So, which political parties are receiving electoral bonds? SBI won’t tell us. Whither political transparency?

[dropcap]I[/dropcap]n an article published in June his year, I had written about the refusal of the State Bank of India (SBI) to disclose information under the Right to Information Act, 2005 (RTI Act) relating to the buyers of Electoral Bonds (EBs) and political parties, which received them.

The Central Public Information Officer (CPIO) denied information about buyers and the denominations of EBs they purchased, saying that compiling such information would lead to a disproportionate diversion of SBI's resources. He also declared that all reports sent to the Central Government about the sale and purchase of EBs were in "fiduciary capacity" and could not be disclosed under Section 8(1)(e) of the RTI Act. Further, he provided only denomination-wise figures for the sale of EBs through the designated branches. This data did not match with the data he had himself provided to Rakesh Reddy Dubbudu of factly.in and one of my fellow co-conveners of the National Campaign for People's Right to Information (NCPRI). In response to such inconsistency, I filed a first appeal with the SBI's First Appellate Authority (FAA) in July 2018.

The SBI's FAA has now admitted that the CPIO of SBI committed a mistake while providing the EB sale data against my first appeal. In his latest communication following the FAA's order, the CPIO has stated that the EB sale data he provided for the Gandhinagar Branch earlier actually belonged to Bengaluru branch of SBI.

SBI's FAA upholds CPIO's rejection order mechanically

Since the Union Finance Minister had claimed that the EB Scheme would introduce greater transparency in political party funding, during his budget speech in Parliament on February 2017, I decided to log in to the Quest for Transparency, a highlight of the website of the Prime Minister's Office. After the Government launched the EB Scheme in January 2018, the SBI announced the first phase of sale of EBs in March. After the 2nd phase of sale in April 2018 was completed, I decided to ask for the following information in an RTI application sent to SBI in May, pertaining to enquiries for the month of March and April.

• First, the denomination-wise total number of EBs sold by each of SBI's authorised branches with the total number of buyers of each denomination.
• Second, the total number of buyers of EBs in each category, i.e. individuals, HUF, Company, Firm, Charitable Trust, and Others who purchased electoral bonds from each of your authorized branches.
• Third, a clear photocopy of all application forms received against which EBs were sold.
• Fourth, a clear photocopy of all redemption slips received and accepted by your authorised branches from every political party in relation to EBs till date.
• Fifth, the methodology applied to ascertain whether or not a political party redeeming EBs with any authorised branches had secured at least 1% of the votes polled during the last round of general elections to Parliament or the State Legislatures, till date.
• Sixth, a clear photocopy of all Declarations of Beneficial Ownership received from companies purchasing EBs.
• Seventh, a clear photocopy of all returns or reports, submitted to the Government of India regarding the sale and encashment of EBs till date.
• Eighth, a clear photocopy of all returns or reports, submitted to the Reserve Bank of India (RBI) regarding the sale and encashment of electoral bonds till date.

The RTI documents and the preliminary analysis of the sale figures were provided by the CPIO to me in June. Now, the CPIO has admitted that the 57 EBs he initially showed as having been sold through the Gandhinagar Branch in Gujarat, were actually sold through the Bengaluru branch of SBI in Karnataka.

SBI sold 10 EBs of INR 1,00,000 denomination (Rs. 10 lakhs or 1 million), 38 EBs of INR 10,00,000 denomination (Rs. 3.8 crores or 38 million) and 9 EBs of INR 1,00,00,000 (Rs. 9 crores or 90 million) denomination totaling INR 12,900,000 (Rs. 12.93 crores or 129.3 million) through its designated branch in Bengaluru.

The CPIO had earlier denied access to information about the beneficial ownership declarations submitted by companies and firms that bought EBs and the reports about EB sale submitted to the Central Government. RBI claimed that they were covered by Section 8(1)(e) of the RTI Act, which applies to information held in a "fiduciary relationship". SBI's FAA mechanically concurred with the CPIO's order without any detailed reasons. Except for stating that I had made my arguments based only on RBI's Master Circular and the Supreme Court's explanation of how a RBI could not claim "fiduciary relationship" with the Banks it regulates, the FAA did not bother to examine the validity of the CPIO's order against those arguments.

