Supreme Court of India
Association For Democratic … vs Union Of India Cabinet Secretary on 26 March, 2021Author: Hon’Ble The Justice








1. The Association for Democratic Reforms and Common Cause

have joined together and come up with the above Public Interest

Litigation praying for the:
Signature Not Verified

Digitally signed by
Madhu Bala
Date: 2021.03.26
15:46:20 IST

“(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 the Reserve Bank of India
Act, 1934,
(ii) Section 137 of the Finance Act, 2017, and the 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
(iv) Section 154 of the Finance Act, 2017 and the corresponding
amendment carried out in Section 182 of the Companies Act, 2013
(v) Section 236 of Finance Act, 2016 and the corresponding
amendment carried out in Section 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 donation in

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 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 political parties

to mandatorily disclose complete details about their income,

expenditure, donations and funding as well as full details of the


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. Paragraphs 11 to 15 of the said interim order read as


“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 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 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 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 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 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 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 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 period of 10 days during which
the Bonds were made available in the month of January, 2019.

In view of Clause 8 of the electoral 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 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

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 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 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

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 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


8. At the outset, learned Attorney General submitted that the

copy of the latest application was received only three days ago and

that 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 for the Union of India and Shri Rakesh Dwivedi,

learned Senior Counsel appearing for the Election Commission of


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


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 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, 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

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 Scheme.

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. Before the issue 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
We recommend, the following safeguards may be incorporated to
minimize the inherent scope of misuse of such bonds for undesirable

(a). The EBBs may have a tenor of maximum 15 days.

(b) The EBBs can be purchased for any value in multiples of
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 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

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.

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 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 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, 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 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 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 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 bank’s 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 non­KYC 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 sub­clause (i) to sub­clause (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


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.

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 grant of stay at this stage.

Hence both the applications for stay are dismissed.

(S. A. Bobde)

(A. S. Bopanna)

(V. Ramasubramanian)
MARCH 26, 2021



Leave a Reply

Sign In


Reset Password

Please enter your username or email address, you will receive a link to create a new password via email.