ToxicsWatch, Journal of Earth, Science, Economy and Justice

One is saddened by the departure of Fali S. Nariman, a noted nonagenarian jurist without donating to the Bhopal disaster victims the legal fees which Union Carbide Corporation/Dow Chemicals Company, a US multinational company paid him, to erase the taint of Bhopal disaster. Prof. Upendra Baxi's advice in this regard is recorded in Nariman’s autobiography-Before Memory Fades. Notably, Nariman also represented asbestos companies. Carcinogenic Asbestos is banned in 70 nations. Its safe and controlled use is impossible. Dow Chemicals Company set up $ 2.2 billion compensation fund to pay victims of asbestos diseases, a liability of Union Carbide in US but not in India. Nariman departed without repenting for having represented corporate criminals. Human life is not confined to one's professional compulsions. One's inner life is guieded by moral compulsions, not professional ones alone.   

Nariman served as Additional Solicitor General of India from 1972 to 1975 but stepped down to protest the Internal Emergency imposed by the then Indira Gandhi led government. Nariman was right to conclude that "One of the lessons of the Internal Emergency (of June 1975) was not to rely on constitutional functionaries. These functionaries failed us-ministers of government, members of Parliament, judges of the Supreme Court, even the president of India". It revealed that even the president of India who signed the Proclamation of Emergency in compliance with the oral instructions prior to its intimation to the council of ministers on the night of June 25, 1975, cannot be trusted. As a consequence Constitution (44th Amendment) Act, 1978 had to be enacted insert Article 352 (3) to ensure that in future president must sign Proclamation of Emergency only after the decision of council of ministers is communicated to him/her in writing. This provision became effective from June 20, 1979. But Nariman forgot to recollect that it was during the Emergency that Union Carbide Corporation (UCC) was granted industrial license to set up its hazardous insecticide factory and research and development centre which was reportedly testing and manufacturing war chemicals in Bhopal.           

In the aftermath of world's worst industrial disaster in the factory of UCC, Nariman appeared for UCC as the lead advocate with Bomi Zariwala, his junior to defend it against the victims of UCC's industrial disaster. UCC engaged him late 1985 in the civil litigation arising out of the disaster. Nariman will have us believe that it all started on September 5, 1986 when Union of India filed a suit on behalf the claimants, the disaster victims under the provisions of Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 in the District Court of Bhopal demanding $ 3.3 billion as compensation from the UCC. The 1985 law was enacted on March 29, 1985 to make Union of India the sole plaintiff in a suit against the UCC and other defendants for compensation arising out of the disaster.  

Nariman's memory seems to have faded in this regard because the fact is that it all started with the filing of suit of Union of India on behalf of all the victims in the Southern District Court, New York presided over by judge John Keenan on April 8, 1985 after some 145 cases which were filed on December 7, 1984 on behalf of victims in various US courts were consolidated and placed before the judge. Union of India had demanded $ 3.3 billion as compensation from the UCC. The suit was filed in the District Court of Bhopal after judge Keenan dismissed the claim on May 12, 1986 subject to the condition that UCC will submit to the jurisdiction of Indian courts.   

On December 17, 1987, Judge Deo, District Judge, Bhopal ordered an interim compensation of Rs. 350 crores. This was challenged before the High Court at Jabalpur, Justice S.K. Sheth reduced the interim compensation to Rs.250 crores. Union of India and UCC challenged this on September 8, 1988 before the Supreme Court. On February 14/15, 1989, Supreme Court approved an abrupt settlement arrived at in the appeal by UCC whereby $ 470 million (its equivalent then was Rs 615 crores) was to be paid by it and its Indian subsidiary to the Union of India in full and final settlement without admitting liability. The role of R. S. Pathak, the 18th Chief Justice of India who relinquished office midway post 1984 disaster unjust settlement on "casual election" to join as a Judge, International Court of Justice and that of Nariman has remained under scrutiny since then. One has learnt that Pathak was all ready to leave but was forced to wait because he had many many judgments pending. If one looks at his judgments between February 1989 and May 1989, one can find the urgency embedded in it. Notably, some of his judgements did not get delivered but were released.  

