The Karnataka High Court on Tuesday quashed a first information report against Bharatiya Janata Party’s former state unit chief Nalin Kumar Kateel for alleged extortion in connection with the now-scrapped electoral bonds scheme, Live Law reported.

The order was passed by Justice M Nagaprasanna who had earlier stayed the investigation in the case after Kateel challenged the registration of the first information report in the matter.

Kateel was the BJP Karnataka chief between 2019 and 2023.

Union Finance Minister Nirmala Sitharaman is among other BJP leaders named as co-accused in the case.

The court, however, restricted the quashing of the FIR only to Kateel as other accused persons, including Sitharaman, have not yet filed a petition against it, The Hindu reported.

In September, the Karnataka Police had booked Kateel, Sitharaman and others for allegedly misusing the electoral bond scheme to extort money from companies.

The FIR was filed based on directions from a Bengaluru court under the Indian Penal Code sections pertaining to punishment for extortion and criminal conspiracy, read with acts done with common intention.

The directions of the Bengaluru court had come on a complaint by activist Adarsh R Iyer of the non-governmental organisation Janaadhikaara Sangharsha Parishath.

Iyer claimed that Sitharaman and officials of the Enforcement Directorate connived with leaders and office bearers of the BJP to commit “extortion under the guise and garb of electoral bonds and benefited to the tune of 8,000 and more crores of INR [Indian Rupees]”.

The complainant also claimed that the Union finance minister had used the central law enforcement agency to “conduct raids, seizures and arrests to compel the corporates to pay”.

The Enforcement Directorate reports to the finance ministry.

Fearing raids, several companies were forced to purchase electoral bonds, which were encashed by the Hindutva party, the complainant had claimed. “The entire extortion racket under the garb of electoral bonds have been orchestrated in connivance with BJP officials at various levels,” he alleged.

The BJP had said that the allegations were politically motivated and that the scheme was a policy matter.

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In his plea challenging the registration of the FIR, Kateel argued that he and the others had been “falsely implicated” in the matter with an ulterior political motive, Bar and Bench reported.

During the hearing, Advocate Prashant Bhushan, representing the complainant, argued that the allegations in the matter are a “classic case of extortion”. Bhushan said that there was no provision in law to prevent citizens from invoking criminal law if grave offences had been allegedly committed, according to Bar and Bench.

Electoral bonds were monetary instruments that citizens or corporate groups could purchase from the State Bank of India and give to a political party, which would then redeem them. The scheme was introduced by the BJP government in January 2018.

The process was anonymous as buyers were not required to declare their purchase of these interest-free bonds and political parties did not need to show the source of the money. The Centre, however, had access to information about the donors as it controls the State Bank of India.

The State Bank of India was authorised to issue and encash electoral bonds through authorised branches.

The scheme was struck down as unconstitutional by the Supreme Court in February on the grounds that it violated voters’ right to information and could lead to quid pro quo arrangements between donors and political parties.

The Supreme Court had also directed the State Bank of India to publish details of the political parties that received electoral bonds from April 12, 2019, and submit them to the Election Commission. The poll panel had to make the data public.

An analysis of data revealed that the ruling BJP had received the bulk of the donations made through the anonymous scheme.

In August, the Supreme Court refused to set up a Special Investigation Team to probe alleged instances of quid pro quo arrangements through the electoral bonds.

The court said it would be premature and inappropriate to do so when the ordinary methods of seeking legal recourse have not yet been invoked.