Non-governmental organisation Association for Democratic Reforms on Tuesday moved the Supreme Court seeking a direction to stop further sale of electoral bonds. The organisation’s plea cited “serious apprehension” that the sale of any more electoral bonds ahead of the elections to four states and one Union Territory would lead to an increase in illegal funding of political parties through shell companies.

The Assembly elections in four states – Tamil Nadu, West Bengal, Assam and Kerala – along with the Union Territory of Puducherry will be held between March 27 and April 29. The results will be declared on May 2. This will be the first set of major elections to take place in the country amid the coronavirus crisis, after the Bihar Assembly polls in October-November.

The NGO filed its application through senior advocate Prashant Bhushan in a writ petition that the organisation had filed in 2017, challenging the provisions of the Finance Act that cleared the way for anonymous electoral bonds. The ADR also filed an urgent listing of its 2017 writ petition.

“That the Electoral Bonds scheme has opened the floodgates to unlimited corporate donations to political parties and anonymous financing by Indian as well as foreign companies which can have serious repercussions,” the plea read. “The petitioner seeks a direction that no further opening of window for the sale of EBs be allowed during the pendency of the instant writ petition.”

In its plea, the NGO also listed the reasons to establish that the use of electoral bonds was a “cause of concern”. “Political parties are not required to disclose the name of the person/entity donating to a party through electoral bonds,” it read. “Since the bonds are bearer instruments and have to be physically given to the political parties for them to encash, parties will know who is donating to them. It is only the general citizens who will not know who is donating to which party.”

The plea also noted the removal of the 7.5% limit on net profits of the last three years of a company, which the organisation said had led to increased corporate funding as there was no cap on how much they can donate.

The ADR plea said:

“It opens up the possibility of companies being brought into existence by unscrupulous elements primarily for routing funds to political parties through anonymous and opaque instruments like electoral bonds. 

This has increased the opacity of funding of political parties, and the danger of quid pro quo and opacity of any benefits are passed on to such companies or their group companies by the elected government.

— The ADR petition

The contribution received by any eligible political party through electoral bonds will be exempted from Income Tax as per Section 13A of the Income Tax Act, the petition highlighted.

The plea also noted that the ruling Bharatiya Janata Party at the Centre had opened special sale window of the electoral bonds ahead of state Assembly polls. “That as per data on Electoral Bonds declared by political parties in their audit reports for the FY 2017-’18 and FY 2018-’19, the ruling party had received more than 60% of the total electoral bonds issued till date,” the plea said. “That so far more than Rs 6,500 crores worth of EBs [electoral bonds] have been sold with the majority of donations going to the ruling party.”

The Centre had notified the electoral bond scheme on January 2, 2018. Electoral bonds are monetary instruments that citizens or corporate groups can buy from the State Bank of India and give to a political party, which is then free to redeem them for money. These bonds are anonymous. The scheme was notified in January 2018. These bonds are issued four times every year in January, April, July and October. This year, they were issued only in January and October.

In December, the Central Information Commission, the highest appellate authority under the Right to Information Act, ruled that there was no public interest in disclosing details of electoral bond scheme donors.

According to an RTI response, electoral bonds of about Rs 62,10,39,47,000, or Rs 6,210 crore, printed over 13 phases, were sold since 2018 till March 2020. Printing the electoral bonds cost Rs 1.85 crore since the beginning of the scheme in 2018. A review of the details on the electoral bonds that were printed and sold showed a significant wastage of money as a large number of the lower denominations remain unsold.