Pathak was an elected judge of the International Court of Justice following the death of M. Nagendra Singh, an Indian judge who was then serving his second term. He served in this position from 1989 to 1991. In 1991 India decided not to renominate Pathak but he entered the fray with the backing of Ireland. After the Irish government came under attack from legislators who blamed Pathak for approving, as Chief Justice of India, the $470-million Bhopal disaster settlement with UCC, Pathak withdrew from the race. Both Pathak and Nariman were disliked because of this settlement. 

Nariman's autobiography reveals how he quoted Pathak copiously to defend himself in his writings on Bhopal disaster case. Taking note of this Prof. Upendra Baxi wrote, " Mr Nariman's invocation of Chief Justice Pathak's sonorous invocation is the ultimate perfidy."    

Recollecting Nariman's respect for Pathak, A.J. Philip, a senior journalist writes, "It is jokingly said that if you have a few millions of rupees to hire the services of Nariman, you can murder anyone and get away with it. No, money is not the only determinant for him. As my memory goes, he did not charge a single penny, though he pored over my case and suggested many changes in the affidavit I and the reporter concerned had to file in the High Court. What mattered to him was that The Tribune Trust was headed by Justice R.S. Pathak, a former Chief Justice of the Supreme Court of India".    

In his autobiography, he has recorded that he faced national and international criticism. Laurie S. Wiseberg, the editor of Human Rights Tribune, a prestigious foreign publication criticing him in 1992 in an article titled " Fallen Angels?" for appearing on behalf of UCC even as he served as a member of the executive committee of International Commission of Jurists (ICJ), Geneva. Nariman had responded to this criticism. Prof. Upendra Baxi had resolved not share any public platform with Nariman ever since he assumed the UCC advocacy. Both exchanged arguments in this read in an 2004-5 issue of Seminar, a reputed Indian journal.     

Given the fact that he continued to be UCC's lawyer, he must have known about an order of the Madhya Pradesh High Court's Divsion Bench of Justices Sheel Nagu and Devnarayan Mishra dated November 28, 2023 has initiated contempt proceedings against officials of the state and Union governments. But the order was recalled on February 19, 2024. Initially, the order had found these officials guilty and served notice for their failure to comply with the Supreme Court's direction dated August 9, 2012 seeking maintainance of consolidated medical records through computerisation and networking of medical records of all hospitals and clinics where gas victims have been undergoing treatment and for the failure of these officials to provide quality medical care through specialists and with the best of facilities. Now, the order of High Court's Division Bench of Justices Sheel Nagu and Vinay Saraf dated February 19, 2024 states that "it would be appropriate that assistance of Monitoring Committee is sought. It is thus directed that each contemnor or his/her representative, who should not be below the rank of Class-1 Gazetted Officer should appear on the next date of meeting of Monitoring Committee to enable the Monitoring Committee to assess present state and extent of compliance of order of Apex Court dated 09.08.2012 passed in Writ Petition (C) No.50/1998 and various directions passed by this Court and thereafter prepare report under various heads showing compliance/non compliance. The Monitoring Committee is requested to assist this Court by submitting report as enumerated above as expeditiously as possible. List in the third week of April, 2024." The unending wait for justice for the victims of the disaster is unlikely to come to an end in near future.  

Before his departure Nariman witnessed how on March 14, 2023, the Supreme Court's Constitution Bench led by Justuce S. K. Kaul dismissed the Union government’s curative petition against the unjust settlement of February 1989 on ground that it was the government which had categorised the huge majority of gas victims as suffering from only “minor” injuries. In its curative plea, the Union of India prayed for another $8.1 billion (Rs 7,844 crore) over and above the $470 million already paid in a settlement in 1989 by UCC (now owned by Dow Chemicals Company). The order of Justice is S. K. Kaul is ridden with factual errors, which is yet to be rectified.  

One checked for use of the phrase "blood money" in Merriam-Webster Dictionary. It says, "The blood money earned by people who profited from the tragedy." The corporate criminals survive on blood money.
Shakespeare has immoralised the fate of unjust people nin his Macbeth. Lady Macbeth notices, "Hell is murky," and observes, "Yet who would have thought the old man to have had so much blood in him? Here's the smell of blood still. All the perfumes of Arabia will not sweeten this little hand". Judges and lawyers are judged even after the delivery of judgements. The cry of the victims of preventable disasters resonates even after the departure of judges like Pathak and lawyers like Nariman after performing their professional roles and having earned their share laurels.            

