ASSOCIATION FOR DEMOCRATIC REFORMS & ANR.versusUNION OF INDIA & ORS

                          [2021] 2 S.C.R. 851                           851


    ASSOCIATION FOR DEMOCRATIC REFORMS & ANR.                           A
                                   v.
                     UNION OF INDIA & ORS.
  (Interlocutory Application No.183625 Of 2019 and 36653 of 2021)
                                  In                                    B
                   (Writ Petition (C) No.880 of 2017)
                          MARCH 26, 2021
           S. A. BOBDE, CJI, A.S. BOPANNA AND
               V. RAMASUBRAMANIAN, JJ.]                                 C
      Elections:
       Electoral Bond Scheme, 2018 – Application seeking stay of
the sale of electoral bonds under the Electoral Bond Scheme, 2018
– Another application seeking an interim direction to the Union of
India not to open any further window for sale of Electoral Bonds        D
which is likely to be opened on 01.04.2021 under the Scheme –
Plea that Electoral Bonds Scheme allows the donors of political
parties to maintain anonymity – Held: Despite the fact that the
Scheme provides anonymity, the Scheme is intended to ensure that
everything happens only through banking channels – While the            E
identity of the purchaser of the bond is withheld, it is ensured that
unidentified/ unidentifiable persons cannot purchase the bonds and
give it to the political parties – A non-KYC compliant application or
an application for purchase of bonds not meeting the requirements
of the scheme would be rejected – As a result the information about
the purchaser would certainly be available with the SBI which alone     F
is authorised to issue and encash the bonds as per the Scheme –
Moreover, any expenditure incurred by anyone in purchasing the
bonds through banking channels, would have to be accounted as
an expenditure in his books of accounts – Furthermore, since the
Scheme mandates political parties to file audited statement of          G
accounts and also since the Companies Act requires financial
statements of registered companies to be filed with the Registrar of
Companies, the purchase as well as encashment of the bonds,
happening only through banking channels, is always reflected in
documents that eventually come to the public domain – Thus, since
                                                                        H
                                  851
852               SUPREME COURT REPORTS                       [2021] 2 S.C.R.


A     the Scheme was introduced on 2.1.2018 and the bonds are released
      at periodical intervals of every year, viz 2018, 2019 and 2020
      without any impediment; and that certain safeguards have already
      been provided by this Court, no justification for the grant of stay at
      this stage – Furthermore, once this Court has passed an order
      directing some interim arrangement, thereafter applications for the
B
      same relief cannot be made, every time the window for the purchase
      under the Scheme is opened.
             CIVIL ORIGINAL JURISDICTION: Interlocutory application
      no. 183625 of 2019 and interlocutory application no. 36653 of 2021 in
      writ petition(c) no.880 of 2017.
C
            (UNDER ARTICLE 32 OF THE CONSTITUTION OF INDIA)
             Prashant Bhushan, Ms. Neha Rathi, Ms. Shivani Kapoor, Advs.
      for the Petitioners.
             K.K. Venugopal, AG, Tushar Mehta, SG, R. Bala, Rakesh Dwivedi,
D     Mukul Gupta, Sr. Advs., Ankur Begani, Ms. Shradha Deshmukh, Shyam
      Gopal, Ms. Chinamayee Chandra, Arvind Kumar Gupta, Ms. Seema
      Bengami, Ankur Talwar, Mrs. Anil Katiyar, Amit Sharma, Dipesh Sinha,
      Ms. Pallavi Barua, Prateek Kumar, Arvind Kumar Gupta, Prashant
      Bhardwaj, Rishi Bharadwaj, Abhiesumat Gupta, Vikram Singh Jakhar,
E     P. V. Dinesh, Ms. Rashmi Singh, Bineesh K., Ashwini Kumar Singh, B.
      K. Pal, Mukesh Kumar Maroria, Amit Anand Tiwari, Ms. Shakun
      Sharma, Ms. Mary Mitzy, Ms. Devyani Gupta, Ms. Sushma Suri, Aviral
      Kashyap, Advs. for the Respondents.
            Applicant-in-person.
F           The Order of the Court was passed:
                                      ORDER
             1. The Association for Democratic Reforms and Common Cause
      have joined together and come up with the above Public Interest Litigation
      praying for the:
G
            “(a) Issue a writ of declaration or any other appropriate
                 writ declaring —-
            (i)     Section 135 of the Finance Act 2017 and the
                    corresponding amendment carried out in Section 31 of
H                   the Reserve Bank of India Act, 1934,
ASSOCIATION FOR DEMOCRATIC REFORMS v. UNION OF INDIA                                853


