CHIEF JUSTICE DY CHANDRACHUD

HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE

MR. JUSTICE B.R. GAVAI

HON'BLE MR. JUSTICE JB PARDIWALA

HON'BLE MR. JUSTICE MANOJ MISRA

Writ Petition (Civil) No.880/2017

ASSOCIATION FOR DEMOCRATICS REFORMS & ANR. (Petitioner)

Versus

UNION OF INDIA & ORS. (Respondent)

KAPIL SIBAL: My Lords, my learned friend has with great perspicacity raised the points before Your Lordships, and I will not repeat them. My Lords, lets in four, five, seven minutes let me broadly tell Your Lordships, what my submissions are. Your Lordships, must assume as a given that capital and influence go hand in hand. In fact, under the very concept of a market economy, capital symbolises power. And it may be in any sector of the economy as it is in politics. The more capital you have, the more power you have. That's number one. Point number two, the electoral process must be such that it must provide a level playing field to all participants. Fair and and free elections, or free and fair elections is the basic structure of the Constitution. Concept number two. 

CHIEF JUSTICE DY CHANDRACHUD: Just a second. Yes. 

KAPIL SIBAL: Concept number three, the moment you allow the corporate sector to donate, whether with transparency or without transparency. I'll come to that a little later, it is inconsistent with the concept of a corporate sector which is in the business of doing business. You have a Memorandum of Association, which tells you what the objects of the corporation are. The shareholders put in their money to ensure that the corporation functions within the framework of the Memorandum of Association. Now, you give the power through an amendment of this nature to allow shareholder's money to be used inconsistent with the Memorandum of the Association. It's a very serious issue. And without consultation and without the consent of the shareholders. Under which law, My Lords, then I asked myself this question, can this ever be allowed? I buy shares in a company. It may be listed. It may not be listed.   

CHIEF JUSTICE DY CHANDRACHUD: But just one caveat Mr. Sibal, which is that we are not here on the challenge to the legality of a law providing for corporate donations per se. That wider issue is not before us. 

KAPIL SIBAL: I agree, but I... 

CHIEF JUSTICE DY CHANDRACHUD: For the reason, that's what Justice Chagla flagged, even Chief Justice Chagla flagged even in 1958. He said there should be no corporate donations, but we are not really dealing with that. So, let’s not really go into that area at all... 

KAPIL SIBAL: I'm not into that area at all. 

CHIEF JUSTICE DY CHANDRACHUD: Because 293 anyway allowed it. 

KAPIL SIBAL: I am not on that. I am on a wider... 

CHIEF JUSTICE DY CHANDRACHUD: On what you said on the latter part of your formulation without the consultation and the approval of the shareholders. 

KAPIL SIBAL: That's the point. That's the point. That's why I said My Lords... 

CHIEF JUSTICE DY CHANDRACHUD: Otherwise, the broader philosophical perspective that look allowing corporate donations is really permitting some form of quid pro quo. 

KAPIL SIBAL: No, no, My Lords, I'm not on that because my learned friend has argued that. 

CHIEF JUSTICE DY CHANDRACHUD: We needn't bring that broad area here, because in that sense, the moment we accept it, 293, our society legitimized corporate quid pro quo. But, there is an element of quid pro quo the moment you have corporate donations. 

KAPIL SIBAL: Exactly, exactly, there is no doubt about it. That's why... 

CHIEF JUSTICE DY CHANDRACHUD: Therefore, a large public limited company who makes a donation doesn't give it for charity or for you know [UNCLEAR]. 

KAPIL SIBAL: Exactly, that's why I said capital and influence are Siamese twins.   

CHIEF JUSTICE DY CHANDRACHUD: We shouldn't really in that sense... 

