: Every candidate as well as every political party.
KAPIL SIBAL: Yes. Every political party. [UNCLEAR] Election Rule 90 gives this, so that Your Lordships...
PRASHANT BHUSHAN: Just one last thing. I wanted to show the amendment in the FCRA just for Your Lordships clarity. That is at page 10, at the bottom of page 10. So earlier My Lord foreign source included three years of a foreign company and by this amendment at page 11, My Lord. It said provided proviso, at the bottom of that highlighted part, provided that where the nominal value of the share capital is within the limit specified under FEMA or rules or regulations made thereunder. Then, notwithstanding the nominal value of the share capital of a company being more than one half of such value at the time of making the contribution, such company shall not be a foreign source. So if you are a subsidiary of a foreign company and you own even 100% of the shares of your subsidiary, provided it is within FEMA, it's not regarded as a foreign source. So, even the subsidiary of a foreign company can now donate to political parties. That's why this is important. Actually, this was a whole slew of amendments brought almost together, 2016 and 2017. It's a bouquet. And by this bouquet, because that limit has also been removed. Therefore, My Lord, it's allowing, allowing shell companies also to donate. Earlier, shell companies could not have because there was a limit, 7.5%. Now, shell companies can also donate. You can set up, you have a foreign company which is in a tax haven, you set up a subsidiary here as a shell company and through that you buy Electoral Bonds and donate to a political party. And nobody comes to know that a foreign company is now financing this political party or these companies are financing this particular political party, etc. Now, My Lord, we have mentioned the salient features of the scheme here at the bottom of page 11. But I can show Your Lordship, the scheme itself, which is in Volume 4, page 118. Volume 4, page 118. But I have mentioned all the salient features, even in the written submissions. Electoral Bond means a bond. I am now reading the scheme. Page 118, Electoral Bond means a bond issued in the nature of a promissory note, which shall be a bearer banking instrument and shall not carry the name of the buyer or the payee, it's like cash. Only difference is that it's a cash which can go up to crore. It's a note which can go up to crore from 10,000 to crore. Today, My Lord, we have only notes of Rs. 500, or less. Even Rs. 2000 has now been demonetized. But here it's 10,000 to crore... 1000 to crore. Now eligibility for purchase of... 3). Eligibility for purchase and encashment of Electoral Bonds. 'The Bond under the scheme maybe purchased by a person who is a citizen of India or incorporated or established in India.' So it can be an individual or a company. A person being an individual can buy a Bond either singly or jointly with other individuals. 3). Only political parties registered under 29-A of the RPA Act and have secured not less than 1% of the votes polled in the last general election to the House of People or the Legislative Assembly as the case maybe, shall be eligible to receive the Bond. So this itself restricts it to only those parties, not all parties are eligible. Those who have received at least 1% vote, either in the Lok Sabha or in the State Assembly. The Bond shall be encashed by an eligible political party only through a bank account with an authorised bank. Denomination - The Bond should be issued in the denomination, shall be issued in the denomination of 1000 to Crore. Validity of the Bond - The Bond shall be valid for days from date of issue, and no payment shall be made to any payee political party, if the Bond is deposited after the expiry of the validity period.' I might just point out, My Lord, on occasions they have increased the validity period under this also. Then, 4- 'The information furnished by the buyer shall be treated as confidential by the authorized bank, and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of a criminal case by any law enforcement agency. So therefore, this has to be treated as confidential by the State Bank. This information about who has purchased the bonds, and it can be disclosed only to a law enforcement agency, which is pursuing some investigation. But I am saying, My Lord, that if at all anybody... at one point the Government had said and this Court by one interim order has also recorded that there is at least some transparency in this because the company, which purchases it has to disclose. Because the political party which receives it has to disclose, not the identity, but has to disclose how much bonds. They have to disclose how much they have purchased. The company has to disclose. The party has to disclose how much they have received, total. They say you can do some mix and match and find out who has donated. Now mix and match can't be done by ordinary citizens for several reasons.
JUSTICE B.R. GAVAI: Who said that you can do mix and match?
PRASHANT BHUSHAN: The Court in some order has recorded this. These are on the basis of the submission of the Government. On the basis of the Government's submission, the Court, in one interim order, has recorded this. I'll show. I'll show. Now mix and match can't be done by ordinary citizens. In fact, My Lord even if I wanted to find out which companies have purchased Electoral Bonds. There are Lakh registered companies in India. Lakh. I would have to scan the... of course, every company is obliged to file the returns of their income and expenditures in the Ministry of Corporate Affairs' website. And by paying some fee, I as a citizen can also access that website of that company to see what is the income and expenditure of that company. So, theoretically it is possible for me to find out which company has purchased Electoral Bonds worth how much. Purchased and given. But I won't know who have they given it to. All that I will know is total amount purchased by them. Now, citizen can't be expected to go through. Of course, they found out about some companies which I'll be coming to. I'll give those examples which have purchased Electoral Bonds because that can be seen from their disclosure to the Corporate Affairs. But I can't be expected to find out from Lakh registered companies who has purchased how much Electoral Bonds But Government can. State Bank of India knows and because State Bank is owned by the Government therefore theoretically, My Lord they can. If they exert sufficient pressure on the State Bank. They can find out who has purchased this particular Electoral Bond because State Bank has that information. Though they are prohibited by law from disclosing it to anybody by the scheme, but they have that information. And they also have the information as to which political party has encashed which Electoral Bond. So, State Bank is the only authority which can do that mix and match.
JUSTICE B.R. GAVAI: Mix and match.
PRASHANT BHUSHAN: Which can do that mix and match. Citizens can't do it. And I am saying, My Lord, that this defeats the citizens’ rights to know about, who is funding these political parties. In fact, in a recent judgment, the Central Information Commission, has ruled, that these national parties, are public authorities under the Right to Information Act. Now, unfortunately despite that judgment, most of these political parties are not obeying that. They are not appointing information officers, which they are obliged under the RTI Act, so that people can ask them questions. We have, in fact, filed a petition in this Court on the basis of that CIC Judgment, as well as the RTI Act, as well as the Fundamental Right of people to know, etc., which is pending, which has been separated by this Court. But I am pointing out, that here you have completely made mincemeat of people's right, to be informed about funding of political parties, by introducing an instrument which today forms the bulk of donations to political parties. They are the bulk of donations to political parties today, this instrument. Then My Lord, of the scheme says, the bond can be encashed only by an eligible political party by depositing the same in their designated bank account. So these are the broad, salient features of the scheme, that however, these are Bearer Bonds. And as I said, My Lord, even the person who has purchased it may just hand it over to another XYZ, and that XYZ may give it to the political party. And therefore the political party can also turn around and say, I don't know who gave me this Electoral Bond. Somebody came and gave it to me, I don't know. In fact I have been the recipient myself of... there was this register of the CBI Director. Somebody came to my residence at night and gave me volumes of the Residents' Register. Original register of that CBI Director. And actually, I didn't know who is that person, there were these two people who came and gave it to me. But when I looked at the register, I could make out that this has to be original. Nobody can fabricate these kind of details, the time, date, car number, persons, and so on visiting the CBI Director. And on the basis of that, this Court then ordered an SIT to be constituted, because he was being visited by several people, who were being investigated by the CBI at that point of time. But I'm saying that sometimes, I get information from people whom I don't know. But I know that this is authentic information, because I can make out by looking at it that this has to be authentic. In that case My Lord, initially, the court asked me to disclose who gave you the register. So this was a petition by CPIL. We held the meeting of CPIL, and we decided that, of course, I didn't even know, but we decided to take a principal stand that whistleblower has given it, and we can't disclose the name of the whistleblower. So, I'm saying that a political party can easily turn around and say, we don't know who has given it. Somebody left it because this is a Bearer Bond. Now, My Lord, coming to... coming back to the submissions. So, I have stated the salient features, In this there are one or two other things also, that the window, if Your Lordship turns to page of my written submissions, the window of sale of Electoral Bonds...
JUSTICE SANJIV KHANNA: Can you come to the points?
PRASHANT BHUSHAN: Yes, I'm coming My Lord.
CHIEF JUSTICE DY CHANDRACHUD: We've seen the scheme now. Let's go straight to your submissions.
PRASHANT BHUSHAN: Right, right. Now My Lords, coming to my submissions, they start at page... First, Your Lordship, may see the previous orders of this case, which I have quoted at page 15, I just wanted to read the justification given by the Government for these electoral bonds. At page of my written submissions, I have quoted the relevant part. Para of my written submissions. 'On 07-01-18...'
JUSTICE B.R. GAVAI: Volume 1?