       (ii)    Section 137 of the Finance Act, 2017, and the                        A
               corresponding amendment carried out in Section 29C
               of the Representation of the People Act, 1951
       (iii)   Section 11 of the Finance Act, 2017 and the
               corresponding amendment carried out in Section 13A,
               the Income Tax Act, 1961                                             B
       (iv)    Section 154 of the Finance Act, 2017 and the
               corresponding amendment carried out in Section 182
               of the Companies Act, 2013 and
       (v)     Section 236 of Finance Act, 2016 and the
               corresponding amendment carried out in Section                       C
               2(1)(j)(vi) of the Foreign Regulations Contribution Act,
               2010
               as being unconstitutional, illegal and void.
       (b)     Issue a writ of mandamus or any other appropriate writ
               directing that no political parties would accept any                 D
               donation in cash.”
       2. On 3.10.2017, notice was ordered in the writ petition and the
writ petition was directed to be tagged along with Writ Petition (C) No.333
of 2015 and Special Leave Petition (C) No.18190 of 2014. Though Writ
Petition (C) No.333 of 2015 was also by the Association for Democratic              E
Reforms and another person, the reliefs sought therein were little
different. The prayers made in the said writ petition were for (i) a
declaration that all national and regional political parties are public
authorities under the Right to Information Act, 2005; (ii) a direction to
the Election Commission of India to collect all information concerning
the finances of political parties; (iii) a direction to all national and regional   F
political parties to mandatorily disclose complete details about their
income, expenditure, donations and funding as well as full details of the
donors.
      3. On 12.4.2019 this Court passed an interim order in common in
Writ Petition (C) Nos.333 of 2015, 880 of 2017 and two other writ petitions.        G
Paragraphs 11 to 15 of the said interim order read as follows:
       “xxxx                       xxxx                        xxxx
       11. We have considered the matter including the amendments in
       the different statutes brought in by the Finance Act, 2016 and
       2017. We have closely examined the stand taken by the respective             H
854      SUPREME COURT REPORTS                           [2021] 2 S.C.R.


A     parties including what has been stated by the Election Commission
      of India in the affidavit filed, details of which have been setout.
      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 would require an in depth hearing which
B
      cannot be concluded and the issues answered within the limited
      time that is available before the process of funding through the
      electoral Bonds comes to a closure, as per the schedule noted
      earlier.
      12. The court, therefore, has to ensure that any interim arrangement
C     that may be made would not tilt the balance in favour of either of
      the parties but that the same ensures adequate safeguards against
      the competing claims of the parties which are yet to be adjudicated.
      13. In the above perspective, according to us, the just and proper
      interim direction would be to require all the political parties who
D     have received donations through electoral Bonds to submit to the
      Election Commission of India in sealed cover, detailed particulars
      of the donors as against the each Bond; the amount of each such
      bond and the full particulars of the credit received against each
      bond, namely, the particulars of the bank account to which the
E     amount has been credited and the date of each such credit.
      14. The above details will be furnished forthwith in respect of
      Electoral Bonds received by a political party till date. The details
      of such other bonds that may be received by such a political party
      upto the date fixed for issuing such bonds as per the Note of the
F     Ministry of finance dated 28.2.2019, i.e. 15.5.2019 will be submitted
      on or before 30th May, 2019. The sealed covers will remain in the
      custody of the Election Commission of India and will abide by
      such orders as may be passed by the Court.
      15. As per Clause 8 of the Electoral Bond Scheme, 2018, electoral
G     bonds are to be issued for a period of 10 days in the months of
      January, April, July and October and additional 30 days is provided
      during an election year. As per the Schedule contained in the Note
      of the finance Ministry dated 28.2.2019, extracted above, a total
      period of 45 days has been fixed for issuing the bonds in the month
      of March, April and May. This, we are told, is in addition to the
H     period of 10 days during which the Bonds were made available in
ASSOCIATION FOR DEMOCRATIC REFORMS v. UNION OF INDIA                             855