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The author is a law and philosophy researcher and a lawyer. He is an ex-Fellow of Berlin based International Research on Authoritarianism and Counter Strategies (IRGAC).

The Constitution Bench of Supreme Court comprising the Chief Justice, and Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala and Manoj Misra will pronounce the judgment in Writ Petition (Civil) No. 880 of 2017 etc. in Chief Justice’s Court at 10.30 a.m. on February 15, 2024. Besides Association for Democratic Reforms (ADR), CPI (M), Spanadan Biswal and Dr. Jaya Thakur are petitioners in the Electoral Bond Scheme (EBS) case. All the petitions are tagged together. Originally, Writ Petition (Civil) No. 333/2015 of ADR and Indian National Congress- SLP (Civil) No.18190/2014 was tagged with the ADR's new petition on October 3, 2017 by Supreme Court's 3-judge bench of Chief Justice and Justices Hima Kohli and J.B. Pardiwala. Jaya Thakur's petition was tagged with it on November 22, 2022. 

Earlier, Indian National Congress was "instructed to withdraw these petitions" on November 29, 2016 by Justices Jagdish Singh Khehar, Arun Mishra A.M. Khanwilkar. It was "Dismissed as withdrawn". Prior to this the petitioner had sought "an adjournment, so as to enable him to obtain instructions about the effect of the amendment to the provisions of the Foreign Contribution (Regulation) Act, 1976" on November 22, 2016. 

Notably, ADR had pursued a similar case [Writ Petition (Civil) 131 of 2013] in Delhi High Court from 2013 till October 9, 2017. ADR and E.A.S. Sarma, ex-Finance Secretary had filed this case. The court had pronounced its judgement on February 28, 2014 directing the Home Ministry to take appropriate action within 6 months, against the political parties for violating the Foreign Contributions (Regulation) Act (FCRA), 1976 and FCRA, 2010. The Court found that BJP and Congress had accepted donations from foreign sources year after year, in violation of provisions of FCRA, 1976 and FCRA, 2010. Both BJP and Congress chose to contest the judgement before Supreme Court (SLP No 18190/2014) and during the proceedings before the Supreme Court, following detailed arguments on our behalf, the two political parties withdrew their SLPs. In this backdrop, they withdrew their petitions. It is recorded in the Court’s order dated November 29, 2016. 

In his letter to Rajiv Gauba, Cabinet Secretary wrote, “In the normal course, if the government had any respect for maintaining the integrity of the electoral process, it would have immediately proceeded to take action against the political parties including BJP, for violating the FCRA, especially in view of the fact that foreign donations to political parties can hurt the sanctity of our democracy, much more than in the case of anyone else receiving such donations." But “Instead of this, the present NDA government quickly took the extraordinary step of retrospectively altering the laws that stood in the way of foreign donations flowing into the bank accounts of the political parties.” These amendments enabled changes to the Finance Acts of 2016 and 2017 and the Companies Act, 2013 to enable private companies to make unlimited donation to political parties. He wrote,  “It is bizarre that an ordinary citizen has to comply with all kinds of cumbersome Know-Your-Customer (KYC) requirements for a meagre account opened in a bank but the political parties should go scot-free when they blissfully receive thousands of crores of rupees without having to answer anyone!” He added, “While we have separately contested the propriety of the government retrospectively amending the two FCRA legislations, prima facie, there is no ethical justification for legalising an offence already committed by a political party under the FCRA and for condoning foreign donations to be received in the future, as by whatever name one may call it, foreign funding of elections is unacceptable." He asked, "“Why should companies, especially, foreign companies, give donations to political parties? Certainly not for promoting democracy, but more for quid pro quos from a willing political executive to enable them to profiteer, at the cost of the public.” He concluded that “Foreign donations to political parties are a threat to India’s democracy.”

It is in this backdrop, that the petitions of ADR  and others were mentioned in the Supreme Court on October 16, 2023. A 3-judge bench of Chief Justice and Justices J.B. Pardiwala and Manoj Misra passed an order saying "In view of the importance of the issue which is raised and having due regard to the provisions of Article 145(3) of the Constitution, we are of the considered view that the batch of petitions be listed before a Bench of at least five-Judges." 