PRASHANT BHUSHAN: Volume 1, page of my submissions. 'On 7th January 2018, five days after the introduction of the scheme, the PIB published an article written by the then Finance Minister on the necessity for introducing Electoral Bonds. The stand of the Government was that expenditures of all political parties runs into thousands of crores. However, there has not been a transparent funding mechanism of the political system. The said PIB released quotes from the then Finance Minister's article.' 'The conventional system of political funding is to rely on donations. These donations, big or small, come from a range of sources from political workers, sympathizers, small business people and even large industrialists. The conventional practice of funding political system was to take donations in cash and undertake these expenditures in cash. Sources are anonymous or pseudonymous. The quantum of money was never disclosed. The present system ensures unclean money coming from unidentifiable sources. It is wholly a non-transparent system. Most political groups seem fairly satisfied with the present arrangement and would not mind the status quo to continue. The effort therefore, is to run down any alternative system which is devised to cleanse the political funding mechanism. It further said that most donors are reluctant to disclose the details of quantum of donations given to a political party. A major step was taken by Shri Atal Bihari Vajpayee. The Income Tax Act was amended to include a provision that donations made to parties would be treated as expenditure and would thus give a tax advantage to the donor. If the political party disclosed its donations in a prescribed manner, it would also not be liable to pay tax. A political party was expected to file its returns both with the Income-tax authorities and the Election Commission. It was hoped that the donors would increasingly start donating money by cheque. Some donors did start following this practice, but most of them were reluctant to disclose the details of quantum of donation given to a political party. This was because they feared consequences visiting them from political opponents. The law was further amended through UPA Government to provide for pass through Electoral Trust so that donors would park their money with the Electoral Trust, which in turn would distribute them to various political parties. Both these reforms, taken together, resulted in only a small fraction of the donations coming in the form of cheques.' And therefore, they say - we have now introduced these Electoral Bonds because... in fact, My Lord, this is the whole...
JUSTICE B.R. GAVAI: What was the Electoral Trust?
PRASHANT BHUSHAN: Electoral Trust is now... is a kind of...
JUSTICE SANJIV KHANNA: That was 2013. That was 2013.
PRASHANT BHUSHAN: Semi anonymous instrument. This is what it is. So any company can form or set up what is called an Electoral Trust, so long as it is recognized by the Income Tax Department. In this Electoral Trust, any company can donate. So let's say that any company has... Company A has set up an Electoral Trust. Companies, B, C, D, E, etc. They all donate to that Trust, and that Trust then donates to different political parties. So, it's a kind of semi-anonymous system. Semi-anonymous meaning, of course in income tax, they have to disclose, who are the companies who have donated to this Trust. They are also expected to disclose, which are the political parties to which the Trust has donated. But, which company has donated to which political party is not known. Sometimes they may say, well, we didn't say, but in fact My Lord, what would be happening,I expect would be, every company donating to an Electoral Trust would say, look, I am giving this Trust 50 crores and we want this 50 crores to be donated to A and B political parties. Normally, that's what is likely to have been happening, likely to be happening through these Electoral Trust. So this is also a kind of semi37 anonymous way, not totally anonymous, because you can come to know, which are the companies who have donated to this Electoral Trust. And you can also come to know, which are the political parties that this Electoral Trust has donated, how much money to. So in that sense, there is more information than you have by way of Electoral Bond. But now the justification. So, the government said, that we want to reduce cash. Earlier people were donating through cash and therefore they also said, that we have reduced this disclosure requirement from anything above Rs. 20,000 to anything above Rs. 2000, though My Lord, that amendment was only made in Income Tax Act, not followed through in the Representation of People Act. But let's assume that it would have been made even in the Representation of People Act. That means, the law earlier was, that you have to disclose any donations above Rs. 20,000. The political party has to disclose to the Income Tax as well as to the Election Commission, anything received above Rs. 20,000. That has been brought down to 2000. How will that reduce cash? Because earlier the party said that look, we have received ‘x' crores by way of donations, small donations below 20,000. Now they will say, we have received the same 'x' crores, by way of small donations, below 2000. That's not going to make any difference because, all that the party has to say is, we put out a sheet, we held a rally, we put out a chaddar, and people put money in that. Somebody put Rs. 500, somebody put Rs. 200, somebody put Rs. 100 etc., and they have collected 'x' number of crores, from small donations in this manner. So, therefore that is not going to make any difference. If you had said on the contrary, that every political party will only take money through banking channels and cash receipts are prohibited, they are a corrupt practice or that the party shall be deregistered, if it starts taking money or the candidate will be disqualified, if he takes money by cash, then yes, you could have done something to stop this menace of cash, etc. This has not stopped the menace of cash. Today My Lord, candidates are still spending, many times the amount by way of cash and they are not being caught. They are not being caught unfortunately,
CHIEF JUSTICE DY CHANDRACHUD: All right now let's get into the submission. You can just show us...
PRASHANT BHUSHAN: Just one more thing...
VIJAY HANSARIA: Section 13-B of Income Tax Act read with Section [UNCLEAR].
PRASHANT BHUSHAN: Now My Lord, coming to the previous orders of this court, in this matter...
JUSTICE B.R. GAVAI: Section 13-B, read with?
VIJAY HANSARIA: 13-B.
JUSTICE B.R. GAVAI: Read with?
VIJAY HANSARIA: With the Income Tax Act.
JUSTICE B.R. GAVAI: No, read with?
VIJAY HANSARIA: [INAUDIBLE]
PRASHANT BHUSHAN: Now, My Lords, one of the justifications given by the Government, for Electoral Bonds was that donor are reluctant to donate openly to political parties because of fear of whatever. Now so we ask this question under RTI, so that response RTI response, My Lord is, in Volume 4, page 536. Volume 4, page 536. They say, 2). SO and CPIO Budget Division gave their inputs in respect of Electoral Bond Scheme 2018 pertaining to pre-budget division subsequent to 07-06-2017 the date of assigning the job to the Budget Division as follows. As regards Point A and B, no representation or petition or communication has been received from the donors regarding the need for maintaining confidentiality of the identity while making donations to political parties. JUSTICE SANJIV KHANNA: This may not...
CHIEF JUSTICE DY CHANDRACHUD: This may not be really very relevant
JUSTICE SANJIV KHANNA: Because they already know it's confidentiality is in a way maintained under the...
PRASHANT BHUSHAN: So that justification given by the, I'm only showing this to show that one of the justifications given by the Government for introducing the Electoral Bond Scheme was, they said that look, we are introducing this anonymous instrument of funding political parties because donors are reluctant to disclose who they are funding to. So we asked this question. Was any representation received from any donor whatsoever that look...
CHIEF JUSTICE DY CHANDRACHUD: No, but you don't have to have a representation from a donor to perceive that reluctance. I mean we're just trying to analyse RTI responsibly will not carry your submission any further.
PRASHANT BHUSHAN: No, I'm saying that Government should have some...
CHIEF JUSTICE DY CHANDRACHUD: There is an assumption that look if you disclose the name of the donor, there'll be other political parties who will know that you have contributed to this political party and therefore they might be subject to... suppose a donor is carrying on business in the State. If the name of the donor is made available to all the political parties, the rival political parties will say, well especially if you're making a contribution to a party which is not in power.
PRASHANT BHUSHAN: Only fear would be from the party.
CHIEF JUSTICE DY CHANDRACHUD: That's the logic. Whether it's valid or not, in what you have to decide.
PRASHANT BHUSHAN: Correct. Now, Your Lordship may come back to my written submission.
JUSTICE SANJIV KHANNA: Mr. Prashant Bhushan you're on the first argument was right to information under 19..?
PRASHANT BHUSHAN: I'm coming to that. I just wanted to lay out the few other factors.
CHIEF JUSTICE DY CHANDRACHUD: Now let's look at the material, what you are supporting...
PRASHANT BHUSHAN: Now interim orders My Lord, two things. Interim orders....
CHIEF JUSTICE DY CHANDRACHUD: Let's see the interim orders. Where are they?
PRASHANT BHUSHAN: Page 15. Bottom.
CHIEF JUSTICE DY CHANDRACHUD: Volume?
PRASHANT BHUSHAN: Volume in my written submissions itself. I have quoted it. And I've given the name of the convenience compilation for the original. We have considered the matter, including amendments to the statutes brought in by the Finance Act 2016 and 2017. We have closely examined the stand taken by the respective parties and what has been stated by the Election Commission in its affidavit, details of which have been set out. All that we would like to state for the present is that the rival contentions give rise to weighty issues which have a tremendous bearing on the sanctity of the electoral process in the country. Such weighty issues, which require an in depth hearing which cannot be concluded, and the issues answered within the limited time that is available before the process of funding through Electoral Bonds come to, comes to a closure, as per the schedule noted earlier. In the above perspective according to us, the just and proper interim direction would be to require all political parties who have received donation through Electoral Bonds to submit to the Election Commission in a sealed cover detailed particulars of the donors against each bond. The amount of each bond and the full particulars of the credit received against each bond, namely, the particulars of the bank accounts to which the amount has been credited and the date of each such credit. Pausing here My Lord,I pointed out that the political party can well turn around and say, we don't even know. I'm saying that and ultimately My Lord...
CHIEF JUSTICE DY CHANDRACHUD: So, the purchaser of the bond may not be the person who is actually handing it over to the political party.
PRASHANT BHUSHAN: Correct. That's why. That's why they may say that we don't know. And they can also say that it was not even handed over in person.It was just left at our doorstep or couriered to us. Anything they can say.
CHIEF JUSTICE DY CHANDRACHUD: The Election Commission is appearing before us.
PRASHANT BHUSHAN: Yes, I'll just read out... I will read out...
