Contempt Plea Filed Against SBI for Electoral Bond Disclosure Delay

As we know, Electoral bonds were declared unconstitutional by the Supreme Court of India On February 15, 2024, in the case of Association for Democratic Reforms v. Union of India, also after this judgment, it was analyzed that past years’ lawful exemption claims of political parties as well as taxpayers i.e. individuals and companies which were claimed by them cannot be revoked based on the “Doctrine of Supervising Impossibility”, which prevents the imposition of impossible requirements retroactively.

But what are electoral bonds?

Among the developments of 2018, the Electoral Bond Scheme was one means by which Indian companies and individuals could contribute to political parties that were registered in India. Such contributions were made by electoral bonds, which are essentially promissory notes with denominations starting from Rs 1,000 and going as high as Rs 1,00,00,000. This scheme aimed at making political funding transparent and accountable.

What was the objective of electoral bonds?

Electoral bonds are a means of anonymously funding political parties in India. The scheme of the Anonymous Electoral Bond was introduced in The Finance Bill, 2017 during the Union Budget 2017-18. It was struck down as unconstitutional by the Supreme Court on 15 February 2024

Shocking amendment in companies act which raised doubts on electoral bonds?

The Changes made to Section 182 of the Companies Act enable an Indian company to contribute any amount to any political party. Inter alia the conditions are that the contribution should (i) be authorized by the Board; (ii) not made in cash, and (iii) be disclosed in the Company’s P&L account, for knowledge, Before the amendment, Section 182(1) placed a cap on the amount of money a company could donate in a single financial year, limiting it to 7.5% of the company’s average net profits during the previous three financial years.

In response to this, the court found these amendments to be unconstitutional due to their infringement upon both the right to information and fair election practices. However, this ruling does not require companies that have already filed their financial statements and made contributions above the pre-amendment limit or failed to disclose the recipient political parties to revise their audited financial statements. This is also based on the Doctrine of Supervising Impossibility, which does not allow imposing requirements retrospectively.

What did the Supreme Court say?

In a pivotal decision, the Supreme Court of India on February 15, 2024, pronounced the Electoral Bond Scheme unconstitutional in the case “Association for Democratic Reforms v. Union of India”. The court held that this scheme infringed the Right to Information guaranteed by Article 19(1)(a) of the Indian Constitution.

Following the ruling, the authorised bank i.e. State Bank of India was ordered to cease the production of electoral bonds, which they were authorized to issue and encash by the government as per the Finance Act. Additionally, SBI was required to submit to the Election Commission of India well known as ECI a detailed description of buying and issuing every bond by March 6, 2024.

The ECI is tasked with publishing this information on its official website by March 13, 2024, by the Supreme Court of India. This was because concerns have been raised about transparency and accountability in this process.

Why contempt plea was filed against SBI?

Recently, a contempt plea was filed against the State Bank of India for failing to disclose details of electoral bonds purchased since April 2019. The Supreme Court had directed the SBI to share this information with the Election Commission of India by March 6, 2024, but the bank sought an extension until June 30, sparking a big controversy.

Why controversy?

By 30^th June 2024 elections might be completed and this might be due to pressure SBI is trying to delay making the information public, which may bring a question on free and fair elections

What was the Contempt Petition?

The contempt petition, jointly filed by the Association for Democratic Reforms (ADR) and Common Cause, accused the SBI of deliberately withholding information about donors and amounts contributed to political parties anonymously. The petition highlighted the contradiction between the SBI’s actions and the government’s earlier affidavit, which claimed that information about the bonds was readily available.

The contempt petition filed by this NGO highlighted the various aspects, including the infrastructure of SBI, and its existing IT systems which were employed for managing electoral bonds, and the discrepancy in the information provided by the bank in response to a Right to Information request.

What are the delays and excuses made by SBI?

The State Bank of India had claimed that it needed time to gather information scattered across its branches, but critics argued that since all banks have large IT systems since 2015, this excuse doesn’t make any sense.

The affidavit supporting SBI’s request for an extension was not sworn by the chairman or managing director of the bank. The petition filed seeks contempt proceedings against SBI for not obeying the court’s order to submit details of political contributions made through electoral bonds by March 06, 2024.

SBI has records of unique numbers for each electoral bond and purchasers’ know your customer details. So, if Section 4 of the electoral bonds scheme explains about this KYC requirement, then SBI should have been able to identify who bought each bond, and put down their names while issuing them.

What are Legal Proceedings?

Lawyer Prashant Bhushan who appeared for the petitioners called for hearing on contempt case to be taken together with an extension sought by SBI as he requested Supreme Court to do so. On review, the Chief Justice said that they were looking into this matter because it raised issues over what the bank had done.

In conclusion, election funding in India may never be same again after a recent verdict delivered by its highest court. Indian Supreme Court judgment on corporate donations and election financing resolves important legal concerns. Transparency in political funding is reduced when information about electoral bonds is delayed in being revealed by the State Bank of India thus underlining why accountability during elections must be a priority, and it will be a big question for the Judicial system of India in case the Supreme court fails to pass any strict judgment before elections to ensure transparency