KAPIL SIBAL: I am not going there, My Lord. That's why I said, that what you're doing in this process is that you are allowing through the Electoral Bond process to not inform the shareholder, as to how his money is going to be spent. Right. And that's a very serious issue because he has invested in the company, not for the purposes of donating to X and Y. That's the third concept. The fourth is even more important. This is nothing to do with Electoral Bonds if you ask me. It is donation to a political party to use the funds as they like. The nomenclature suggests Electoral Bonds means this is for the purposes of the election. There is nothing in the scheme. There is nothing in the scheme which connects the donation made to the participation in the electoral process. Nothing. It is a means for political parties to be enriched. Why do I say that? I make a donation of crores to a political party, through an Electoral Bond. The political party opens a current account and crores goes into that account. Now, that political party can actually give that money to the mainstream media channel and say, you propagate my ideology or give a present to somebody or do what you want to do with it. 

CHIEF JUSTICE DY CHANDRACHUD: There's no spending requirements. 

KAPIL SIBAL: None, none. Zero. That's the most serious issue. Because you can spend this money any way you like. You can build your offices. You can build your offices all over the country with that money. You can set up a whole internet, said network throughout the country with that money. You can use advertising campaign for whatever you like with that money. Show your face times a day. And see the nexus. The corporate sector gives money to the political party. The political party and the corporate sector owns a media house. Just look at the nexus. The corporate donor owns the media house. The corporate donor gives it to the political party. The political party uses the media house. No questions asked. 

TUSHAR MEHTA: This is a constitutional argument. He is going on for some personal instances. 

KAPIL SIBAL: No, I'm not talking of any instance. I'm talking about the scheme. Please do not interfere. I'm talking about the scheme. I'm not talking about any instance. That's the law. 

TUSHAR MEHTA: This is a Constitution Bench.   

KAPIL SIBAL: This is of course, hopefully it is. I thought I was sitting before five judges. I thought I realized by now it is. 

TUSHAR MEHTA: Yeah, it is. 

KAPIL SIBAL: Thank you. Got to know about it from you. 

CHIEF JUSTICE DY CHANDRACHUD: The Article argument... 

KAPIL SIBAL: Yes. Yes, My Lords. The scheme is wholly arbitrary. It has to be struck down on its terms. It has nothing to do only with elections and how you spend your money in the electoral process. Now My Lords, kindly have a look at Volume 4, and PDF 142. These are FAQs My Lords, that were asked, qua the scheme, from the SBI. 

CHIEF JUSTICE DY CHANDRACHUD: 142? 

KAPIL SIBAL: Yeah. First,I'll give you… show you My Lords, 138, which is a given My Lords. Actually, I need not even mention this. At 138, the question is - What is the minimum and maximum limit for donation? The minimum amount for donation is 1,000. There is no maximum amount. 

CHIEF JUSTICE DY CHANDRACHUD: 138, Mr. Sibal? 

KAPIL SIBAL: Question My Lords, at 31. 

CHIEF JUSTICE DY CHANDRACHUD: 31? 

KAPIL SIBAL: Yes. Just note it ... Your Lordships know… You know about it already. 

CHIEF JUSTICE DY CHANDRACHUD: Yeah, that’s okay. KAPIL SIBAL: Now come to 142. 142. Question - Can a political party use this current account for other operations also? Answer is, yes. Next question is - Can political party close this current account after the election? The account may be continued for normal banking operations. However, if required, the account can be closed at any time by the political party. 

JUSTICE SANJIV KHANNA: What are you hinting at Mr…?   51 KAPIL SIBAL: I’m sorry? 

JUSTICE SANJIV KHANNA: What are you hinting at? 

KAPIL SIBAL: My Lords, if you close the account, that's the end of the matter. 

JUSTICE SANJIV KHANNA: You get the money, close the account. But… 

KAPIL SIBAL: That's it. And then you spend it the way you want. My Lords, this is not a scheme for… I can understand. Quite frankly, I can understand the corporate sector being told that we impose a cess, like Education Cess. You impose a cess on the corporate functioning of companies. With that cess you have a capital, and capital you distribute in accordance with their representation in the Lok Sabha. So, everybody has the same amount. And the same money can be used for that. What you are doing now is entirely different. You are saying you give me as much money as you want to give me. That as he has argued that… 

CHIEF JUSTICE DY CHANDRACHUD: Your submission is, this is not money for electoral participation, but money for… 

KAPIL SIBAL: … enriching the party. 