CHIEF JUSTICE DY CHANDRACHUD: Who's appearing for the Election Commission? Mr. Sharma, you have details of, you have detailed this data which has been submitted pursuant to the Interim Order.
AMIT SHARMA: We have that in a sealed cover. We brought that My Lord.
CHIEF JUSTICE DY CHANDRACHUD: Do keep it with you in the court. That at an appropriate time we'd like to look at it.
AMIT SHARMA: But this is pertaining 2019. That interim order was passed in 2019. Pertaining to that the data is with us.
PRASHANT BHUSHAN: This data... but this was a continuing interim order.
CHIEF JUSTICE DY CHANDRACHUD: But this is not only confined to the 2019 election. The mandate is that you must continue to maintain this data.
AMIT SHARMA: As far as the data of 2019 is concerned that's there in the sealed cover. If My Lords require data...
JUSTICE SANJIV KHANNA: Mr. Sharma, let's be clear. This is an interim order.
AMIT SHARMA: That's right.
JUSTICE SANJIV KHANNA: It will continue till the decision.
TUSHAR MEHTA: Para if Your Lordships [UNCLEAR], possibly that's the...
AMIT SHARMA: Para of...
JUSTICE SANJIV KHANNA: That's for the past.
PRASHANT BHUSHAN: 'The above details will be furnished forthwith in respect of Electoral Bonds received by a political party till date. The detail of such other bonds received by such political party up to the date fixed for issuing such bond as per note of the Ministry of Finance dated so and so will be submitted on or before 30th May 2019.'
JUSTICE SANJIV KHANNA: Just one thing now. You are reading paragraph 13, as restricted by paragraph 14? And you have not carried forward the data with regard to post the Interim order?
AMIT SHARMA: I'll have to seek the instructions.
JUSTICE SANJIV KHANNA: Please take instructions on that.
AMIT SHARMA: We'll do that.
JUSTICE SANJIV KHANNA: does not restrict it to... restrict paragraph 13. Paragraph is for the past. Paragraph is from that period onwards.
AMIT SHARMA: My Lords, I'll take instructions.
CHIEF JUSTICE DY CHANDRACHUD: What paragraph says is that in respect to the past period, the data will be submitted forthwith. But para is a continuing direction. This is not only confined to the 2019 election.
AMIT SHARMA: My Lords, I'll seek instructions.
PRASHANT BHUSHAN: Then My Lord, the next order at para which I have quoted is that mix and match thing. I said this Hon'ble Court in its interim order dated 26-03. Subsequent interim order. 'However, based on the Government's claims while rejecting the Petitioner's prayer for interim stay as noted. The financial statements of Company is registered under the Companies Act which are filed with the Registrar of Companies are accessible online on the website of the Ministry for anyone. They can also be obtained in physical form from the Registrar of Companies upon payment of prescribed fee. Since the scheme mandates political parties to file audited accounts of statements and also the Companies Act requires financial statements of registered companies to be filed with the Registrar of Companies, the purchase, as well as encashment of Bonds happening only through banking channels, is always reflected in documents that eventually come to the public domain. All that is required is a little more effort to cull out such information from both sides, purchaser of Bond and political party and do some match the following. Therefore, it is not as though the operation of the scheme as behind iron curtains, incapable of being pierced.' Pausing here, My Lord, this is not correct. Because you can't... citizen can't do this match the following etc. Because the company does not disclose who they have given the Bond to. Company only discloses the total Bonds purchased. The political party only discloses the total Bonds received. So you can't... no citizen can match. Only the State Bank, only the State Bank. State Bank, and any law enforcement agency which asks such information from the State Bank. Strictly speaking, only that. Otherwise citizens certainly can't. It completely defeats the citizen's rights. Now My Lord, I just want to read out the objections of the Election Commission. Para - 'When this Bond Scheme was introduced, the Election Commission, as well as the Reserve Bank strongly objected to it.' Election Commission, paragraph 25. In its letter, and they have given the pages of the primary documents from Volume of the compilation. I am, in the interest of conserving time, I am just reading these relevant parts. Volume 4, then Your Lordship may turn to the Election Commission's... page 467. This is an important communication by the Election Commission.
JUSTICE B.R. GAVAI: Volume 4, page?
PRASHANT BHUSHAN: 467 of Volume 4. That's document number 37. Document number 37. In the Finance Act, 2017. Sir, I am directed to draw your attention to Finance Act 2017, which has introduced certain amendments to the Income Tax Act, Representation of People Act, Companies Act and will have serious impact on transparency aspect of political finance funding of political parties. Then they mentioned the amendments, etc. and then they say... 2(2) It is evident from the amendment that has been made that any donation received by a political party through an Electoral Bond has been taken out of the ambit of reporting under the contribution report, prescribed under Section 29-C of the RP Act, and therefore this is a retrograde step as far as transparency of donations is concerned and the proviso needs to be withdrawn. Moreover, in a situation where contributions received through Electoral Bonds, are not reported on perusal of the contribution reports of political parties, it cannot be ascertained whether the political party has taken any donation in violation of the provisions of 29-B of the RP Act, which prohibits political parties from taking donations from government companies and foreign sources. Income Tax Act - An amendment has been made to Section 13-A, of the Income Tax Act, whereby no donation exceeds Rs. 2000 can be received by a political party other than by account payee cheque etc. However, the limit for anonymous donations by political party still remains at 20,000 in Section 29-C of the RP Act. The RP Act needs to be amended, to reduce the limit of anonymous cash donations to 20,000, so as to bring these two Acts in consonance to each other. Pausing here, My Lord, it makes no difference in my respectful submission, because the political party earlier said, that we have received 'x' crores, from 20,000 or less, now they'll say we have received the same 'x' crores from 2000 or less. If they don't want to disclose those cash donations, they don't have to. So, it's not going to make any substantial difference whether the limit is 20,000 or 2000.Then My Lords, Companies Act, certain amendments have been proposed to Section 182 of the Companies Act, where the first proviso, has been omitted and consequently, the limit of 7.5% of the average net profits in the preceding three financial years, on contributions by companies has been removed from the statute, this opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties, with no other business of consequence having disbursable profits. So, the Election Commission had pointed this out, that, look, you are doing this, but this will open up the gates to shell companies being used to donate money to political parties. The Second Amendment in 182(3), abolishes the provision, that firms must declare their political contributions on their profit and loss account, that this requirement is now reduced to only showing the total amount under this head, which would again compromise transparency.In view of the position explained above,I am directed to state that, the amendments made in RP Act, Companies Act, introduced by the Finance Act referred to in para so and so, may be reconsidered so as to provide a transparent reporting of contributions received by political party through Electoral Bond and the provision should be made in the Companies Act to declare party wise contributions made by companies, in the profit and loss account so that transparency in the fundraising by political parties is maintained with respect to para 4(1), the Commission has expressed its apprehension, that the abolition of relevant provision of 182 would lead to increase... Yes, I was just reading the last paragraph of that EC's letter, para 6, at page 469. Yes My Lord, I was just reading the last part of that EC's letter. The last part is at page 469. Last paragraph, para 6. With respect to para 4.1, the Commission has expressed its apprehension that the abolition of the relevant provision of Section 182 would lead to increased use of black money for political funding through shell companies. As I have said, My Lord, what would be happening is that, let's say one of the allegations in that Adani matter is that the money which was siphoned out by over invoicing to companies which are registered in tax havens were thereafter funnelled these companies. Now, suppose that money is now funnelled through a subsidiary to political parties that's really black money. It's really black money and in a way, foreign money, which is coming to political parties through these shell companies, which have been set up as subsidiaries.
CHIEF JUSTICE DY CHANDRACHUD: Now, Mr. Bhushan, can we go straight to your formulation now.
PRASHANT BHUSHAN: Yes.
CHIEF JUSTICE DY CHANDRACHUD: I think we seen the scheme. We've seen the RBI reply.
PRASHANT BHUSHAN: Just one RBI reply.
CHIEF JUSTICE DY CHANDRACHUD: RBI reply perhaps. They now can formulate then we can go to Mr. Sibal.
PRASHANT BHUSHAN: Now just My Lord. Just the RBI letter and the Government's reply under, on this, they said. Government said not RTI. Government in Parliament said.
CHIEF JUSTICE DY CHANDRACHUD: Let us see that
PRASHANT BHUSHAN: Yes page 489,
CHIEF JUSTICE DY CHANDRACHUD: Volume 4?
PRASHANT BHUSHAN: Volume 4, page 489. They were asked whether you have received any concern from the Election Commission and they said no. Page 489, 'Will the Minister of Finance please, be pleased to state, Question D, whether it is a fact that the Election Commission has raised concerns on the issue of Electoral Bonds. If so, details as well as reasons thereof'. Now see the answer to Question D, at Page 490. The Government has not received any concerns from the Election Commission on the issue of Electoral Bonds. They treat that so casually. You can just say whatever you want and get away with it and the RBI's objection is at page 437. 437 of the same Volume, Document Number 29.
JUSTICE SANJIV KHANNA: Foreign funding probably. This is mainly on account of foreign funding, or otherwise.
PRASHANT BHUSHAN: This is 30th January, 2017 letter by the RBI.
CHIEF JUSTICE DY CHANDRACHUD: What page is that Mr. Bhushan?
