SBI Faces Supreme Court Scrutiny Over Electoral Bond Data: What It Means

On February 15, 2024, the  Supreme Court of India unequivocally declared the electoral bond scheme "unconstitutional." The momentous decision came from a five-judge Constitution bench presided over by Chief Justice DY Chandrachud, emphasizing that the covert nature of the electoral bond scheme runs afoul of the right to information enshrined in Article 19(1)(a). The court's verdict resonates with unmistakable clarity: the electoral bond scheme must be struck down as it infringes upon the fundamental right of citizens to be informed about potential quid pro quo dealings with political funding. 

Originally touted as an alternative to cash donations to political parties, the scheme aimed to instill transparency in political funding. However, the court's ruling categorically denounces its constitutionality, emphasizing a violation of citizens' right to information regarding potential quid pro quo dynamics in political financing.

Following the Election Commission of India's (ECI) publication of the consolidated electoral bond data on its website, the Supreme Court has directed its scrutiny towards the State Bank of India (SBI) for its alleged failure to fully disclose the pertinent information as mandated.

Background

The electoral bonds scheme, introduced through amendments in the Finance Act 2017, faced vehement opposition from petitioners such as the Association for Democratic Reforms (ADR), the Communist Party of India (Marxist), and Dr. Jaya Thakur. Central to their challenge was the assertion that the scheme's provision of anonymity compromised transparency in political funding, infringing upon voters' right to information. The petitioners also raised concerns about the potential misuse of the scheme, allowing contributions through shell companies. Whereas the Union Government has previously staunchly defended the electoral bonds scheme, presenting it as a mechanism to ensure the use of 'white' money for political funding through legitimate banking channels. Justifying the anonymity clause, the government contended that maintaining donor confidentiality was imperative to shield contributors from potential retribution by political parties.

Key Points Raised During the Verdict

Throughout the proceedings, the Supreme Court bench raised pivotal queries, addressing the selective anonymity of the scheme and probing its potential to legitimize kickbacks for political parties. Notably, the bench questioned the asymmetry in information access, highlighting that the ruling party could ascertain donor identities, while opposition parties remained in the dark.

The court also argued that corporate contributions are inherently different from those made by individuals, characterizing them as pure business transactions. The judgment deemed the amendment to Section 182 of the Companies Act as manifestly arbitrary, questioning the rationale behind treating companies and individuals on an equal footing. The removal of the cap on corporate donations, previously restricted to 7.5% of net profits, also drew scrutiny.

The ruling mandates the immediate cessation of the issuance of electoral bonds by the respective banks. Specifically, the State Bank of India was directed to furnish comprehensive details regarding donations facilitated through electoral bonds, shedding light on the political parties that have benefited from these contributions.

CJI : SBI shall furnish the details of electoral bonds encashed by the political parties. SBI shall submit the details to the ECI. ECI shall publish these details on the website by March 31, 2024.

The verdict, delivered by Chief Justice DY Chandrachud, outlined several critical conclusions:

1. Violations of Constitutional Rights: The electoral bond scheme was declared violative of Article 19(1)(a), emphasizing its impact on the citizens' right to freedom of speech and expression.

2. Unconstitutionality of Amendments: The amendments to the Companies Act, which facilitated corporate political funding, were deemed unconstitutional. The court highlighted the arbitrary nature of treating companies and individuals alike, stressing the adverse influence of corporations on the political process.

3. Halting Electoral Bond Issuance: The State Bank of India, the issuing bank for electoral bonds, was directed to cease the issuance immediately.

4. Disclosure of Details: The court mandated that the State Bank of India furnish details of electoral bonds encashed by political parties. The Election Commission of India was instructed to publish these details on its website by March 31, 2024.

Understanding The Electoral Bonds Scheme

The electoral bond scheme was pitched as an alternative to cash donations, aiming to bring transparency to political funding. According to its provisions, any citizen of India or entity incorporated in the country could purchase electoral bonds. However, only political parties registered under Section 29A of the Representation of the People Act, 1951, and securing not less than 1 percent of the votes polled in the last elections were eligible to receive these bonds.

Electoral bonds, as per the scheme, could only be encashed by eligible political parties through an account with an authorized bank. 

Supreme Court's Directive to SBI

The apex court, in its scrutiny of the electoral bond data, observed a glaring omission in the information provided by the SBI to the ECI. Specifically, the alphanumeric numbers associated with the electoral bonds were notably absent from the submissions made by the bank. Consequently, the court has issued a notice to the SBI, mandating a comprehensive response to this discrepancy on March 18th.

During the hearing, senior advocate Prashant Bhushan elucidated the court's concerns regarding the incomplete nature of the data submitted by the SBI. Bhushan emphasized that the absence of alphanumeric identifiers hindered the transparency of the electoral process, as it impeded the identification of both bond purchasers and redeemers

Notable Players in Electoral Bond Transactions

Recent data released by the Election Commission of India (ECI) sheds light on the magnitude of financial transactions facilitated through electoral bonds. The State Bank of India (SBI), the sole issuer of electoral bonds, disclosed data pertaining to the purchase and encashment of these bonds between April 1, 2019, and February 15, 2024.  Political donations facilitated through electoral bonds predominantly find their destination in the coffers of political parties or their leaders. Noteworthy beneficiaries include stalwarts like the BJP, Congress, AIADMK, and a slew of regional players, each vying for their share of the financial pie.

The data provided by the SBI encompasses two primary sets. The first set delineates the date of purchase, the purchaser's identity, and the denomination of each electoral bond purchased. Over 22,000 bonds were purchased within the specified timeframe, indicating a substantial volume of financial activity. The second set elucidates the encashment details, revealing that approximately 22,030 bonds were encashed by political parties during the same period.

Notably, the Bharatiya Janata Party (BJP) stands at the forefront, encashing electoral bonds amounting to a staggering ₹6060.5 crore between April 12, 2019, and January 24, 2024.  During the aforementioned period, the BJP's share in the total bonds encashed soared above 47.5%, cementing its formidable financial prowess. The All India Trinamool Congress trails behind, having received ₹1,609.50 crore (12.6%) via this channel, followed closely by the Congress with ₹1,421.9 crore (11.1%). 

While the BJP leads the pack, other prominent political parties have also capitalized on electoral bonds. The Bharat Rashtra Samithi, Biju Janata Dal, and Dravida Munnetra Kazhagam stand out, each encashing more than ₹500 crore worth of electoral bonds during the specified period.

How Electoral Bond Data Reveals Political Donation Dynamics

The Election Commission has recently released detailed data on electoral bonds, sourced from the State Bank of India (SBI), in compliance with a mandate set forth by the Supreme Court. The disclosed data reveals a roster of prominent buyers of electoral bonds, ranging from industrial behemoths to lesser-known entities with substantial financial clout. Steel tycoon Lakshmi Mittal, synonymous with towering industrial prowess, emerges as a key figure, alongside stalwarts like Vedanta, ITC, and Mahindra and Mahindra. Airtel's Sunil Bharti Mittal, a titan in the telecommunications domain, also features prominently in this list of donors.

Agarwal's Vedanta Ltd. emerges as a significant player, with investments amounting to Rs 398 crore, followed closely by Bharti Airtel's conglomerate, which collectively injected Rs 246 crore into the electoral ecosystem.

However, amidst all the biggies in the business, the emergence of lesser-known entities like Future Gaming and Hotel Services highlights the multifaceted nature of political contributions. Despite being shrouded in scrutiny by the Enforcement Directorate, Future Gaming and Hotel Services has wielded considerable financial influence, with electoral bonds worth over Rs 1,350 crore.