CHIEF JUSTICE DY CHANDRACHUD: … the political party, the beneficial party. 

KAPIL SIBAL: Yes, it’s just enriching the party. 

CHIEF JUSTICE DY CHANDRACHUD: There are no spending requirements, there’s no auditing requirement as to how the money is utilised. Nothing. 

KAPIL SIBAL: No accountability. Absolutely no accountability. 

CHIEF JUSTICE DY CHANDRACHUD: What's the next point? 

KAPIL SIBAL: The last point, the fifth point is that, in fact, it protects… the nature of the scheme protects those who have committed a crime. I'll give you an example. Under the Prevention of Corruption Act, My Lords… Section of the Prevention of Corruption Act, you give money to a public servant… Members of Parliament are public servants. Many members of the political party who are in the fray are public servants. Now, as Your Lordships knows, under Section 7, you can also prosecute a person in anticipation of a favour; not just having granted a favour. So, you give a donation. No questions asked. You get a favour. You don't... cannot correlate one with the other. And I can't prosecute you. This is a scheme to protect criminals from being prosecuted. Just read Section with me. Prevention of Corruption Act. This is also true under the PMLA. Because the predicate offense has been committed, it results in proceeds of crime. You'll never get to know. Rather than furthering the rule of law, it tinies it. That's the other Article argument. You'll never know who bribed whom? How much was the bribe? For what quid pro quo was there? You never get to know. That there is quid pro quo My Lords, is in my first submission, that capital and influence go together. Nobody can doubt that proposition My Lords. So, in effect through this scheme, you are trying to protect those people where the source of the money is, my learned friend has argued, I don't want to repeat anything that he has said. And My Lords, see what is the scheme. If it's less than Rs. 2000, its cash. If it's more than Rs. 20,000, the name of the donor has to be given. And if it is Electoral Bonds, nothing. That's the three layers of the scheme. So, while the donor's name will be given if it's more than Rs. 20,000. And so, ordinary, ultimately, let's put it this way, this Constitution is for the citizens of this country to participate in the election. The corporate sector is not a voter. The citizen is the voter. The citizen should be entitled, is entitled to contribute. If he gives more than Rs. 20,000 his name will be there. But the corporate sector, who is not a citizen, can donate crores, 100 crores, his name would not be there. What's the rationale for that? I, as a citizen named I'll have to be disclosed. So, is the corporate sector is being granted a privilege over a citizen of this country? That privilege of anonymity. How is he more privileged than a citizen who is at the heart of the Constitution of India? How is he being given a preferential treatment? Why? Because you want to enrich yourself through this scheme. And enrich yourself because you're in power. My Lords, the opposition may be in power in a state, they will also enrich themselves. This is not political. Because all business will actually be attracted towards this game because this is one way of getting access. I just, pardon me for saying so from personal experience, if people donate, My Lords, we know who has donated. He will give me a call and say, "Sir, I want to come over". I will hear him. But if I don't know his name, who has donated, I won't listen. I mean, how many calls will I answer? So, you get access, straight away you get access. And all this anonymity that we are talking about is really not anonymous. Because the person who donates will go and tell him orally that I gave you such and such money. This is the amount I gave you. 100 crores. Only he will know that he gave. 

CHIEF JUSTICE DY CHANDRACHUD: The anonymity would exist only if it was truly fungible.   

KAPIL SIBAL: That's right. 

CHIEF JUSTICE DY CHANDRACHUD: In which case, if it's truly fungible like a demat account. In which case you give it to say the election committee and then it is... 

KAPIL SIBAL: Then it is anonymity. 

CHIEF JUSTICE DY CHANDRACHUD: Then it becomes anonymous. 