PRASHANT BHUSHAN: Page 437 of Volume 4, Document 37, yes. 29. 'Please refer to your email dated January 28, 2017 forwarding a proposal to amend Section of the RBI Act so as to enable scheduled banks to issue Electoral Bonds as a mode of donation to registered political parties. We have examined the proposal and our views are as follows: 1) The move will result in multiple non-sovereign entities being authorised to issue Bearer Instruments as such the proposed mechanism militates against the RBI's sole authority for issuing Bearer Instruments such as cash. Bearer Instruments have the potential to become currency and if issued in sizable quantities can undermine the faith in bank notes issued by the Central Bank. Amending would seriously undermine a core principle of Central Banking Legislation and so would set a bad precedent. 2) Even the intended purpose of transparency may not be achievable as the original buyer of the Instrument need not be the actual contributor to the political party. The Bonds are Bearer Bonds and are transferable by delivery. Hence, who finally and actually contributes Bonds to the political party will not be known. 3) While the person buying the Bearer Bond will be as per KYC parameters, the identities of the intervening persons will not be known. Thus, principles and the spirit of PMLA Act will get affected. 4) If it is the intention that the person/entity buying such Bonds is expected to tender it to a political party, such intention can be accomplished today by a normal cheque, demand draft or any other electronic or digital mode of payment. There is no special need for or advantage by creation of an Electoral Bearer Bond and that to by disturbing the established international practice. We are therefore, of the opinion that it will not be advisable to amend Section of the RBI Act just for the sake of providing a formal mechanism to persons, entities contributing to political parties when existing Banking Instruments such as cheques, drafts, digital mode can equally be achieving the said purpose and objective.' Now My Lord, I'll come back to my legal submissions. I have in my written submissions, I am not reading that, I have quoted several letters of the RBI. I don't need to... Your Lordships can go through it and just for the interest of time. Now my grounds for challenge My Lord. Page 23. First ground is that it violates the Citizen's Right to Information about funding of political party. That, My Lord, I have quoted Anjali Bhardwaj, recent judgment of this Court in the case of Information Commissions. First, My Lord para 39 - 'Right to Information has been held to be part of the fundamental Right of Freedom of Speech and Expression in terms of 19(1)(a) and of the Constitution. Political parties hold a very important constitutional status explained above, having significant powers in the form of decisive control over the formation of Central/State Governments, voting by MPs and MLAs, passage/non-passage of important bills in State Assemblies. For the purpose of properly giving effect to the citizens... said citizen's Right to Information about political parties, including voter's.' One other thing that is that political parties are given a common symbol. So therefore, political parties are part of the instrumentalities of the State and this has been held by this Court, and even the CIC has held that political parties are public authorities under the Right to Information Act. 'For the purpose of properly giving effect to the right of citizens to have information about political parties, including voter's fundamental rights, information about who all have donated to a particular political party is an essential information for the common people. Without any knowledge of which political party is being funded, by which corporate house/ individuals, and whether policies are being carved in favour of such corporate entities, a citizen is bereft of critical information. This Court has, in a large number of decisions held that transparency and Right to Information are cherished fundamental rights under 19(1)(a) and 21.' In Anjali Bhardwaj, just one short quote -' Much before the enactment of the RTI act, which came to the Statute book in 2005, this Court repeatedly emphasized People's right to information to be a facet of 19(1)(a) of the Constitution. It has been held that the Right to Information is a fundamental right and flows from 19(1)(a), which guarantees the Right to Speech. This right has also been traced to Article 21, which concerns about Right to Life and Liberty. There are umpteen number of judgments declaring that transparency is a key for functioning of a healthy democracy. Judgments of this Court, such as the five Judge Bench in State of UP vs Raj Narain, seven Judge Bench in SP Gupta, then in Reliance Petro Chemicals, Jayantilal Mistry, and scores of others have recognized the Right to Information and transparency to be a fundamental right and a basic facet of democracy and Rule of Law.' All these judgments My Lord, are in the judgments compilation. In fact, if Your Lordship wants, I'll just give the relevant paragraphs of each of these judgments. This Anjali Bhardwaj, My Lord, is in Volume document... It's the first document, and the relevant para is para 10. This Raj Narain is the second document in the judgments compilation and the relevant para is para 74. Page 69, para 74. Pardon My Lord?
JUSTICE B.R. GAVAI: Have you referred to them in your submission? Paras?
PRASHANT BHUSHAN: No. In this, the paras are not referred. That's why I'm just telling Your Lordships, which are the relevant paras.
JUSTICE B.R. GAVAI: Raj Narain is para?
PRASHANT BHUSHAN: Anjali Bhardwaj is the first document. Page 19, para 10. That I think I have quoted. Then My Lord, UP vs... State of UP vs Raj Narain. That is second document in the documents compilation... In the judgments compilation. And in that para 74, page 69. Then the third is SP Gupta. Relevant para is para 67, page 319. The third document. Reliance Petrochemicals is the fourth document, the relevant para is para 34, page 1136.
JUSTICE B.R. GAVAI: Para?
PRASHANT BHUSHAN: Para. 34, page 1136 of the compilation. Then Association for Democratic Reform. Now, this was a very, very important case, My Lord. I have quoted it here also, because this was the case where they mandated the disclosure of assets, liabilities, criminal antecedents, and educational backgrounds of candidates, contesting election by means of an affidavit. And here the important thing is, that they said, that this flows out of Article 19(1)(a) rights. And when the government tried to overturn this by means of a legislation, that legislation was struck down, on the ground that this violating fundamental right of the citizens to know about candidates. And I submit My Lord, if the citizens have a right to know about candidates, as to what are the assets, liabilities, what are the criminal antecedents, etc., by way of an affidavit, then, equally or more importantly, citizens have a right to know about, funding of political parties, who's funding them. Political parties are playing a very important role in our Democracy. They get a common symbol. They contest as a party. They form the government, they have given a right under the 10th Schedule for disqualification of those who flout the party as mandate, etc. as to how to vote and so on. So therefore citizens... If citizens have a right to know about candidates, about the assets, liabilities, etc. They certainly have a right to know, about parties as to who's funding them. And then My Lord, I have given the relevant quote from this ADR.
JUSTICE B.R. GAVAI: Para 42.
PRASHANT BHUSHAN: At page, of my written submission, page...
JUSTICE B.R. GAVAI: Para 42?
PRASHANT BHUSHAN: Yes. Para 42. And My Lord, the quote is, now we would refer to various decisions of this Court, dealing with citizens' right to know which is derived from the concept of freedom of speech and expression. The people of this country have a right to know every public act, everything that is done in a public way by public functionaries. MPs and MLAs are undoubtedly public functionaries, so are political parties. The public education is essential for functioning of the process of popular government and to assist the discovery of truth and strengthening the capacity of an individual in participating in the decision making process. The decision making process of a voter, would include his right to know, about public functionaries, who are required to be elected by him, equally about political parties also. In State of UP vs Raj Narain, the Constitution Bench considered a question, whether privilege can be claimed by the Government of UP, under 123 of the Evidence Act, in respect of what has been described as the Blue Book summoned from the Government of UP and certain documents summoned from the SP. The Court observed that, the right to know which is derived from the concept of freedom of speech, though not absolute, is a factor, which should make one vary, when secrecy is claimed for transactions which can at any rate have no repercussion on public security. The Court pertinently observed, as under, in a government of responsibility like ours, where all the agents of the public must be responsible for their conduct, there can be but few secrets. The people of this country have a right to know, every public act, everything done that is done in a public way, by their public functionaries. They are entitled to know the particulars of every public transaction, in all its bearing. From the aforesaid paragraph, it can be deduced that members of a democratic society, should be sufficiently informed so that they may influence intelligently the decisions which affect themselves. And this would include their decisions of casting votes, in favour of a particular candidate. If there is disclosure by a candidate as sought for, then it would strengthen the voters in taking appropriate decisions of casting their votes. To sum up, the legal and constitutional position which emerges, can be stated that, to maintain the purity of elections and in particular, to bring transparency in the process of election, the Commission can ask the candidates, about the expenditure incurred by the political parties and this transparency, in the process of election would include transparency of a candidate, who seeks election or re11 election. In a democracy, the electoral process has a strategic role. The little man of this country, would have basic elementary right to know full particulars of a candidate who is to represent him in Parliament, where laws to bind his liberty and property may be enacted. Obviously, My Lord, this would apply with greater force to political parties. The right to get information in a democracy is recognized all throughout and it is a natural right flowing from the concept of democracy. At this stage we would refer to Article 19(1) and (2) of the International Covenant of Civil and Political Rights, which is as under: Everyone shall have the right to hold opinions without interference. Everyone shall have the right to freedom of expression. This right shall include freedom to seek, receive, and import information and ideas of all kinds, regardless of the frontiers, etc., etc. And para 7, My Lord, under our Constitution 19(1)(a) provides for freedom of speech and expression.
JUSTICE SANJIV KHANNA: In a nutshell Mr. Bhushan. Your argument is the citizens must know what are the sources of fund of a political party. That is in larger public interest...
PRASHANT BHUSHAN: Not just in larger public interest. I's the citizen.....