A 5-judge bench partly heard the matter on October 31, 2023 and on November 1, 2023. On November 2, 2023, arguments were concluded and judgment was reserved. 

The Court's order dated Novemver 2 reads: "We have heard Mr Prashant Bhushan, learned counsel, Mr Kapil Sibal, learned senior counsel, Mr Shadan Farasat and Mr Nizam Pasha, learned counsel, appearing on behalf of the petitioners. Mr Vijay Hansaria, Mr Sanjay R Hegde, learned senior counsel, and Mr P B Suresh, learned counsel, appearing on behalf of the intervenors, supported the petitioners. On behalf of the Union of India, we have heard Mr R Venkataramani, learned Attorney General for India and Mr Tushar Mehta, learned Solicitor General with Mr Kanu Agrawal, learned counsel. Submissions have been advanced on behalf of the Election Commission of India by Mr Amit Sharma, learned counsel. On 12 April 2019, an interim direction was issued by this Court to the Election Commission of India. The Election Commission of India has produced in a sealed packet data in terms of the interim order as of April 2019. The order of this Court was not restricted to the date on which it was pronounced. If there was any ambiguity, it was necessary for the Election Commission to seek a clarification from this Court. In any event, we now direct that the Election Commission shall produce up-to-date data until 30 September 2023 in terms of the interim directions which were issued on 12 April 2019. This exercise shall be carried out on or before 19 November 2023. Data in a sealed packet shall be handed over to the Registrar (Judicial) of this Court." The 19-page long interim order in the ADR case [Writ Petition (Civil) No.333/2015] was delivered by Chief of India headed bench comprising of Justices Deepak Gupta and Sanjiv Khanna.

Prior to this, a 3-judge bench of CJI S. A. Bobde, Justices A. S. Bopanna and V. Ramasubramanian had reiterated the interim order in a 20-page long order dated March 26, 2021. Originally, the petitioners had prayed for declaration of "(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 and (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." The 3-judge bench did "not see any justification for the grant of stay" on Electoral Bond Scheme. Hence, two applications of ADR and Common Cause-Interlocutory Application No. 183625 of 2019 and Interlocutory Application No. 36653 of 2021 in ADR case [Writ Petition (Civil) No. 880 of 2027)] seeking stay Electoral Bond Scheme were dismissed. 

In compliance with the Court's order dated November 2, 2023, the  Election Commission of India wrote a letter dated November 3, 2023 to all Chief Electoral Officers of all States and Union Territories on the Subject of "Submission of details in respect of Electoral Bonds".

Excerpts from submissions in Supreme Court in Electoral Bonds Scheme (EBS) case in Dr. Jaya Thakur v. Union of India. 

This petition was filed on October 18, 2022 and registered as Writ Petition (Civil) No. 975 of 2022 on November 5, 2022. It was verified on November 17, 2022.  The 45-page long written submission on behalf of Kapil Sibal, Senior Advocate for Dr, Jaya Thakur, the petitioner challenges the Electoral Bonds Scheme of 2018 (as amended in 2022), issued by the Department of Economic Affairs, Ministry of Finance, by way of Notification No. S.O. (E) 29/2018 dated January 2, 2018, in purported exercise of power under the Finance Acts of 2016 and 2017.

The petition concludes that regulation of spending in elections is a delicate process that necessarily must take into account the following factors:
a. Elections need funding.
b. Individuals ought to have the freedom to contribute to political candidates or issues of their choice.

However, excessive funding corrupts the political process in at least two ways.
a. It gives rise to a “pay for play” political culture where wealthy corporations or persons pay high amounts in order to influence the political process in a way so as to ensure that they obtain the “gratitude” of the powerful which is often expressed in the form of policies and laws that favour these donors over others. A political system where the rich have unhindered access to power leads to cynicism among the other persons and a corresponding lack of faith in the fairness of the democratic process. Public faith in democracy is what is ultimately the final line of defence for a democratic system. The perception of a “quid pro quo” often spells the death knell for public faith in the system.
b. Public policy is dictated by the desires of a few over the needs of the many. This leads to laws that serve private or public interests, and which favour the priorities of a few over everyone else.

