Case: ASSOCIATION FOR DEMOCRATIC REFORMS  &amp; ANR Vs. UNION OF INDIA &amp; ORS

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 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 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 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 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. 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 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 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 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. 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. ----- (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 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 document referred to in sub-clause (i) to sub-clause (iv): Provided that the financial statement, with respect to One 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 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 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 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 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 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. 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.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]9. We have heard Shri Prashant Bhushan, learned counsel for the applicants/writ petitioners, Shri K.K. Venugopal, learned Attorney General 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 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 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.13. It is true, as seen from the correspondence, that RBI has had 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, 1934.14. Even in his letter dated 14.9.2017 the then Governor of RBI 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 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.16. Therefore, it is not correct to say that the RBI was opposed to the Scheme in principle. RBIs objection was to the issue of bonds in 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 Governments 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 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 extant instructions issued by RBI regarding KYC norms and the banks 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 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 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 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 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 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 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/1.20. 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 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 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 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.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 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 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 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 do some match the following. Therefore, it is not as though the operations under the Scheme are behind iron curtains incapable of being pierced.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.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.