JUSTICE SANJIV KHANNA: There will be always the conflict which will come up. Some people will say it may have its own repercussions, but it's in larger public interest and therefore it will be covered by the Article 19(1)(a).
PRASHANT BHUSHAN: And as contrary to what the Government is arguing, they are saying, that there are reasonable restrictions which can be imposed on the rights under (1)(a). But those reasonable restrictions. Firstly, they have to be reasonable proportionate. Secondly, they have to be covered by one of the 6, things which are mentioned there. Public order, etc., etc. Obviously, My Lord, the funding of political parties cannot be covered by any one of those grounds, which are mentioned in 19(2) as grounds on which restrictions can be imposed on this fundamental right under 19(1)(a). So, therefore, therefore My Lord, and moreover about funding of political party there is also this problem. If I know that this party is being funded by companies who are getting benefits from this political party. Then I know that this particular party is corrupt because it is essentially getting a quid pro quo. And I suspect and I'll show the figures. The figures about Electoral Bonds show that number they are almost all in denominations of crore. So, they are being largely purchased by corporates etc., companies. Number 2, that they are essentially only being given to ruling parties. Bulk goes to the ruling party at the Centre, more than 50%, the remaining go to ruling parties in the States. And virtually nothing, virtually nothing by way of Electoral Bond goes to parties which are not ruling parties either in the Centre or the State. And today, My Lord, this Electoral Bond forms the bulk of the political funding of parties. It forms the vast bulk of political funding of parties, so therefore by making this non-transparent, you are defeating a very important right of citizens to know about who is funding these political parties. Where are they getting their money from? Whether this is tainted money, whether this is black money, whether this is laundered money. Whether this is shell company through shell companies, whether whatever. So therefore all that is being defeated. Therefore, this will clearly violate Article 19(1)(a) rights. And this 19(1)(a) that right to information about public functional is public...
CHIEF JUSTICE DY CHANDRACHUD: Let's go to the next legal ground. 19(1)(a) you have now indicated.
PRASHANT BHUSHAN: One judgment which I wanted, which I have not mentioned in my written submission, which I wanted to show is a judgment of Justice Chagla of Bombay High Court. Very, very important judgment.
JUSTICE SANJIV KHANNA: 57?
PRASHANT BHUSHAN: Yes, 1957 Judgment. Tata.
CHIEF JUSTICE DY CHANDRACHUD: Can you give us a citation?
PRASHANT BHUSHAN: Yes. That citation is, that's the 40th document in the compilation of judgment. It's in Volume page 4249. All the judgments are in Volume 5. JUSTICE B.R. GAVAI: Page 4?
PRASHANT BHUSHAN: 4249. That's the citation is AIR 1958, Bombay, page 155 or it's also, 1957 SCC Online, Bombay, page 82. This is an important judgment. Actually, My Lord, though it came fairly early in our constitutional history. But you can see how prescient Justice Chagla was even in 1957, when he delivered this judgment. This was a case where one of the Tata companies wanted to amend its Articles of Association to be able to give donations to the Congress Party. Now, in that context, My Lord, this discussion takes place and he says right at the beginning, page 4249 of Volume 5, where this judgment is given. He says - 'It is with considerable uneasiness of mind.
JUSTICE B.R. GAVAI: You're reading para?
PRASHANT BHUSHAN: First para. Right in the beginning. Right in the beginning of that judgment. 'It is with considerable unease of mind and a sinking feeling in the heart that we approach this appeal and the proposal of TISCO that they should be permitted by an amendment in the Memorandum to make contributions to political parties. Democracy in the country is nascent, and it is necessary that Democracy should be looked after, tended and nurtured so that it should rise to its full and proper stature. Therefore, any proposal or suggestion which is likely to strangle that Democracy almost in its cradle, must be looked at not only with considerable hesitation, but with a great deal of suspicion. Now, Democracy in a political system which ensures decisions by discussion and debate, but the decision and debate must be conducted honestly and objectively, and the decisions must be arrived at on merits, without being influenced or actuated by extraneous considerations. On first impression, it would appear that any attempt on the part of any one to finance the political party is likely to contaminate the various springs of Democracy. Democracy would be vitiated if results were arrived at not on their merits, but because money played a part in bringing about those decisions. The form up and trappings of Democracy may continue, but the spirit of underlying Democratic Institutions will disappear. History of Democracy has proved that in other countries Democracy has been smothered by big business and money bags playing an important part in the working of Democratic Institutions. And it is the duty not only of politicians but also... not only of politicians, not only citizens, but even of a Court of Law to the extent that it has got the power to prevent any influence being exercised upon the voter, which is an improper influence and may be looked at from any point of view as a corrupt influence. The very basis of Democracy is the voter, and when in India we are dealing with adult suffrage, it is even more important than elsewhere that not only the integrity of the representative who is ultimately elected to Parliament is safeguarded, but that the integrity of the voter is also safeguarded. And it may also be said... and it may be said that it is difficult to accept the position that the integrity of the voter and that of a representative is safeguarded, if large industrial concerns are permitted to contribute to political funds to bring about a particular result.' Thereafter, he says... then...
JUSTICE J.B. PARDIWALA: Read para 17, Mr. Bhushan.
PRASHANT BHUSHAN: 7?
JUSTICE J.B. PARDIWALA: 17.
PRASHANT BHUSHAN: 17. Yes, yes. 'The learned Judge, trial Judge has very rightly wanted to impose certain conditions before he would make the order as he was entitled to do. And it must again be said in fairness to the company, that the company volunteered, voluntarily offered to accept those terms, and they now form part of the Order. And the terms are that all contributions made by the company to any political party should be clearly shown in the Profit and Loss account and the balance sheet of every year of the company. Now even Mr. Seervai, who was appearing for the Tata concedes that one way of controlling and curbing this mischief is to give complete publicity to the donations made by trading and industrial corporations to the political... to the political funds of different parties. It is essential that the elector should know how a party is being financed and by whom and to what extent. It is necessary in order to decide the credentials of a party to know with whose strength and with whose support, it has come to the polls. Mr. Seervai says, that the conditions which the company has voluntarily undertaken to comply with, is sufficient to ensure such publicity. In our opinion, it is not. Mr. Seervai points out, that the report of the company will go to 37,000 shareholders and 37,000 keen eyes will peruse the report of the company. But we are not interested with shareholders in this context. That is one section of which we are least concerned or interested in. We are concerned with the millions of voters of this company, who can never afford the luxury of buying or holding shares. And it is these people, whom we want to protect and whose interests we want to safeguard. It is these people who should know, when to go to the polls, when they go to the polls, for whom they are voting, and therefore, if publicity is necessary, it is necessary to enlighten these voters, as to what form, and under what shape and with whose support, the political parties come to polls. Therefore, we will add to the condition already imposed by the learned Judge, and we will impose a condition on the order passed by the learned Judge, confirming the alteration that the company at the end of each financial year, will publish in two leading newspapers of India, one which must be published in Bombay, a complete statement of all contributions and donations, made to it, by any political party, or to any political institution, or any political cause. Before parting with this case, we think it is our duty to draw attention of Parliament, to the great danger inherent in permitting companies to make contributions to the funds of political parties'. Pausing here for a moment, My Lord, The Supreme Court of Brazil has prohibited corporate donations to political party, by a judicial order. By a judicial order, they have prohibited. They say that corporates cannot be permitted to fund political parties. Here what we are doing is going exactly the opposite direction. We have even removed that limit of 7.5%. We have permitted foreign funding and so on. It is a danger that may and may even throttle democracy in this country. Therefore, it is desirable for Parliament to consider, under what circumstances and under what limitations, companies should be permitted to make these contributions. As Mr. Seervai has pointed out, it is only because TISCO, did not have such provision in its memorandum and had come to court, that we could impose such a condition upon it. The other companies which already have such an object included in their memorandum, are under no obligation to publish to the world, what funds they are contributing and to whom. Democracy cannot function unless, voters have all the necessary information about parties, for whom they are going to vote. In our information, 273 is not sufficient check on this evil, by powers are conferred upon the directors, etc. So, they say that Parliament should bring about. Here, we are doing the opposite, we are instead of providing for greater transparency, we are removing whatever transparency that existed, by this means. Coming back, My Lord, to the written submission. So, it's a very, very prescient remark made by Justice Chagla... I have My Lord, in my written submissions, I have quoted, from some other judgments also, I am not going to read it out because they are all effectively saying similar things.
CHIEF JUSTICE DY CHANDRACHUD: Then let's go to the next submission. On the Right to Information, you've made your point.
PRASHANT BHUSHAN: Yes, yes. Now, My Lord. Coming to the next submission,
CHIEF JUSTICE DY CHANDRACHUD: 21.