Keeping in mind these dangers, India, before the EBS scheme, carefully regulated political donations in the following manner:
a. An elaborate system of disclosure was prescribed. First, Political parties were to give the data of the donations received to both the EC and the Income Tax authorities. Second, Companies that made political donations were required to disclose political contributions in their profit and loss statements. Thus, the public had the opportunity to find out how candidates were raising funds and could exercise their vote keeping this in mind.
b. In order to ensure that shell companies are not set up to fund political parties, companies could donate only up to 7.5% of their profits.
c. Political parties were forbidden from obtaining foreign funds under the FCRA.

It is the wanton destruction of this carefully calibrated structure by the EBS scheme that is under challenge in the present petitions.

The removal of restrictions on corporate funding- i.e. the 7.5% of profit cap that was imposed under the Companies Act, violates Article 19(1)(a) insofar as it permits deep pocketed companies to flood out the voice of citizens who do not have access to such funds. It also violates the “equal treatment” clause as it permits some people more political access than others based on money power.

The removal of the transparency and disclosure requirements violates the rights of citizens to know the candidates, their antecedents and their big money associations which are valuable to those seeking to exercise their ballots. This is in violation of rights under Article 19(1)(a), and 19(1)(c). Further, it utterly destroys the ability of shareholders to influence the political activities of companies. The Boards decide on donations and the profit and loss statement only records political donations and not to whom they were made. As such, shareholders have been denied complete agencies on how companies owned by them act politically. This is in violation of Article 300A of the Constitution.

The 23-page long rejoinder submissions in response to the respondent’s written submission which was tendered on October 31,2023 was filed on behalf of Kapil Sibal in Writ Petition (Civil) No. 975 of 2022. It was drafted by Gautam Bhatia, Rupali Samuel, Aparajita Jamwal, Rishabh Parikh and  Prasanna S. The respondent, the union government does not deny that the EBS infringes upon the voters’ right to information. It argues that the EBS strikes a “balance” between free and fair elections (powered by clean money), and the right to information. 

The rejoinder submits that the EBS is an executive instrument that deals with political party funding, and, therefore, indisputably, with entities that participate in the electoral process. It submitted that this Court ought to subject legislation that affects or alters the rules relating  to the electoral process (including election funding) to heightened and  anxious scrutiny. The impugned amendments brought in
through the Finance Act, 2017 and the Electoral Bonds scheme ought not to be accorded a presumption of constitutionality. The EBS bears no rational nexus to either election funding or clean money. This lack of
nexus was conceded by the Solicitor General in his arguments, who stated that the bonds are not related to elections and can be used for any activities by the party. Thus, the EBS only enables the enrichment
of political parties, without any transparency and accountability.

It is unfounded and disingenuous to suggest that confidentiality of donors is the only incentive for resorting to black  money in politics. Corruption is well documented as an endemic problem in politics in India, with politicians obtaining kickbacks in exchange for government favours. Thus, when analysed from the perspective of moral and societal harm, the problem of black money in politics arises from the use to which money is put (such as, for example, a quid pro quo between a donor and a politician). Under the EBS, at best, the aspect of transfer of money could be said to be brought into the banking stream (and that too, only in those cases of direct donation by the original purchaser of the bond), but even so, the use of money for an immoral and societally harmful purpose is not prevented or deterred. Indeed, the legitimising of the means of transfer of such money through an anonymous bearer bond only makes it more difficult to discover that the illegitimate use of money has occurred, even when it is done in plain sight. In other words, the harm from corruption is not eliminated by offering legitimate channels for funnelling such money towards such illegitimate uses. For example, corruption in the form of a quid pro quo which was undertaken through cash payments remains harmful to society even when such payment for an undue favour is made through a bond, since the use of the money is for a harmful purpose.

As a matter of law, if those engaging in criminal activities and hence operating through cash enter the EBS system, then the EBS is abetting crimes by offering a non-transparent, legitimate channel for transfer of bribe money. The confidentiality granted by the EBS makes it impossible for regulators, investigators, opposition parties and the public to identify the existence of any quid pro quo since no correlations
between receipt of funds and government benefits can ever be discerned or red flagged in the first instance for further detailed examination. Conversely, if the EBS does not shield criminals, and the bribe masked as donations would render the donor/donee liable for criminal prosecution, then all such criminal actors continue to be incentivised to resort to black money. Thus, the EBS is no answer to preventing use of black money for criminal activity. The only deterrent to criminality is a robust and fair investigation agency coupled with a speedy and just criminal justice system.