       the month of January, 2019. In view of Clause 8 of the electoral          A
       bond Scheme the days fixed for issuing the bonds in the month of
       March and May will necessary have to be related to the period of
       30 days allowed for an election year. The total period, therefore,
       allowable for the month of January (10 days), April (10 days) and
       30 days for the election year would be 50 whereas the Schedule
                                                                                 B
       contemplates issuance of bonds for a total period of 55 days i.e.
       45 days plus 10 days of January. A period of 5 days, therefore,
       have to be deleted from the Schedule contained in the Note of the
       Ministry of Finance dated 28.2.2019. such deletion will be made
       by the Ministry of Finance who will be free to decide the days of
       deletion/exclusion.”                                                      C
       4. As can be seen from the last line of paragraph 11 of the
aforesaid order, this Court thought fit to make an interim arrangement as
it was not possible to decide all the issues within the limited time available
before the process of funding through Electoral Bonds came to a closure.
At the time when the aforesaid interim order was passed, the schedule            D
for the issuance of Electoral Bonds for the months of March, April and
May, 2019 had been announced to be (i) 1.3.2019 to 15.3.2019; (ii)
1.4.2019 to 20.4.2019; and (iii) 6.5.2019 to 15.5.2019.
       5. Thereafter, the Association for Democratic Reforms filed the
above application I.A. No.183625 of 2019 seeking a stay of the Electoral         E
Bond Scheme, 2018 notified by the Central Government vide notification
dated 2.1.2018. It is mentioned in paragraph 6 of this application that
after this Court passed the interim order dated 12.4.2019 certain vital
documents having a strong bearing on the case surfaced. However, the
above application filed on 29.11.2019 could not be taken up for hearing.
       6. Therefore, the writ petitioners have come up with a fresh              F
application in I.A. No.36653 of 2021 seeking an interim direction to the
respondents not to open any further window for sale of Electoral Bonds
under the Electoral Bond Scheme, 2018 and to prevent the respondents
from any further sale of Electoral Bonds. This application is filed on the
premise that the window for the sale of fresh bonds is likely to be opened       G
at present on April 1, 2021.
      7. Since the reliefs sought in both the applications, though filed in
a gap of two years, are one and the same, they were taken up together.
      8. At the outset, learned Attorney General submitted that the copy
of the latest application was received only three days ago and that              H
856             SUPREME COURT REPORTS                            [2021] 2 S.C.R.