Paragraph 25 of the RBI's July 2015 Master Circular has stated under Customer Confidentiality Obligations, that the relationship between bankers and customers are obliged to maintain confidentiality as per the nature of their contractual relations. The exceptions to the same leading to disclosure can be made under the compulsion of law, as a duty towards the public, towards the interest of bank and as per an express or implied consent of the customer. Hence, the CPIO cannot claim the protection of a "fiduciary" or trust-based relationship, as the Circular explicitly details the nature of the relationship as being contractual in nature.

In the case of Jayantilal Ratanchand Shah & Ors. v. RBI, the Supreme Court rejected RBI's claim that it stands in a "fiduciary" relationship with the Banks that it regulates. The reasoning provided was that, the reports of the inspections, statements of the bank, and information related to the business obtained by the RBI are not under the pretext of confidence or trust. In this case neither the RBI nor the Banks act in the interest of each other. By attaching an additional "fiduciary" label to the statutory duty, the Regulatory authorities have intentionally or unintentionally created fear. Further, the Court held that since RBI is a statutory body set up to uphold public interest, they are obliged to act with transparency toward the interests of their customers.

SBI's FAA refused to examine the correctness of the CPIO's reply in light of the RBI's Master Circular of July 2015 and the Supreme Court's ruling on the nature of "fiduciary relationship" in the Jayantilal Mistry case. The FAA also ignored my citation of case law, decided by the Central Information Commission twelve years ago, about the illegal practice of using Section 7(9) of the RTI Act for refusing access to information. He has upheld the CPIO's decision to reject information about buyers of EBs by agreeing that such information is not available in compiled for and compiling it would disproportionately divert SBI's resources. My argument that Section 7(9) cannot be used to reject an RTI application but must be used to facilitate access to the requested information in any other form were simply ignored by the FAA. The FAA's decision is an indication of a refusal to apply one's mind despite compelling case law. He could have permitted file inspection but he chose not to so do. So much for the Quest for Transparency of political party funding through the sale of EBs!

In this backdrop, I will soon file a second appeal before he Central Information Commission against the orders of the CPIO and the FAA of SBI.

Electoral Bonds Scheme explained in brief

The EB Scheme allows any person including HUF, company, firm, charitable trust or unincorporated body of individuals to buy EBs from the designated branches of SBI during each window of sale that the government announces from time to time. EBs are in the nature of promissory notes and carry no rate of interest. The identity of the buyer is not recorded on the EB. So the political party will have no formal mechanism to know who is the actual donor through EB. A buyer could send the EBs through his/her chauffeur to be delivered at the office of a political party. They hold a validity of 15 days only and there is no limit on how many or how much worth of EBs any person can buy. Recipient political parties have to redeem the EBs within this period using an SBI account. The value of EBs will not be credited to any other bank where the political party may have an account.  If they miss the 15-day deadline neither the buyer nor the recipient political party gets the money back. Instead it will be deposited in the Prime Minister Relief Fund.

Through the Finance Act, 2017 , the Government of India made some changes to the statutory scheme of political party funding. First, cash donations to political parties must not be more than Rs. 2,000/- from one donor. Second, individuals and companies, associations, trusts etc may make donations of any amount to political parties through cheques, bank drafts or electronic transfers.

Other amended acts include first, the RBI Act, 1934 was also amended to provide statutory recognition of electoral bonds. Second, the Income Tax Act, 1961 was also amended to relieve political parties from the obligation of reporting details of donations received through EBs to the tax authorities in order to continue to avail IT exemption. Third, the Representation of the People Act, 1951 was amended to relieve political parties from the obligation of maintaining the identity of donors who use EBs and disclosing the same to the Election Commission of India.

Lastly, the Companies Act, 2013 was amended to completely remove the cap on registered companies for making donations to political parties. Earlier, they could donate not more than 7.5% of their net profit during the three preceding years and publicly disclose the same in their profit and loss at the end of the year. The amendments in 2017 stated that a company might donate its entire share capital to political parties soon after formation and then wind up, i.e. removing limits on both time and amount. Further, there is no duty placed on companies to reveal the name of the political party to which they donate any amount of money, let alone through EBs in their profit and loss account.

As per my previous article, the electoral bond announcement through the annual budget in February 2017 only reveals a backward leap towards the era of secrecy, and the undelivered promises of transparent mechanisms.