The expenditure of a candidate in an election is capped by Section 77(3) of the Representation of the Peoples Act 1951 read with Rule 90 of the Conduct of Election Rules 1961. The present cap is either Rs 95 lakhs or Rs 75 lakhs per candidate for Parliamentary constituencies and Rs 40 lakhs or Rs 28 lakhs per candidate for state legislative assembly constituencies. Any spending above this limit is illegal and amounts to a corrupt practice under Section 123(6) of the Representation of the Peoples Act 1951. Therefore, such illegitimate and illegal utilisation of funds over and above the expenditure cap can never be done through open and lawful means. Those resorting to expenditure in excess of the cap would continue to use black money. 

The claim that the total cash circulating in the economy has fallen after the EBS is not factually correct. The RBI’s Annual Report for 2022-23 states that as of March 2023, the total currency circulating
in cash is worth Rs.33,48,228 crores. The RBI’s own official data shows that this number has been steadily increasing over the last six years. Source: RBI Annual Reports dated 2019-20 and 2022-23 at https://rbidocs.rbi.org.in/rdocs/AnnualReport/PDFs/8CURRENCYMANAGEMENT31110531A057411F9EADC90842596B4B.PDF and https://rbidocs.rbi.org.in/rdocs/AnnualReport/PDFs/0RBIAR201920DA64F97C6E7B48848E6DEA06D531BADF.PDF 

The EBS does not tackle the problem of black money. Consequently, the issue of “confidentiality” in order to ensure clean money in election funding does not arise. 

The confidentiality under the EBS remains an asymmetric, or partial confidentiality and cannot protect against reprisals. This is because, first, it is always possible for the ruling political party to discern broad
patterns of donation via electoral bonds: for example, the ruling party will know how much it has received from a particular corporate donor; it will also know the “total” of how much that donor has donated via
electoral bonds under the disclosure in its books of accounts required by Section 182 of the Companies Act, 2013. Thus, if the total donations disclosed by the corporate donor exceeds the amount the party in
power has received, it will immediately know that the said corporate donor has patronised its political opponents. Consequently, the EBS does not solve the problem of “victimisation” and “reprisals” that the
Respondent expresses concern about; rather, it exacerbates it since corporates cannot resist demands made by ruling parties for donations under the EBS on the ground that these payments would expose them
to criminal liability. Secondly, the trigger for full disclosure under the EBS is the existence of a First Information Report (FIR), which is an extremely low threshold for the political Executive which has the
instruments of law and order at its disposal. Once again, information about donations - upon this trigger being met - will be to agencies or instrumentalities under control of the incumbent. During the course of
oral argument, the Learned Solicitor General invited this Court to “read down” this clause to add in the requirement of a court order; it is respectfully submitted that the impugned Scheme must stand or fall
on its own terms; it cannot be altered on the basis of concessions made across the bar.

Ever since the 1970s, it is well accepted that the test for a violation of fundamental rights - including
Article 14 - is the test of effect. The effect of the EBS - both structurally and empirically - is an undue pro-incumbent benefit; this, it is submitted, should attract this Court’s anxious scrutiny, as one of the surest signs of democratic decay is when legal regimes are designed in a manner so as to concentrate greater economic or political power within incumbents, and thus impede the periodic transfer of power that marks all healthy democracies.

The asymmetric confidentiality incorporated by design into the scheme of the EBS has a spin-off harm, in that it keeps the political opposition as well as the voter in the dark about donations to the ruling party, and whether those donations have (or have not) reflected in policy outcomes. This prevents open debate, since the lack for information precludes lawful critique or questions about potential crony capitalism, and further undermines the democratic public sphere.

Even if the Respondent’s arguments about confidentiality are to be accepted, the EBS fails to pass the test of proportionality. The threats of victimisation or harassment can be dealt with on a case-by-case basis, rather than through a blanket denial of the voter’s right to know. Respondent has failed to engage with this argument.

