Centre defends electoral bonds in SC; says reforms aim to defeat black money

The Centre on Thursday defended in the Supreme Court its decision to issue electoral bonds saying it aimed at ensuring "enhanced accountability" and pushing electoral reforms "to defeat the growing menace of black money".

In an affidavit, filed in a writ petition of CPI(M) and its general secretary Sitaram Yechury, the Centre said the electoral bonds were introduced on January 2, 2018 to promote transparency in funding and donation received by political parties.

These can be encashed by an eligible political party only through their authorised bank accounts.

"Keeping in view the emergent need to ensure that there is enhanced accountability and electoral reforms to defeat the growing menace of black money, especially when the country is moving towards a cashless-digital economy, the legislature has adopted a conscious legislative policy culminating in the introduction of the electronic reforms," the Centre's affidavit said.

It added that the electoral bonds do not have the name of the donor or the receiving political party and only carry a unique hidden alphanumeric serial numbers as an in-built security feature.

Only a political party, registered under Section 29A of the Representation of People's Act, 1951 and which has secured not less than 1 per cent of the votes polled in the last general election to the Lok Sabha or the Legislative Assembly, will be eligible to receive the bond, it said.

"A non-KYC compliant Application or an Application that doesn't meet the requirements of the scheme shall be rejected," it said.

The Centre denied that the amendments and the notification issue by it seek to create "an anonymous and secretive mechanism for increasing the wealth of political parties".

It also denied that they are "arbitrary in nature or brings in unreasonable restrictions on the freedom to information regarding the identities of persons or corporations making contributions to political parties".

The government further stated that the scheme envisages building a transparent system of acquiring bonds with validated KYC and an audit trail.

"Besides, a limited window and a very short maturity period shall make any misuse improbable. Donors, who buy these bonds, their balance sheet will reflect such donations made. The electoral bonds will prompt donors to take the banking route to donate, with their identity captured by the issuing authority. This will ensure transparency, accountability and a big step towards electoral reform," it said.

The government sought dismissal of the petition filed by the left party saying there is "no invidious or arbitrary discrimination, and there has been no violation of any fundamental right of the Petitioner".

On February 2, last year, the apex court had sought the Centre's response on a plea by the CPI(M) and Yechury terming the issuance of electoral bonds by the government as "arbitrary" and "discriminatory".

The plea has claimed that government's decision entitles political parties to receive unlimited donations without recording its source.

Challenging the Centre's decision, the CPI(M) said that the amendments in the Finance Act, 2017, jeopardise the very foundation of Indian democracy and it would lead to greater political corruption.

The petition claimed that the introduction of electoral bonds by the Finance Act by which details of donations made to political parties are not reported or recorded by the parties and whose purchasers' identity remains hidden from the public realm is the creation of an "obscure funding system" which is unchecked by any authority.

It sought striking down of amendments made through the Finance Act, 2017 and the January 2, 2018 notification issued by the Ministry of Finance, whose cumulative effect is that political parties are entitled to receive unlimited donations from individuals and corporations, including loss-making and foreign corporations, without having to record or report the sources of such funding.

The NDA government had announced electoral bonds in the earlier budget, claiming that the scheme would clean up political funding.

The move was resisted by opposition parties. The Election Commission of India had also expressed its reservations initially.