KAPIL SIBAL: That's right. Now it is not. In fact, it is not anonymous if you ask me. That's my submission. Because I have given a 100 crores. I know that I bought a bond. My learned friend, Mr. Prashant Bhushan said, no, no he gave it to a third person. Doesn't matter. But who is interested in, in that bond? The person 'Y', who bought the bond. So, I will go and tell whoever I want to tell, that I gave you. So, he doesn't have to go to the State Bank of India. Let's talk practical politics. He doesn't have to go to the State Bank of India to find out. Nor does the State Bank of India have to disclose it. The person who gave it will disclose it. Because he knows why he gave it. So, what is anonymous about this? This is protecting the rich. 

CHIEF JUSTICE DY CHANDRACHUD: There is another thing... [NO AUDIO] 

CHIEF JUSTICE DY CHANDRACHUD: The issue which we were just discussing, on which perhaps the learned Attorney may give us an answer. But since Mr. Sibal is on his leg, we will just put it to him. Mr. Attorney and Mr. Solicitor, you can also lend your... then you can answer. Suppose, A purchases the bond. 

KAPIL SIBAL: Yes, My Lord. 

CHIEF JUSTICE DY CHANDRACHUD: A purchases bonds worth X amount, 100 crores. 

KAPIL SIBAL: Yes. 

CHIEF JUSTICE DY CHANDRACHUD: A is only the person who's been put up to purchase the bond because A has the KYC etc. A has to only physically hand over the bond to B. Right. Who in... B gives it to C, who will in turn give it to a political party. Now B... there is   54 no control over the transaction between A and B. So, B can trade on that bond for cash or for whatever other consideration. B acquires that bond. B hands it over to a political party or B gives it to C and C hands it over to a political party. The person who has satisfied the requirement of the transaction being through the normal banking channel, because A is the purchaser, the ostensible purchaser of the bond. KAPIL SIBAL: Correct. 

CHIEF JUSTICE DY CHANDRACHUD: But this does not obviate the fact that the people who are really... 

KAPIL SIBAL: Behind it. 

CHIEF JUSTICE DY CHANDRACHUD: ... behind it. 

KAPIL SIBAL: Yes. 

CHIEF JUSTICE DY CHANDRACHUD: But they have used authorized banking channel. All that they have to do is... 

KAPIL SIBAL: Get somebody's KYC. 

CHIEF JUSTICE DY CHANDRACHUD: They say trading is prohibited, but there's no way you can prohibit trading in the bond. 

KAPIL SIBAL: Absolutely. Absolutely, My Lord. 

CHIEF JUSTICE DY CHANDRACHUD: He doesn't have to buy the bond from A through official banking channel because there's no record of any transactions of the bond. It just goes from hand to hand. 

KAPIL SIBAL: That's right. 

JUSTICE SANJIV KHANNA: Because of the curtain, then there cannot be any questions with regard to quid pro quo.   

KAPIL SIBAL: That's right. And then ultimately, the person who is actually invested in it is the person who will tell the political party who is the holder, ultimately. 

JUSTICE SANJIV KHANNA: No. In this case, probably they know who is the purchaser. 

KAPIL SIBAL: It could be B or C. 

JUSTICE SANJIV KHANNA: They’d know the purchaser, but the actual purchaser is A. 

KAPIL SIBAL: Exactly. 

JUSTICE SANJIV KHANNA: Whereas in the KYC, etc, A is the one who is… 

KAPIL SIBAL: That’s right. Absolutely right. So My Lord, it perpetuates… 

CHIEF JUSTICE DY CHANDRACHUD: Also, B may be an aggregator of the bonds, by having different people subscribe to, or 100 different people subscribe to bonds worth one crore each. 

KAPIL SIBAL: That's right. My Lord, there the human… at least the Indian human mind is ingenious in these matters. We control the economy of the world in many ways. And the RBI raised these concerns repeatedly. 

KAPIL SIBAL: We now look at question C. Frequently Asked Questions, FAQ, page 138. Question No. 36. 