PRASHANT BHUSHAN: Page 29, that they violate Article 21, by promoting corruption, by legitimizing anonymous funding leading to quid pro quo, between political parties and corporates individuals and also encourage money laundering on a large scale. Electoral Bonds by the very nature bely the objective, for which they were introduced. These instruments allow political parties to receive huge funds from anonymous entities and thereby facilitating a quid pro quo in the form of kickbacks and preferential treatment to these funding entities. Large contributions running into hundreds of crores from one corporate house to a political party, which is more often than not the ruling party is bound to result in political favours, increasing the influence on policy decisions and thus an increased control on democratic processes in the country. The impugned amendments have facilitated and legitimized all of the above. RBI and EC had also warned the government in strong words about the possible misuse of Electoral Bonds. However, the views of these institutions were overruled in a bid to introduce Electoral Bonds. The impugned amendments have in fact legitimized unlimited funding by corporates, even foreign companies.
CHIEF JUSTICE DY CHANDRACHUD: You have really shown this actually. When you are making your submissions, you've already argued the point, actually.
PRASHANT BHUSHAN: Yes, I was saying, now just see the data. Now just see the data My Lord in Volume 4.
CHIEF JUSTICE DY CHANDRACHUD: Yes please show us that.
PRASHANT BHUSHAN: Volume and just turn to page... the report starts.... this is a report of the Association for Democratic Reforms, which does a very thorough job. Starts at page 719 of Volume 4, Electoral Bonds and Opacity of Political Funding.
JUSTICE B.R. GAVAI: Page? Page?
PRASHANT BHUSHAN: Page 719, of Volume 4. That's where the report starts. But Your Lordship may straight away come to this chart at page 726. So, first is... first is that chart at page 726 which shows that 94.25%, or 12,999 crores of the total value of bonds purchased were in denomination of crore indicating that these bonds are being purchased by corporates rather than individuals. So this is the...
CHIEF JUSTICE DY CHANDRACHUD: Where do we get that? Actually we of course, have that bar chart. But where do you have the percentages? Oh yes, yes.
PRASHANT BHUSHAN: Actually, haan on top, Para 3. So now, by now actually 13,000 crores of bonds have been purchased. 13,000 crore this is vast bulk of now the political funding of political party is only through this instrument. And then the next page 727. Sorry, not 727. 728. Now, this was only up till last years. That is up till the financial year 2021-22 only that the bar chart at the bottom of this page 728. Party wise Electoral Bond declared in the audit reports for the last years in crores. Now, if Your Lordship just sees BJP, the first party, in total 5271 crores.
CHIEF JUSTICE DY CHANDRACHUD: Where do you get that?
PRASHANT BHUSHAN: The first line page 728 at the bottom of page 728, Party Wise Electoral Bonds, the bars, the green bars.
CHIEF JUSTICE DY CHANDRACHUD: Yes.
PRASHANT BHUSHAN: At the bottom of, total is at the bottom and party by party it's given. BJP 5271 crores. Now this was only up till 2021-22 after that more than 3500 crores worth of more bonds have been purchased that is after between after financial year 2021-22, another more than 3000 worth of Electoral Bonds. But this is up till 21-22. Now, see BJP total is 5271 crores. Out of a grand total of 9191 crores. Grand total is on the right bottom.
JUSTICE SANJIV KHANNA: Mr. Bhushan, I'm sorry. Paragraph says, BJP received donations through Electoral Bonds, Rs. 1033.70.
PRASHANT BHUSHAN: That's year by year. I'm just saying total. Come to the bottom My Lord.
JUSTICE SANJIV KHANNA: Bottom?
PRASHANT BHUSHAN: Bottom is the Total. Total for years. Since the bonds were introduced. At the bottom left of this chart, of this green bar chart, bottom left shows total BJP - 5271. Has Your Lordship got it?
CHIEF JUSTICE DY CHANDRACHUD: Yes.
PRASHANT BHUSHAN: So, 5271 is the Total Bonds received by BJP. 952 is received by Congress. 767 is received by Trinamool Congress. 63 crores is received by NCP. 383 is received by TRS. 112 is received by TDP. 330 crores is received by YSR. 622 is received by Biju Janata Dal. 431 is received by DMK. 101 crores is received by Shiv Sena. After that 48 Crores is received by Aam Aadmi Party. crores by JDU. crores by Samaj... Now, after that they are insignificant. Now if Your Lordship sees the only significant contribution are all to ruling parties, either at the Centre or at the States. There is no significant contribution to any party which is not in power in the Centre or in the States during this period. All these parties are in power. And the central ruling party has received more than 50%, almost 60% of the total contributions. And then Your Lordship may turn to page 736 of the same thing. Summary and Highlights... This is for years. This is for years. Now, just see summary and highlights. 'The total do donations received by the political parties analysed during the year period, year period was 16,000 an odd crore. Donations worth 9188 crores were from Electoral Bonds. Therefore, that is 55.9% of the total donations are only from this one Electoral Bonds. 4600 crores were received from the corporate sector. 2600 crores were received from other sources.' Then para 4, My Lord - 'Electoral Bonds are the most preferred mode of donations for contributing to national and regional parties amounting to so and so, followed by direct corporate donations worth 4600.' Out of this corporate donation, large percentage would be through Electoral Trusts which are also kind of semi-anonymous, though not fully anonymous. Then they say -'The total donations declared by BJP is more than three times the total donation declared by all other national parties put together. During the year period, more than 52% of BJP's total donations came from Electoral Bonds worth 5271 crores, while all other national parties amassed 1783 crores, INC etc.' So, therefore, what this shows is that - Number one - that Electoral Bonds has become the main source of donations to political... funding political parties. It is by far the majority of the funding. Number - that almost all the donations through Electoral Bonds are being received by the ruling parties, primarily by the ruling party at the Centre and secondarily, by ruling parties in the States. Number 3- that essentially all the donations, because 94 point some percent, are in denominations of crore, and the remaining are in denomination of lakhs. Virtually nothing below that. Almost not even 0.1%, below that, it's all lakhs and crore. So therefore, is mostly corporate funding. And then My Lord, I now want to show some interesting facts about, who is giving this money. Para 52 of my written submissions, coming back to my written submissions page 30. A company which is investing in a political, 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, legislations, regulations and executive orders as also favourable contracts going to the donor company, their friends and allies. This quid pro quo arrangement between the parties, politicians, and corporate entities, is a premeditated and the most sophisticated arrangement, where, instead of breaking a rule or regulation, the system is just bent enough, in such a way so as to benefit the corporate or the rich donor. In this scheme of things, the party... the only party at loss, are the citizens.
JUSTICE B.R. GAVAI: This can be used as a kickback.
PRASHANT BHUSHAN: Yes. And I'm saying that there is circumstantial evidence showing that it is being used as a kickback, because circumstantial evidence is that... Actually you have legalized kickbacks. By this instrument, you have legalized kickbacks, because you can easily give a kickback and get away by anonymizing this kickback. Para 53. So, it is also astonishing, that if the government's arguments is to be accepted, that no one except SBI has the details about donors then that would mean, that the Election Commission, Government of India, Enforcement Directorate, have no access to the list of donors unless, some alleged criminal offense is already being investigated and they have specific information, that money has been routed through Electoral Bonds. This means that it is 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. Such is the effect of the impugned amendments, that even subsidiaries of foreign companies, which have never carried out legitimate business in India, can now secret secretly funnel hundreds of crores to a political party. The corporates also do not have to disclose to whom they have made their contribution in the balance sheet. The bonds are fashioned in a way that, the money could secretly pass several hands to reach the ultimate political beneficiary political party, thereby creating further layers of opaqueness and potential for money laundering. Now, this is important. According to a Business Standard report dated 21-06-2023, that is page 766, Your Lordship may note, page number is not given, Volume 766...
CHIEF JUSTICE DY CHANDRACHUD: We've got the page number over here in para 55. You have given the page number.
PRASHANT BHUSHAN: Right, Vedanta Limited, a multinational mining company headquartered in Mumbai, donated 457 crores, so this one company, from whose returns we have been able to see, that they donated 457.... they disclosed in the Stock Market, in the last five year s to political parties through these bonds. Vedanta's donation only for Financial Year '23 was 155 crores, which was higher than 123 crores donated in Financial Year '23 according to the Stock Exchange disclosures by the Company. It is interesting to note, that in Financial Year '23 Vedanta Limited had been declared as a preferred bidder for various mining licenses, namely, Bicholim Iron Ore Block, in Goa, something bauxite, some coal blocks in Odisha and in Chhattisgarh. While various newspaper portals have reported that Vedanta is facing severe financial crisis, it is under a lot of debts. It is still donating 100's crores. The same raises severe concerns about... regarding the fact as to why such high donations are being made when the company is under debt. An investigative report by the International Investigative Group Organized Crime and Corruption Reporting Project, 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 Union Government where key environmental regulations were modified in favour of Vedanta, who had been an important donor to the BJP. Two entities linked to Vedanta subsidiary, Bhadram Janhit Shalika and Janhit Electoral Trust gave a combined 43 crores to the party between 2016 and 2020. So, this is what I was saying about Electoral Trust there is some transparency, though not full transparency. This Electoral Trust was created by Vedanta. So, the donation from just one of the trusts...
CHIEF JUSTICE DY CHANDRACHUD: We'll continue after lunch.
PRASHANT BHUSHAN: I'll finish in an hour, by o' clock....
CHIEF JUSTICE DY CHANDRACHUD: Try and do it in about or minutes. You made your point, really. Now what remains? PRASHANT BHUSHAN: No, there is about democracy. The effect on democracy.
