The Supreme Court on Wednesday reserved its order on a plea seeking directions to stop further sale of electoral bonds ahead of the Assembly elections in West Bengal, Assam, Tamil Nadu, Kerala and Puducherry, Live Law reported.

The three-judge bench headed by Chief Justice of India SA Bobde, however, expressed concern on the possible misuse of these bonds. “If a political party gets Rs 100 crore worth bonds what is the control over the use of these bonds for illegal activities or purposes outside political agenda?” the bench asked, according to the Hindustan Times. It directed the Centre to look into these concerns.

The court also expressed apprehension that the money might be used to fund terror activities. “There are political parties who do terrorism,” CJI Bobde said. “We are not sure of what we are saying but this angle of possibility of funding of terrorism through funding needs to be examined.”

The observations were made on a plea filed by the Association for Democratic Reforms. The non-governmental organisation has expressed “serious apprehension” that the sale of electoral bonds ahead of the Assembly polls would lead to an increase in illegal funding of political parties through shell companies.

Electoral bonds are monetary instruments that citizens or corporate groups can buy from a bank and give to a political party, which is then free to redeem them for money. The Centre had first introduced electoral bonds in January 2018.

During the hearing on Wednesday, Attorney General KK Venugopal, representing the Centre, said that since the electoral bonds scheme was launched in 2018, black money has been kept under check as all political funding is made through banking channels and not in cash. Bonds can be purchased only through cheque or a Demand Draft, so there is no black money, he argued.

Senior advocate Rakesh Dwivedi, who represented the Election Commission, said that the poll panel was not opposed to these bonds as such, but raised concerns over its anonymity. “We are against stay of electoral bonds as then we will go back to the unaccounted cash system,” Dwivedi said. “Bonds is one step forward, as all transactions are through banking channels. But we want transparency.”

Advocate Prashant Bhushan, appearing for the petitioner, highlighted the objections raised by the Reserve Bank of India and the Election Commission on the sale of anonymous electoral bonds. He emphasised that this was a form of “legalised corruption” that will pave way for shell companies to essentially offer bribes.

He submitted that at least the central bank should be informed as to who the initial subscriber is. “Now it is issued in scripted form, like cash, and no one except SBI [State Bank of India] knows the donor identity,” Bhushan said.

Bhushan added that this was not a question of morality, but a question of democracy. “The electors have the right to know the source and background,” he said. “If you remove transparency in political funding, it goes to the heart of electoral democracy.”

The Supreme Court observed that it was possible that funds channeled through this mechanism are “diverted by particular people for other purposes with an agenda”. “You can start a protest, with this funding,” CJI Bobde said. “You can start many things.”

When Solicitor General Tushar Mehta submitted that only political parties with at least 1% vote share can take electoral bonds, the court remained unconvinced. It said, “We are sure that there are parties who meet this criteria and have violence as an agenda,” according to Live Law.

The case so far

The Association for Democratic Reforms had filed a writ petition in 2017, challenging the provisions of the Finance Act that cleared the way for anonymous electoral bonds.

In November, the ADR had filed a plea to expedite hearing on the matter in light of the Bihar Assembly elections. It had then pointed out that a notification of January 2, 2018, stipulated the sale of electoral bonds in months of January, April, July and October months of each year. But, the sale window was not opened in April and July in 2020. However, it was opened in October, just ahead of the Bihar elections.

The NGO had earlier moved a similar plea, seeking stay on the scheme in January 2020 ahead of the Delhi Assembly elections. The Supreme Court had refused to grant the interim stay on the scheme and had sought response from the Centre and the Election Commission.