JUSTICE SANJIV KHANNA: 128? 

KAPIL SIBAL: 138, question 36. My Lord has that? Who is the bona fide owner of the Electoral Bond? PDF 138. Who is the electoral owner of ... Who is the bona fide owner of that bond? Electoral Bonds are bearer banking instruments. It's exactly what My Lord, the Chief Justice said… And the holder of Electoral Bonds is the bona fide owner of the same. Nothing can be more anonymous than this. All that you need is the KYC, that's it. And then see 17, at page 31… sorry page 131. PDF 131, Question 17. Can Electoral Bonds be purchased multiple times by the same applicant? Yes. Yes, every application will be treated as fresh request for Electoral Bonds purchased, and every time fresh KYC documents... So, you will have bond brokers, you'll have in between, you'll have all kinds of people participating in this. So, it's not just a question of transparency, it's much wider than that. Last of all My Lords, if I do not know these facts. If I don't get to know the name of the donor, I don't get to know the transaction. I don't get to know the possible direct or indirect quid pro quo, I can't participate in democracy. It is also a matter of participation in democracy. I will then be sued for defamation that you made this allegation without the facts. But how will you get to know... how will I get to know the facts if you hide the facts through an electoral scheme like this? I can't raise questions in Parliament. I can't raise questions outside Parliament. But this scheme has no definite objective. If it were a definite objective of funding through the corporate sector, the process of election without funding a political party I can understand. You can have Electoral Bonds to fund the election process. But what you are doing here is you're funding a party. It's different. The object is different. Do you call it Electoral Bonds but these are not Electoral Bonds and the limit of expenditure has nothing to do with it. 123(6) of the Constitution of The Representation of People's Act talks of expenses, corruption, an act of corruption beyond 95 lakhs now. So, the larger issue that Your Lordships will have to consider, that this is no part of participatory democracy at all. Every scheme must have a legitimate object. What's the legitimate object here? Which is constitutional. The scheme must be such, it must be proportionate to the objects sought to be achieved. And the underlying principle under the Constitution is free and fair election, which is a basic feature of the Constitution. How are you serving these three purposes My Lords? You are serving none of these three. No legitimate object because it is not limited to the elections. No proportionality because it's unlimited. And no free and fair elections because, my learned friend has shown to Your Lordships, how heavily it is loaded towards the party in power. So, you are creating a non-level playing field through the Electoral Bonds. And that's violative of 324. Now My Lords, historically, as Your Lordship knows, in 1969, through legislation we had prohibited corporate donations altogether. In 1985, through an amendment we said, okay, the corporate sector can donate but only to the extent of 5% of the average earnings in the last three years. Three financial years. 

JUSTICE B.R. GAVAI: 5% or 7.5%? 

KAPIL SIBAL: I am sorry? Initially 5%. My Lords 1985 was 5%. Then through an amendment, it was, 2013 Act, it was changed to 7.5. 

JUSTICE B.R. GAVAI: 2000?   

KAPIL SIBAL: 2013. The Companies Act. Actually, I put it all in the written submissions, but because my learned colleagues are waiting for me to end. So, I'm not wanting to take their time. Your Lordships have said that do it... be as short as possible. But whatever I have said to Your Lordships, are the propositions that emerge from the scheme itself. 

CHIEF JUSTICE DY CHANDRACHUD: Mr. Sibal, submissions are in which Volume? 

KAPIL SIBAL: Volume 1. 

CHIEF JUSTICE DY CHANDRACHUD: Again, Volume 1, right? 

KAPIL SIBAL: Yes. Volume 1. All the submissions are in Volume 1. 

CHIEF JUSTICE DY CHANDRACHUD: Yes, please go ahead. 

