The Supreme Court on October 14, 2022 asked the government whether the electoral bonds' system reveals the source of money pumped in to fund political parties even as the Centre repeatedly maintained that the scheme is "absolutely transparent".
"Is it transparent? Does the system provide from where the money comes?" Justice B.R. Gavai, heading a Bench comprising Justice B.V. Nagarathna, quizzed the government.
"The methodology of receiving money is absolutely transparent… It is impossible to get any black or unaccounted money in… To say that this (electoral bonds scheme) affects democracy may not hold water. We will take Your Lordships through this step-by-step," Solicitor General Tushar Mehta replied for the government.
The exchange came hours before the announcement of the poll dates for Assembly elections in Gujarat and Himachal Pradesh.
Senior advocate Kapil Sibal, for the petitioners, said the scheme affected the very idea of free and fair elections provided under Article 324 of the Constitution.
"They have been issuing electoral bonds before every State elections," advocate Prashant Bhushan, also for the petitioners' side, interjected.
"When are the elections due?" Justice Gavai asked.
"Today they are going to announce the dates for Gujarat and Himachal Pradesh," Mr. Bhushan responded.
Urging to refer the case before a larger Bench, Mr. Sibal said the court should consider the cardinal issue of the impact of electoral bonds on Article 324.
"Free and fair elections are central to a democracy. It is the Basic Structure… Now, an opaque way of funding political parties where you do not even know who is funding whom destroys the very concept of Article 324. This is a matter for a larger Bench," Mr. Sibal argued.
Justice Gavai indicated that the court should first hear on whether the case should be referred to a larger Bench. He said it was the prerogative of the Chief Justice of India to form a larger Bench, if required.
Mr. Bhushan flagged three important and interconnected issues highlighted in the petitions challenging the scheme
He said, besides the question of validity of electoral bonds, separate petitions have questioned whether or not political parties came under the ambit of the Right to Information Act. He said the third issue was the challenge to the retrospective amendments made to the Foreign Contributions Regulations Act by which subsidiaries of foreign companies would not be treated as foreign sources.
"By not treating subsidiaries of foreign companies as foreign sources, political parties and others, including public servants, can get foreign money through the subsidiaries of foreign companies by virtue of these amendments," he submitted.
"Does this even extend to public servants?" Justice Gavai voiced incredulity.
"Yes, everybody now," Mr. Sibal said.
"Yes, and the question in all these cases is whether these amendments could have been made through a Money Bill which does even get the approval of the Rajya Sabha… Only the Budget is regarded as a Money Bill and can go through without Rajya Sabha approval. These amendments were made through a Money Bill, which, according to us, is totally illegal," Mr. Bhushan contended.
"This needs a detailed hearing," Justice Gavai reacted.
"These issues go to the very root of democracy in the country," Mr. Bhushan said.
Mr. Mehta assured the court that the scheme was "most transparent" and not a subject of "what you say loosely in discussions".
Attorney General R. Venkataramani said there should be a "threshold hearing" on the question of reference to a larger Bench. He and Mr. Mehta urged the court to list the case in January. They said several Constitution Benches were scheduled in the interim.
But Mr. Sibal and Mr. Bhushan pressed for an earlier date. "Or in the meantime the elections will held...That is the problem," Mr. Sibal said.
"Anyway it has been pending for seven years… We can have it in January?" Justice Gavai suggested, but the petitioners requested for an earlier hearing considering the importance of the issue.
The court finally scheduled the hearing on December 6.