CHIEF JUSTICE DY CHANDRACHUD: Half an hour, we'll give you half an hour. 1:30. I give some time.
PRASHANT BHUSHAN: I'll finish by o'clock. I'll definitely finish by...
CHIEF JUSTICE DY CHANDRACHUD: We'd like to wrap up this side by 04:00 today. So that then we can put the others in. JUSTICE B.R. GAVAI: Mr. Bhushan rather than reading your submissions, you can formulate your submissions.
PRASHANT BHUSHAN: I'll finish in 45.
CHIEF JUSTICE DY CHANDRACHUD: What is the next point you want to make Mr. Bhushan?
PRASHANT BHUSHAN: If Your Lordship just see that IFB Agro, so they disclosed under Volume 4, page 784. Right. I told Your Lordship, that Vedanta has been given various contracts. Several, they've...
JUSTICE B.R. GAVAI: You've already told us that in spite of it being in losses, still it is paying Electoral Bonds. PRASHANT BHUSHAN: Not just losses. I'm just saying that there are a number of mining contracts, etc. that Vedanta has been getting. It's also the largest donors of Electoral Bonds to political parties. So, that much we know. Now, just see this Agro, IFB Agro case. Page 784 of Volume 4. Document 77. These are just examples which will show that there is substantial indication that these bonds are being given by way of kickbacks to influence either government decisions or influence government policy. Now, let's see 784 of Volume 4. This is a disclosure made by this company called IFB Agro Industries limited, under the LODR requirements of SEBI. It says- 'we write in continuation of our earlier letters to the Stock Exchanges, wherein we have intimated about excise related issues being faced by or affecting the company. The Board of Directors in its meeting dated 31st March, 2022, considered such issues and in the best interest of the company and all its stakeholders decided to approve contributions to political parties by way of subscription to Electoral Bonds, in one or more tranches aggregating to not more than 40 crores in financial year 2022-23'. So, this is a somewhat direct indication that they have given that this, one company has given, that it has subscribed and given Electoral Bonds for, because that was facing excise related issues. So, to ward off excise related issues, they have paid these Electoral.
CHIEF JUSTICE DY CHANDRACHUD: Perhaps Mr. Bhushan, we will keep individual cases out of reckoning because the reason is those companies are not before us.
PRASHANT BHUSHAN: No, no. I understand.
CHIEF JUSTICE DY CHANDRACHUD: Also, any observation which we make in regard to those companies may implicate them in criminal wrongdoing.
PRASHANT BHUSHAN: I'm not saying that Your Lordship...
CHIEF JUSTICE DY CHANDRACHUD: So, we will take it as a sort of an illustration by you to buttress your argument. 39
PRASHANT BHUSHAN: Of course. Of course.
CHIEF JUSTICE DY CHANDRACHUD: The constitutional argument can't rest on that.
PRASHANT BHUSHAN: Yes, yes, it is an illustration.
CHIEF JUSTICE DY CHANDRACHUD: Also, as a matter of first principle, they are not before us.
PRASHANT BHUSHAN: I understand. Now My Lord, para 59 of my written submissions. There is a quote from PUCL, that is that judgment by which this Court struck down that Section 33-B, which was brought in the Representation of People Act, to obviate the disclosure. Now this is actually a quotation from... given in that judgment, from the National Commission for Review of the Constitution… Review of Working of the Constitution. This says 'High cost of elections and abuse of money power'. One of the critical problems in the matter of electoral reforms, is the hard reality that for contesting an election, one needs large amounts of money. The limits of expenditure prescribed are meaningless and almost never adhered to. As a result, it becomes difficult for the good and honest to enter legislatures. It also creates a high degree of compulsion for corruption in the political arena. This has progressively polluted the entire system. Corruption, because it erodes performance, becomes one of the leading reasons for non-performance and compromised protection, unaccounted funds from business groups who expect a high return on this investment, kickbacks or commissions on contracts, etc. No matter how we look at it, citizens are directly affected, because apart from compromised governance, the huge amount… the huge money spent on elections, pushes up the cost of everything in the country. It also leads to unbridled corruption, and the consequences of widespread corruption are even more serious than many can imagine. Electoral Compulsions for funds, becomes the foundation for the superstructure of corruption’. And then My Lord, there is a quote from Subramanian Swamy, that’s what…
CHIEF JUSTICE DY CHANDRACHUD: That we not read. It's about corruption in politics and…
PRASHANT BHUSHAN: Yes. And that corruption actually erodes everything in a democracy. And then in the supplemental Judgment, page 34, Justice Ganguly's judgment, he clearly and directly says, ‘Today corruption in our country…’ Para 81. ‘Today, corruption in our country, not only poses a grave danger to the concept of constitutional governance, it also threatens the very foundation of Indian democracy and the rule of law. The magnitude of 40 corruption in our public life is incompatible with the concept of a secular, socialist, democratic, republic. It cannot be disputed that where corruption begins, all rights and… corruption devalues human rights/development, and undermines justice, liberty, equality, fraternity, that are the core values of our preamble vision. Therefore, the duty of the Court…’
CHIEF JUSTICE DY CHANDRACHUD: Mr. Bhushan, actually, we can go to your last point, which is that, this is a subversion of democracy.
PRASHANT BHUSHAN: Yes, yes.
CHIEF JUSTICE DY CHANDRACHUD: We will read your judgments. We have all the judgments now. How would you actually conceptualize it? How would you conceptualize it?
PRASHANT BHUSHAN: So then My Lord, the argument is…
CHIEF JUSTICE DY CHANDRACHUD: That’s your third last?
PRASHANT BHUSHAN: Electoral Bond… yes. If Your Lordship sees, the third argument starts at page 36. Now, if Your Lordship first looks at the quotation that I have given from the Law Commissions Report at page… bottom of page 36. This is the Law Commission's Report on Electoral Reforms, and this comes just before the Electoral Bonds were introduced, March 2015. So, there's a quote from there. ‘First is the undeniable fact that financial superiority translates into electoral advantage, and so richer candidates and parties have a greater chance of winning elections. This is best articulated by the Supreme Court in Kanwar Lal Gupta versus Amar Nath Chawla’, where there's a quote from that. ‘Money is bound to play an important part in the successful prosecution of an election campaign. Money supplies assets for advertising and other forms of political solicitation, that increases the candidate’s exposure to the public. Not only can money buy advertising and canvassing facilities such as hoardings, posters, handbills, brochures, etc., and all the other paraphernalia of an election campaign, but it can also provide the means for quick and speedy communication and movement, and sophisticated campaign techniques, and is also a substitute for energy, in that, paid workers can be employed, where volunteers are found to be insufficient. The availability of large funds does ordinarily tend to increase the number of votes a candidate will receive. If therefore, one party or individual has a larger resource… has larger resources available to it than another individual…’
CHIEF JUSTICE DY CHANDRACHUD: It can be formulated like this. Maybe your submission will be like this, that the party in power, is in a much more vantage position to secure a greater amount of funding through the electoral bonds because of its ability to dole out a quid pro quo in the form of government contracts or government leases or licenses or concessions.
PRASHANT BHUSHAN: Or policy changes or...
CHIEF JUSTICE DY CHANDRACHUD: Or policy changes which will benefit that particular industry
PRASHANT BHUSHAN: Or warding off excise issues, etc., etc. So there are all those...
JUSTICE B.R. GAVAI: All those favours.
CHIEF JUSTICE DY CHANDRACHUD: All those favours and by therefore concentrating the allocation of electoral bonds to the Party in power. This is a very important source of perpetrating power and therefore it is contrary to democracy.
PRASHANT BHUSHAN: Yes, in fact, My Lord...
CHIEF JUSTICE DY CHANDRACHUD: I think that could be the formulation really.
PRASHANT BHUSHAN: Today, money is universally recognized by the Law Commission, by various bodies, including judgments of this court that money power or the very unequal use of money power erodes the concept of free and fair elections, or a level playing field in elections etc. And what this electron bond is doing is, that it is further making that playing field uneven by as I showed My Lord, almost all the electoral bonds, 99.9% have gone either, more than 50% have gone only to the ruling party at the Centre, and the remaining, almost all the remaining have gone to ruling parties in the States. Only one party I am told that is CPM, which is before Your Lordship has consciously refused to take Electoral Bonds. So, even though they are the ruling party in one state., they have not received any Electoral Bonds. But, otherwise almost all the Electoral Bonds have gone only to ruling parties and therefore and Electoral Bonds cannot even be taken by smaller parties which receive less than 1% votes, and they cannot be taken by individual candidates. Therefore, what this instrument is doing is by privileging the ruling parties because it's easy way of getting your policies changed, your decisions changed, various other favours from the ruling parties, obviously, favours can only be given by the ruling party, the party, which is in control of the government. Therefore, it is further skewing the level playing field in elections. It was already skewed but instead of setting that right in fact, there should have been a limit on the expenditure of political parties. Instead of doing those things or saying that political parties and candidates should only take money and spend money through banking channels is doing exactly the opposite. This Electoral Bonds. It's allowing, in fact My Lord, there are a large number of companies which do not have so much black money. They have only white money. CHIEF
JUSTICE DY CHANDRACHUD: In the erstwhile regime, prior to the Electoral Bonds, a corporate entity could make contributions as well. It was 7.5% of your profits.