KAPIL SIBAL: It is page 48. PDF 48. And if you just... I'll take few minutes, My Lord. Then I'll be done. Because my learned friends, I want to give them time too. The first My Lord, few pages are just the scheme itself. The Electoral Bond Scheme itself. Goes up to, goes up to page, PDF page 63. My Lords have that? It's just the elements of the Electoral Bond Scheme, which have already been explained to Your Lordships. So,I will not trouble Your Lordships with that. That's been explained. But you come to 63. Then My Lords, I deal with the issue of free and fair elections under the constitution. And I say, it's the basic feature of the Constitution. And, it's now recognized, that para 15, I say, 'as will be developed below any nature of funding that is opaque and that seeks to hide the source of funding is contrary to the spirit of free and fair elections, which is part of the basic structure'. That's the transparency argument. Plus the free and fair in the context of which, in the context of my submissions before Your Lordships now. Then, election is a vehicle of representative democracy. I've given judgments My Lords. Page 66. And then, para at 66, is the constitutional mandate of free and fair elections under the principle of Universal Adult Franchise is a central pillar of our democratic culture. Under our political system, elected representatives do not have any political legitimacy, independent of the will of the people, and must discharge their duties in public trust. It must never be forgotten that this Constitution is citizen centric. It is for the citizens to decide to donate. If you want corporate funding, then that corporate funding must be for the electoral process. Must not be for political parties. Otherwise, it would not be free and fair election. Then therefore, you must interpret superintendents direction and control of the conduct of elections in that context. That's set out at page 67, end of paragraph 19. Then I differentiate between freedom and fairness, which is para 20. I won't trouble Your Lordships with the language. And para 24, I say, 'economic power' at page 68. 'Economic power presents a grave risk to any level playing field between individual citizens and groups and can give some voices a disproportionate say in deciding the agenda of the political parties and hence the laws and policies that will govern the entire country. In pluralistic democracies like India, practices, must emerge that preserve the equal voice of all citizens, and that ensure that the special needs of all groups are heard'. If the voice of the corporate sector drowns the voices of citizens, My Lords, that's a very dangerous trend in democracy. Then Justice Bhagwati's judgment in Kanwar Lal Gupta's case. Let's leave that out. I think that's one extreme position, which I don't want to argue. And then, this is important. Kindly see para at page 72, reiterating my learned friend's submission that it's the voter's right to know. That's fine. And My Lords, this whole concept of black money. I mean, I don't understand… The cash that is given below 2,000, can be black money. The Rs. 20,000 has to be disclosed that also can be black money, whereas, you can say cash in hand, Rs. 20,000. And the Electoral Bond can also be black money. And over and above that, there is that black money, because there is cash that doesn't go into Electoral Bonds. So what is this black money issue about? The kind of extravaganzas that we see, My Lords, is what? Is it white money? So, this has nothing to do with black money. This is the case of the government, that black money was used earlier; no doubt. Black money is used today; no doubt. There is more cash in the market than it was in 2014 or 2019. That's government's own statistics. So, black money is a bogey, and all three elements can be part of black money. That can't be an argument. So dealt with… And then… So, the three issues My Lords, I have raised at page… PDF 75, whether corporate donations should be allowed at all? But that's not a question that Your Lordships has to answer. If yes, what kinds of companies should be allowed to make such donations? If corporate donations are allowed, what cap of net profits should be set, and who is the appropriate body within the corporation to authorize such donations? That's, if you agree to all what the other side says. If you agree to what the government says, My Lord, then these questions will arise. But that's subject to my submissions that I've made to Your Lordships. The shareholder arguments My Lords, I placed there at para 43 - The objects of the company and all that which I've already commented upon. Then I've given the history. Then 2013, My Lord asked the question, the cap of 7.5. That's at para 47. And actually, My Lords, there's a wonderful report of Justice Shah, I think at the Law Commission, which actually sets out the practices in all the countries - UK, US, Japan, Philippines, Australia and Germany. And on all those countries, there is no question of any opacity. Most countries do not allow corporate donations at all. But where they do allow, there's no opacity. And this is all at PDF page… Your Lordships may only note it… 296 in Volume 4. That Prashant Bhushan has covered. That's really it My Lords. I want to take as little time as possible.

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