The EBS clearly fails the final prong of the proportionality standard. While denying any possibility of favour as a result of donations, it presumes the fact of disfavour and invokes the possibility of victimisation (which, it may be stated, assumes the failure or partisanship of the State, the investigative
agencies, and the courts), which may be suffered by an indeterminate set of big-money political donors, as a justification for denying every voter the right to know who funds political parties. This is not, under
any circumstances, a constitutionally compliant “balancing of interests” under the proportionality standard.

The EBS grants a privilege to corporations to make unlimited and anonymised contributions to political parties without any oversight whether externally by regulators or internally by the requirement for shareholder approval. By way of the EBS, a corporate entity is permitted to (i) be equated with a citizen of India; (ii) interfere and influence with the electoral process; (iii) give unlimited funding, irrespective of its profitability, thereby permitting the Board of Directors to forego their fiduciary duty towards its shareholders and (iv) hide from the shareholders as to which political party the Company has given
funding to. The Solicitor General has already conceded in his oral arguments that to the extent that the present scheme allows a company that does not even make profits to make donations, it may be struck
down. This all-encompassing privilege cannot be justified on the single plank of “donor privacy.”

The union government has argued that the amendment to the Reserve Bank of India Act, 1934 was to only facilitate the issuance of bearer bonds by the State Bank of India. However, the amendment made to sub-section 3 of Section 31 of the Reserve Bank of India Act, 1934 grants power to the Central Government to
“authorise any scheduled bank to issue an electoral bond” without requiring any RBI approval. Further, this amended provision does not set out any legislative policy for the exercise of this power and amounts
to excessive delegation which is unconstitutional. The contours of the scheme are thus not legislatively set out, but are within the domain of the Executive to frame. The EBS was notified on 02.01.2018 in
purported pursuance of power under sub-section 3 of Section 31 of the Act by the mere issuance of a notification by the Ministry of Finance. Similarly, the EBS was amended on 07.11.2022 to allow a 15 day window of purchase to be notified before elections to state legislative assemblies by the mere issuance of a notification by the Ministry of Finance, without RBI needing to give any approval.

It concluded that the EBS, and the legislative amendments that enable it, are violative of the Constitution and this Court may be pleased to strike them down as unconstitutional. 

Oral Arguments 

Introduction of the Scheme of Electoral Bond

On March 2, 2023, a 3-Judge Bench of Supreme Court headed by Chief Justice (Dr.) Dhananjaya Y. Chandrachud, Justices Pamidighantam Sri Narasimha and J.B. Pardiwal passed an order on petitions concerning "the loss of investor wealth in the securities market over the last few weeks because of a steep decline in the share price of the Adani Group of companies. The decline in the share price was precipitated by a report published by Hindenburg Research on 24 January 2023." 

According to the report of the Hindenburg Research, "the Adani Group of companies has manipulated its share prices; failed to disclose transactions with related parties and other relevant information concerning related parties in contravention of the regulations framed by SEBI; and violated other provisions of securities laws. The report also states that Hindenburg Research has taken a short position in the Adani Group companies through US traded bonds and non-Indian traded derivative instruments." 

The order provides an overview of the petitions in this regard. "WP(C) No. 162 of 2023 states that public money amounting to thousands of crores is at risk because public institutions like the State Bank of India and the Life Insurance Corporation of India are exposed to the Adani Group. It inter alia seeks the issuance of directions to the Union of India and the Union Ministry of Home Affairs to constitute a committee headed by a retired judge of the Supreme Court to investigate the contents of the report published by Hindenburg Research."

The order records that "WP(Crl) No. 39 of 2023 is for the issuance of directions to the Union Ministry
of Home Affairs to register an FIR against Mr. Nathan Anderson (founder of Hindenburg Research) and his associates for short selling, and for directions to recover the profits yielded by the short selling to compensate investors". 

It also records that "WP(C) No. 201 of 2023 inter alia states that “the Adani Group has been in flagrant violation of ... Rule 19A of the Securities Contracts (Regulation) Rules by surreptitiously controlling more than 75% of the shares of public listed Adani group companies, thereby manipulating the price of its shares in the market.” It inter alia seeks a court monitored investigation by a Special Investigation Team or by the Central Bureau of Investigation into the allegations of fraud and the role played by top officials of leading public sector banks and other lender institutions". 