A     however he will advance arguments without seeking time for counter if
      no fresh material other than those found in I.A. No.183625 of 2019 is
      relied upon. This was agreed to.
              9. We have heard Shri Prashant Bhushan, learned counsel for the
      applicants/writ petitioners, Shri K.K. Venugopal, learned Attorney General
B     for the Union of India and Shri Rakesh Dwivedi, learned Senior Counsel
      appearing for the Election Commission of India.
              10. We should point out at the threshold that there cannot be
      repeated applications seeking the same relief, merely because the interim
      reliefs sought, relates to something that is to happen at periodical intervals
      of time. Under Clause 8(1) of the Electoral Bonds Scheme, 2018 the
C     bonds under the Scheme are made available for purchase, for a period
      of 10 days each in the months of January, April, July and October.
      Therefore, once this Court has passed an Order on 12.4.2019 directing
      some interim arrangement, thereafter applications for the same interim
      relief cannot be made, every time the window for the purchase under
D     the Scheme is opened.
              11. Despite the aforesaid normal rule of procedure and practice,
      we heard the learned counsel on both sides on the present applications,
      due to the seriousness of the issues raised. The main attack of Shri
      Prashant Bhushan, to the Electoral Bonds Scheme is that it allows the
E     donors of political parties to maintain anonymity which is not healthy for
      a democracy. Though technically the Government may be in a position
      to find out the names of the donors, as the Scheme operates through the
      State Bank of India via banking channels, the members of the public
      and political parties not in power, will not be able to find out. Moreover,
      the amount of funds received by a party in power will normally be more,
F     as it will be reciprocated with favours. The learned counsel also drew
      our attention to the various letters written by the Reserve Bank of India
      (for short “RBI”) as well as the Election Commission to contend that
      they had serious reservations about the Scheme.
              12. Opposing the prayer for stay, it is contended by the learned
G     Attorney General that this Scheme was intended to prevent unaccounted
      money having a sway in the elections and that under the Scheme the
      donors are obliged to operate only through banking channels. This,
      according to the learned Attorney General, curbed the menace of black
      money playing a huge part in the elections. Shri Rakesh Dwivedi, learned
      Senior Counsel for the Election Commission of India supported the
H     Scheme.
ASSOCIATION FOR DEMOCRATIC REFORMS v. UNION OF INDIA                         857


       13. It is true, as seen from the correspondence, that RBI has had     A
some reservations. But it is not correct to say that the RBI and the
Election Commission of India opposed the Electoral Bond Scheme itself.
The Electoral Bond Scheme, 2018 was issued by the Central Government
by a notification dated 2.1.2018 in exercise of the power conferred by
Section 31(3) of the Reserve Bank of India Act, 1934. Before the issue
                                                                             B
of the said Scheme, there were discussions in which RBI participated.
In their letter dated 4.8.2017 RBI recommended only certain safeguards.
The relevant portion of the letter of the RBI dated 4.8.2017 reads as
follows:
      “xxxx                       xxxx                     xxxx
                                                                             C
      We recommend, the following safeguards may be incorporated
      to minimize the inherent scope of misuse of such bonds for
      undesirable activities.
      (a) The EBBs may have a tenor of maximum 15 days.
      (b) The EBBs can be purchased for any value in multiples of            D
      Rs.1,000, Rs.10,000 or Rs.100,000.
      (c) The purchase of EBBs would be allowed from a fully KYC
      compliant bank account of the purchaser.
      (d) The EBBs can be redeemed only by way of deposit into
                                                                             E
      the designated bank account of an eligible political party.
      (e) The sale of EBBs will be open for a limited period, may be
      twice in a year, for 7 days each.
      (f) The EBBs will be issued at RBI, Mumbai only”
       14. Even in his letter dated 14.9.2017 the then Governor of RBI       F
stated that the major objective of the Scheme is to provide anonymity
and that the same can be achieved if the bonds are issued in electronic
form with RBI as the depository rather than as a physical scrip. On
27.9.2017 the matter was placed before the Committee of the Central
Board of RBI and the Committee flagged serious reservations. These           G
reservations, incorporated in the next letter of the RBI dated 27.9.2017
were read out to us by Shri Prashant Bhushan, in support of his contention
that the Scheme, as proposed by the Government will not only be seen
as facilitating money laundering, but also projected as intended to enable
it.
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858             SUPREME COURT REPORTS                            [2021] 2 S.C.R.


