THE POLICY LAB (TPL) - 41
MARCH 09, 2024

By J B Mohapatra

IN the context of the judgement of the SC in the Electoral Bond Scheme (Civil Original Jurisdiction- Writ Petition (C) No. 880 of 2017) (EBS) - 2024-TIOL-17-SC-IT-CB , whereby the Court proceeded to hold that in the context of the EBS, the proviso to section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017), and section 13A(b) of the Income Tax Act (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and hence unconstitutional; and that the deletion of the proviso to section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is equally violative of Article 14, relying among others (a) the aspect of infringement of voter's right to information and (b) disharmony between the ends that the EBS intended to achieve and the means to achieve those or 'the least restrictive means test' as the Court puts it, 2 questions particularly with reference to directions of the Court for public disclosure of contributions made in para 219 of the judgement are relevant. (That para enjoined the SBI to share the details of purchases of the electoral bonds and details of encasement of the bonds by political parties with the ECI and also enjoined the ECI to put out the said information in the public.)

A: The first of questions is the mode and manner in which the consequential processes post-publication of information can be administered and/or regulated in view of the spate of inquiries that are going to ensue either informally at the level of public forums or formally at the level of investigative agencies (and thereafter at the courts), and whether the government and/or the Court can ensure (a) processing of information at public platforms and at the level of government agencies and departments remains solidly embedded on objective facts and (b) formal inquiries if initiated are not interpreted as being results of 'fishing and roving' expeditions.

Para 100 of the SC's judgement, in that context, which comprises 10 sentences and is a vital cog in building up the equation between big money and electoral politics as also the reasoning behind the decision for disclosure of donor information reads as follows:

"100. Economic inequality leads to differing levels of political engagement because of the deep association between money and politics. At a primary level, political contributions give a "seat at the table" to the contributor. That is, it enhances access to legislators. This access also translates into influence over policy-making. An economically affluent person has a higher ability to make financial contributions to political parties, and there is a legitimate possibility that financial contribution to a political party would lead to quid pro quo arrangements because of the close nexus between money and politics. Quid pro quo arrangements could be in the form of introducing a policy change, or granting a license to the contributor. The money that is contributed could not only influence electoral outcomes but also policies particularly because contributions are not merely limited to the campaign or pre-campaign period. Financial contributions could be made even after a political party or coalition of parties form Government. The possibility of a quid pro quo arrangement in such situations is even higher. Information about political funding would enable a voter to assess if there is a correlation between policy making and financial contributions."

Significantly, this 10-sentence paragraph contains the word 'possibility' in 2 of the sentences and 'could be' in 3 other.

While 'roving and fishing' expeditions to ferret information is generally not countenanced by the courts, as held by the SC in Manoharlal Sharma case (WP (Criminal) No 225 of 2018) - "Perception of individuals cannot be the basis of a fishing and roving enquiry by this Court, especially in such matters", the implications of not adhering to a set of standards for processing the information following the SC judgement in the EBS case can be huge and incalculable.

B: The second question relates to the structure and the language of the notification through which the EBS stood defined and got operationalised, and whether the said notification could have been differently worded and in a manner similar to some other schemes which guaranteed confidentiality so that the threshold levels for judicial review of EBS could have been similarly raised.

Electoral Bond Scheme, 2018 notified under section 31(3) of the RBI Act, 1934 (section 31(3) of the RBI Act is an insertion through Finance Act, 2017 and empowered the central government to authorise any commercial bank to issue electoral bonds) contains a provision for contributors' information secrecy. Para 7(4) of the EBS reads as follows:

"(4) 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, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency."

Contrast the confidentiality clauses in EBS notification dated 2-1-18 with similar clauses in undisclosed income declaration schemes, for example, the Voluntary Disclosure of Income Scheme, 1997 (VDIS). Relevant clause 72 of Finance Act, 1997, which reads as follows, ensured confidentiality of information submitted by the VDIS declarants.

"72. (1) All particulars contained in a declaration made under sub-section (1) of section 64 shall be treated as confidential and, notwithstanding anything contained in any law for the time being in force, no court or any other authority shall be entitled to require any public servant or the declarant to produce before it any such declaration or any part thereof or to give any evidence before it in respect thereof.

(2) No public servant shall disclose any particulars contained in any such declaration except to any officer employed in the execution of the Income-tax Act or the Wealth-tax Act, or to any officer appointed by the Comptroller and Auditor-General of India or the Board to audit income-tax receipts or refunds."

Clause 71 of Finance Act, 1997, which reads as follows, makes it impermissible to tender and treat the declaration as an admissible evidence against the declarant.

"71. Notwithstanding anything contained in any other law for the time being in force, nothing contained in any declaration made under sub-section (1) of section 64 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty or for the purposes of prosecution under the Income-tax Act or the Wealth-tax Act or the Foreign Exchange Regulation Act, 1973 (46 of 1973) or the Companies Act, 1956(1 of 1956)."

Rule 10 of the Voluntary Disclosure of Income Rules, 1997 reads as under:

"10. The particulars furnished by a declarant shall be kept secret and shall be treated as confidential. No court or any other authority shall be entitled to require any officer of the Income-tax Department or the declarant himself to produce before it any such declaration or to give evidence before it in this regard. Further, nothing contained in any declaration shall be admissible as evidence against the declarant for the purpose of any proceeding relating to imposition of penalty or launching of prosecution under the Income-tax Act, the Wealth-tax Act, the Foreign Exchange Regulation Act, 1975, or the Companies Act, 1956."

Evidently, the VDIS 1997 attempted to ensure confidentiality of information by building an overarching government guarantee for safeguarding citizens' sensitive financial data from any attempt by an agency or an authority seeking access to those and even when sought by the courts in a manner which undoubtedly is different what para 7(4) of EBS, 2018 conveys both in the context of who are entitled to information and when. It will remain in the realm of conjecture whether the threshold levels for conducting a judicial review of buyer details of bonds under EBS, 2018 notification under section 31(3) of the RBI Act, 1934 could have been raised if the conditions for disclosure as provided in VDIS, 1997 or such other schemes were incorporated in the EBS, 2018 notification.

All things stated, while the right to donor privacy stands denied to contributions made as quid pro quo in the SC judgement on EBS and that decision is unquestionably premised on universally accepted and constitutional principles, the mode and manner for conducting the subsequent exercise for linking contribution to possible quid pro quo unless regulated by standards and under the Court's oversight can be cacophonous and unproductive.