The order records: "WP(Crl) 57 of 2023 is for directions to any investigative authority to: (i) investigate the Adani Group companies under the supervision of a sitting judge of this Court; and (ii) investigate the role of LIC and SBI in these transactions."

It records that " SEBI has placed on record a brief note on the factual and legal aspects describing the existing statutory regime, regulatory mechanisms and frameworks in place for the protection of investors. It has also laid out the regulatory framework governing short selling."  

In its note SEBI has submitted that: a. It has adopted a disclosure based regulatory regime for both issuance of and trading in securities. This is in line with the discontinuation of pricing control for capital issues in favour of the principle of free discovery by the markets based on demand and supply from informed investors; and b. It is “strongly and adequately empowered to put in place regulatory
frameworks for effecting stable operations and development of the securities markets including protection of investors.” It has also detailed the extant framework governing investor protection in the context of the
subject matter at hand. It has stated that the key pillars of investor protection are:

“11.1 Mandatory disclosures by listed companies to facilitate free and fair price discovery and to ensure that all investors have equal access to material information for them to be able to take informed investment decisions;
11.2 Market systems to ensure seamless trading and settlement including volatility management;
11.3 Enforcement action in the event of misconduct in the market including fraud or violations of SEBI regulations.”

On the subject matter of these petitions, SEBI has stated that "SEBI is already enquiring into both, the allegations made in the Hindenburg report as well as the market activity immediately preceding and post the publication of the report, to identify violations of SEBI Regulations including but not limited to SEBI (Prohibition of Fraudulent and Unfair Trade Practices I relating to Securities Market) Regulations 2003, SEBI (Prohibition of Insider Trading) Regulations 2015, SEBI (Foreign Portfolio Investors) Regulations 2019, Offshore Derivative Instruments (ODI) norms, short selling norms, if any. As the matter is in early
stages of examination, it may not be appropriate to list details about the ongoing proceedings at this stage.”

In its order, the Court has recorded that "it appears that SEBI is seized of the investigation into the allegations made against the Adani Group companies. SEBI has not expressly referred to an investigation into the alleged violation of the Securities Contracts (Regulation) Rules 1957 which provide for the maintenance of minimum public shareholding in a public limited company. Similarly, there may
be various other allegations that SEBI must include in its investigation."

The Court has directed that "As a part of its ongoing investigation, SEBI shall also investigate the
following aspects of the issues raised in the present batch of petitions: a. Whether there has been a violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957; b. Whether there has been a failure to disclose transactions with related parties and other relevant information which concerns related parties to SEBI, in accordance with law; and c. Whether there was any manipulation of stock prices in contravention of existing laws." It has directed, "SEBI shall expeditiously conclude the investigation within two months and file a status report." SEBI is supposed to file its report in the first week of May. 

The Court has constituted an Expert Committee  headed by Justice Abhay Manohar Sapre, a former judge of the Supreme Court of India for the assessment of the extant regulatory framework and for making recommendations to strengthen it. The committee consists of O P Bhatt, Justice J P Devadhar (retired), KV Kamath, Nandan Nilekani and Somashekhar Sundaresan. The remit of the Committee is as follows:
a. To provide an overall assessment of the situation including the relevant causal factors which have led to the volatility in the securities market in the recent past;
b. To suggest measures to strengthen investor awareness;
c. To investigate whether there has been regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani Group or other companies; and
d. To suggest measures to (i) strengthen the statutory and/or regulatory framework; and (ii) secure compliance with the existing framework for the protection of investors

SEBI has been asked to apprise the expert committee of the action that it has taken in furtherance of the directions of this Court as well as the steps that it has taken in furtherance of its ongoing investigation. Secretary, Ministry of Finance has been asked to appoint a nodal officer to provide logistic assistance to the committee.

In its previous order dated 10 February 2023, the Court had noted that there was a need to review existing regulatory mechanisms in the financial sector to ensure that they are strengthened with a view to protect Indian investors from volatilities in the market."  The Expert Committee constituted in this regard has also been asked to furnish its report in "sealed cover" to the Court by first week of May 2023. 

Will the Court's committee and the SEBI succeed in uncovering the Rs 81, 000 crore scam?  The total bank debt to the top five Adani Group companies is estimated to be over Rs 81,000 crore as of January 26, 2023.