A            15. However, paragraph 5 of the same letter dated 27.9.2017 of
      the then Governor of RBI to the Finance Minister makes their final
      position clear and it reads as follows:
             “If the government is aggreable to revisit its stance on issuing
             EBs in scrip form, we can discuss the modalities of issuance
B            of EB in demat form, including the facility for multiple
             transfers before the proceeds are eventually credited to a
             political party’s designated bank account, and with the
             Reserve Bank being the sole custodian of the information of
             the initial subscriber and the subsequent transferees. You
C            would kindly appreciate that this would give us the twin
             advantage of providing anonymity to the contributor and at
             the same time ensuring that consideration for transfers
             between persons and entities, before the value of bond is
             credited to the political party, is through bank transfers and
             not cash or other means. This will be an enduring reform,
D            consistent with the government’s digitisation push, which can
             segue into an even more transparent process of electoral
             funding when the system is ready for it.”
             16. Therefore, it is not correct to say that the RBI was opposed to
      the Scheme in principle. RBI’s objection was to the issue of bonds in
E     scrip form rather than in demat form. What RBI wanted to achieve
      was, in their own words, the twin advantage of (i) providing anonymity
      to the contributor; and (ii) ensuring that consideration for transfers is
      through banking channels and not cash or other means. In fact RBI
      called Electoral Bonds as “an enduring reform, consistent with the
F     Government’s digitization push”. Therefore, the concerns expressed
      by RBI, to the form and not to the substance, cannot really advance the
      case of the petitioners.
             17. As a matter of fact, most of the recommendations of the RBI
      have been accepted and incorporated in the Scheme. The following
G     features of the Scheme demonstrate this: (i) only political parties registered
      under Section 29A of the Representation of the People Act, 1951 and
      secured not less than 1% of the votes polled in the last general election
      to the House of the people or the legislative assembly shall be entitled to
      receive the bond; (ii) the bond can be encashed by an eligible political
      party only through a bank account with the authorized bank; (iii) the
H
ASSOCIATION FOR DEMOCRATIC REFORMS v. UNION OF INDIA                             859


extant instructions issued by RBI regarding KYC norms and the bank’s             A
customer shall apply for the buyers of the bond and the authorized bank
may also call for any additional KYC document; (iv) the bond shall be
valid for 15 days from the date of issue and no payment will be made to
any payee political party if the bond is deposited after the expiry of the
validity period; (v) all payments for the issue of the bonds shall be accepted
                                                                                 B
in Indian rupees, through demand draft or cheque or through electronic
clearance system or direct debit of the buyers’ account; (vi) the bond
can be encashed only by depositing the same in the designated bank
account of the eligible political party; (vii) the face value of the bonds
shall be counted as income by way of voluntary contribution received by
an eligible political party for the purpose of exemption from income tax         C
under Section 13A of the Income Tax Act, 1961.
      18. Despite the fact that the Scheme provides anonymity, the
Scheme is intended to ensure that everything happens only through
banking channels. While the identity of the purchaser of the bond is
withheld, it is ensured that unidentified/ unidentifiable persons cannot         D
purchase the bonds and give it to the political parties. Under clause 7 of
the Scheme, buyers have to apply in the prescribed form, either physically
or online disclosing the particulars specified therein. Though the
information furnished by the buyer shall be treated confidential by the
authorised bank and shall not be disclosed to any authority for any
                                                                                 E
purposes, it is subject to one exception namely when demanded by a
competent court or upon registration of criminal case by any law
enforcement agency. A non-KYC compliant application or an application
not meeting the requirements of the scheme shall be rejected.
        19. As far as the information to the Election Commission is
concerned, the interim order passed by this Court on 12.4.2019 takes             F
care of the same. In the reply filed by the Election Commission of India
on 3.2.2020 to I.A. No.183625 of 2019, it is stated by them that the
Election Commission of India has received sealed covers from various
political parties (National, State and registered & unregistered parties).
In Annexure C/1, to the reply filed by the Election Commission of India          G
the Election Commission has provided a list of the political parties who
have filed necessary details as per the order of this Court dated 12.4.2019.
The dates on which the Election Commission of India received
the necessary information in sealed covers is also indicated in Annexure
C/1.
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860               SUPREME COURT REPORTS                       [2021] 2 S.C.R.