PRASHANT BHUSHAN: Yes, but they had to disclose.
CHIEF JUSTICE DY CHANDRACHUD: That's right. That's what I was coming to. The difference there was that you had your duty to disclose, so that by your disclosure, there can be a public scrutiny into whether, this is really a quid pro quo for any benefits that you have received in terms of government contracts, licenses, policies, concessions.
PRASHANT BHUSHAN: So, there are two separate arguments resting on this, My Lord. One is, that this is promoting corruption. This instrument of anonymized donations is promoting corruption, that's one separate argument. And corruption has been held to be part of or a corruption free society is part of Article 21, Rights of the Citizens. So, this is one argument. The other argument is, that it is actually eroding democracy itself. Because it is queuing the level playing field between ruling parties and opposition parties on the one hand and between parties and candidates on the other hand.
CHIEF JUSTICE DY CHANDRACHUD: And another point, perhaps which you may also want to explore is that this is not an anonymized donation in relation to the donee. It's an anonymized donation in relation to the rest of society. The donee, may or may not, but could know who the source is.
PRASHANT BHUSHAN: Normally they would know. Normally they would know because...
CHIEF JUSTICE DY CHANDRACHUD: That's whatI said. So, according to you therefore, when you say anonymized donation it's not really anonymized in relation to the donee to receive the fund.
PRASHANT BHUSHAN: Correct. Absolutely, absolutely right. It's anonymized for the rest of society.
CHIEF JUSTICE DY CHANDRACHUD: it's anonymized in terms of the disclosure of the name to the wider public.
PRASHANT BHUSHAN: So, it's anonymized at two ends. It's anonymized at the end of the company or the person who buys the bonds by the scheme itself. Meaning that nobody else other than the person and the State Bank can come to know who's buying the bonds and law enforcement agencies, if they are investigating some act of corruption in relation to these bonds, etc. The second is that the political parties which receive...
JUSTICE SANJIV KHANNA: That's because of the exceptions carved out in the rules, the investigating agencies can verify that, but obviously the general public is not aware of that.
PRASHANT BHUSHAN: Yes, yes, general public will not come to know. So therefore, it's at the one hand, on one hand, it is promoting corruption and thereby violating Article rights. And on the other hand, it is skewing the electoral system in favour of the ruling parties and in favour of parties vis-a-vis candidates further skewing...
JUSTICE SANJIV KHANNA: But Mr. Bhushan, even if the earlier regime was there, the donations to the ruling party will be always more sizable in number compared to the non23 ruling party. PRASHANT BHUSHAN: True to some extent. Yes, they would be more sizable in number. But I'm saying that here...
JUSTICE SANJIV KHANNA: So, whether we have this system or the earlier system...
PRASHANT BHUSHAN: So, here you are giving kickbacks. Earlier...
JUSTICE B.R. GAVAI: Earlier system also it could have been, but at least the donor and donee, they had to make the disclosures.
PRASHANT BHUSHAN: There you could be prosecuted. If you had given donations to a political party who in turn, had given you some favours by way of mining contracts, etc., you could be prosecuted for corruption. But now, because nobody will come to know as to who has donated, whether you have received some quid pro quo, etc., therefore, it is promoting corruption. It is privileging. And if Your Lordship will see, that now virtually all the donations or most of the donations are coming by way of Electoral Bonds. So therefore, and the bulk is going to the ruling party.
CHIEF JUSTICE DY CHANDRACHUD: In the case of a company, now even the shareholders will not be told who you are contributing to. The shareholders will only be given the net result.
PRASHANT BHUSHAN: Correct.
CHIEF JUSTICE DY CHANDRACHUD: That we have contributed as a company, 250 crores this year.
PRASHANT BHUSHAN: Correct.
CHIEF JUSTICE DY CHANDRACHUD: Shareholders now have no access to who you have contributed that amount to.
PRASHANT BHUSHAN: That's why in that Justice Chagla's judgment, the TATA judgment, they said that, yes, we are allowing you to change your memorandum because you are permitted. But, you will have to advertise in the newspapers saying where and to whom you have donated. And they said that, we are doing it because they have come to us with permission to amend the memorandum. But other companies may have already this provision in their memorandum or in their Articles that they can donate to political parties. And therefore, at the end they have cautioned that we are now advising Parliament to bring in a law which will make it mandatory for public disclosure. Of course, even earlier in the regime, citizens could find out who has donated to whom, because even when companies donated to particular parties, they were still obliged to maintain accounts and disclose their accounts in the company website. But, ordinary citizen is not expected to be able to go through all the websites of all these lakh companies to find out who has donated to whom, etc. Therefore, they said in that judgment, that we are placing this condition upon you that you disclose it by way of advertisement to the public. And they said, that because this requirement is not there for other companies who may already have political donations in their Articles of Association. Therefore, we are now advising Parliament to bring in a law to make this disclosure compulsory. Now, instead of doing that, we have gone exactly in the opposite direction. That we have now anonymized to the public, even that possibility of coming to know from the 45 returns of these companies, who has donated and to whom, because that has been removed. So therefore,... therefore, my submission is, that this will, this will destroy democracy. It's already, our democracy was almost a money game. It had become a money game.
CHIEF JUSTICE DY CHANDRACHUD: We’ve got your third point also; you've made your point. We then conclude now? CHIEF
JUSTICE DY CHANDRACHUD: Just…
CHIEF JUSTICE DY CHANDRACHUD: You can just wrap up now and…
PRASHANT BHUSHAN: Your Lordship may just see it. I mean, I don't even have to read…
CHIEF JUSTICE DY CHANDRACHUD: If there’s something crucial that we have missed out, you can show that. Just flag it for us, and then we’ll look at it, definitely.
PRASHANT BHUSHAN: So, I have, My Lord, at page 37… 36. I have given the quotations from the Law Commission's Report on…
CHIEF JUSTICE DY CHANDRACHUD: Fair enough. That we'll have a look at.
PRASHANT BHUSHAN: Now, these are quite important, because they were suggesting exactly the opposite. They also suggested that this 7.5% is also too much. Large corporates can donate huge amounts of money. And My Lord, Brazil Supreme Court, which we have also mentioned, Brazil Supreme Court has banned… Para 73.
JUSTICE SANJIV KHANNA: That may have its own consequences in terms of source of collection of money.
PRASHANT BHUSHAN: Pardon My Lord?
JUSTICE SANJIV KHANNA: That they have its own consequences, because for election funding is a major issue; it's not something very simple.
PRASHANT BHUSHAN: Yes. Yes.
JUSTICE SANJIV KHANNA: It’s a complicated issue. Anyway, we have understood your…
PRASHANT BHUSHAN: No. What is happening as a result of this is, as it is, the reason why elections became a money game, which is mentioned in all these reports, whether it's Law Commission or the Constitution Review Committee or various judgments of this Court. One of the reasons is that, we have first passed the post in our system at two levels - when we vote for our candidates, and then when we select the government. First pass of the post is that, only that candidate who receives the highest number of votes, even if he gets only 30% vote, becomes the sole representative of that constituency. Second first passed of the post is, only that party or coalition which has a majority gets the whole government, and the rest of the opposition, even if it's there 49% seats, gets nothing. The result of these two first passed the posts system is, that when you vote for your candidate at the time of elections, you are not necessarily voting for the candidate or the party that you consider to be the best. If you feel that that best party has no chance of winning, you don't want to waste your vote. So, then you say, “All right, these are the only two parties which have some chance of winning or forming the government. I will choose the least bad, in my perception, among these two parties”. JUSTICE B.R. GAVAI: How is that relevant Mr. Bhushan?
PRASHANT BHUSHAN: Pardon My Lord?
JUSTICE B.R. GAVAI: How is this argument relevant?
PRASHANT BHUSHAN: Because…
JUSTICE B.R. GAVAI: Are we going to change the Constitution?
PRASHANT BHUSHAN: No, no, I'm not saying that. I'm saying that, reason why elections have become a game of money, is partly because of this first pass the post system, because the perception as to which party has some chance of winning, is formed on the basis of the visibility of the parties and this is stated by the Election Commission very clearly… by the Law Commission very clearly in their report. That visibility is a function of money. Because with money, you can advertise, you can put up holdings, billboards, you can have paid workers, you can do everything with money. Today, even rallies are organized.
CHIEF JUSTICE DY CHANDRACHUD: All right. I think we'll wrap up now Mr. Bhushan. Yes.
PRASHANT BHUSHAN: What I was saying is, that instead of curbing, instead of going…
JUSTICE B.R. GAVAI: You have already said, instead of curbing, it promotes corruption. It interferes in free and equal…
CHIEF JUSTICE DY CHANDRACHUD: Mr. Bhushan, we'll hear you now in rejoinder once we hear the other side. There will be lot of… they will cover some ground which…
PRASHANT BHUSHAN: All that I wish to say is that, I thank this Court for giving me this opportunity, and I thank all my colleagues who have put together such an excellent note and…
CHIEF JUSTICE DY CHANDRACHUD: Thank you, Mr. Bhushan.