A            20. In Annexure C/2 to the reply, the Election Commission has
      also furnished details of submission of audited annual accounts of the
      political parties.
            21. The fact that some of the parties have not yet submitted their
      audited annual accounts is a different matter and the same is not the
B     subject matter of the present applications.
             22. We do not know at this stage as to how far the allegation that
      under the Scheme, there would be complete anonymity in the financing
      of political parties by corporate houses, both in India and abroad, is
      sustainable. If the purchase of the bonds as well as their encashment
C     could happen only through banking channels and if purchase of bonds
      are allowed only to customers who fulfill KYC norms, the information
      about the purchaser will certainly be available with the SBI which alone
      is authorised to issue and encash the bonds as per the Scheme. Moreover,
      any expenditure incurred by anyone in purchasing the bonds through
D     banking channels, will have to be accounted as an expenditure in his
      books of accounts. The trial balance, cash flow statement, profit and
      loss account and balance sheet of companies which purchase Electoral
      Bonds will have to necessarily reflect the amount spent by way of
      expenditure in the purchase of Electoral Bonds.

E           23. Under Section 128 (1) of the Companies Act, 2013 every
      company shall prepare and keep books of accounts and financial
      statement for every financial year. ‘Financial statement’ is defined under
      Section 2(40) as follows:-
            “2. ——
F
            (40) “financial statement” in relation to a company, includes—
            (i)     a balance sheet as at the end of the financial year;
            (ii)    a profit and loss account, or in the case of a company
                    carrying on any activity not for profit, an income and
G                   expenditure account for the financial year;
            (iii)   cash flow statement for the financial year;
            (iv)    a statement of changes in equity, if applicable; and
            (v)     any explanatory note annexed to, or forming part of, any
H                   document referred to in sub-clause (i) to sub-clause (iv):
ASSOCIATION FOR DEMOCRATIC REFORMS v. UNION OF INDIA                           861


             Provided that the financial statement, with respect to One        A
             Person Company, small company and dormant company,
             may not include the cash flow statement;”
       24. Under Section 129(1), such financial statements should give a
true and fair view of the state of affairs of the company and comply
with the accounting standards notified under Section 133. These financial      B
statements are to be placed at every Annual General Meeting of the
company. Under Section 137, a copy of the financial statement, along
with all the documents duly adopted at the Annual General Meeting shall
be filed with the Registrar of Companies.
       25. The financial statements of companies registered under the          C
Companies Act, 2013 which are filed with the Registrar of Companies,
are accessible online on the website of the Ministry of Corporate Affairs
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 statement of accounts and also
since the Companies Act requires financial statements of registered            D
companies to be filed with the Registrar of Companies, the purchase as
well as encashment of the 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        E
do some “match the following”. Therefore, it is not as though the
operations under the Scheme are behind iron curtains incapable of being
pierced.
        26. One of the contentions of the petitioners is that though the
first purchase may be through banking channels for a consideration paid        F
in white money, someone may repurchase the bonds from the first buyer
by using black money and hand it over to a political party. But this
contention arises out of ignorance of the Scheme. Under Clause 14 of
the Scheme, the bonds are not tradable. Moreover, the first buyer will
not stand to gain anything out of such sale except losing white money for
the black.                                                                     G
       27. The apprehension that foreign corporate houses may buy the
bonds and attempt to influence the electoral process in the country, is
also misconceived. Under Clause 3 of the Scheme, the Bonds may be
purchased only by a person, who is a citizen of India or incorporated or
established in India.                                                          H
862                SUPREME COURT REPORTS                       [2021] 2 S.C.R.


A            28. Therefore, in the light of the fact that the Scheme was
      introduced on 2.1.2018; that the bonds are released at periodical intervals
      in January, April, July and October of every year; that they had been so
      released in the years 2018, 2019 and 2020 without any impediment; and
      that certain safeguards have already been provided by this Court in its
      interim order dated 12.4.2019, we do not see any justification for the
B
      grant of stay at this stage. Hence both the applications for stay are
      dismissed.

      Nidhi Jain                                             Applications dismissed.

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