Image courtesy: Ashish Asthana, https://www.governancenow.com/

Aug 17, 2018

By: Venkatesh Nayak

Readers may recollect my despatch from June 2018 about the refusal of the State Bank of India (SBI) to disclose under The Right to Information Act, 2005 (RTI Act) information about 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 disproportionate diversion of the Bank's resources. He also decided 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. SBI's CPIO provided only denomination-wise figures for the sale of EBs through the designated branches. Even this data did not match with the data the same CPIO had earlier supplied to Mr. Rakesh Reddy Dubbudu, of Factly.in and one of my fellow Co-Convenors of the National Campaign for People's Right to Information (NCPRI). So I filed a first appeal with SBI's First Appellate Authority (FAA) in July, 2018.

The SBI's FAA has now admitted that the CPIO, SBI goofed up while providing the EB sale data against my RTI application. 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! (click here for my first appeal and the FAA's order)

SBI's FAA upholds CPIO's rejection order mechanically

As the Hon'ble Union Finance Minister had claimed that EB Scheme would introduce greater transparency in political party funding, when he read out his budget speech in Parliament, in February 2017, (see paras # 164-165 of his speech), I decided to go on a "Quest for Transparency" - a highlight of the website of the Prime Minister's Office. Readers will remember, after the Government launched the EB Scheme in January, 2018, SBI announced the first phase of sale of EBs in March, 2018. July 2018 saw the 4th phase of sale of EBs. 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, 2018:

"Apropos of the Government of India notifying your Bank as the “Authorised Bank” for the purpose of sale and encashment of Electoral Bonds Scheme, 2018, I would like to obtain the following information about the same under the RTI Act:

(i)  The denomination-wise total number of electoral bonds sold by each of your authorised branches in March and April 2018 along with the total number of buyers of each denomination;

(ii) The total number of buyers of electoral bonds in each category, namely, individuals, HUF, Company, Firm, Charitable Trust and Others who purchased electoral bonds from each of your authorised branches in March and April 2018;

(iii) A clear photocopy of all application forms received by your authorised branches against which electoral bonds were sold in March and April, 2018;

(iv) A clear photocopy of all redemption slips received and accepted by your authorised branches from every political party in relation to electoral bonds till date;

(v) The methodology applied by your Bank to ascertain whether or not a political party redeeming electoral bonds with any of your 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;

(vi) A clear photocopy of all Declarations of Beneficial Ownership received from companies purchasing electoral Bonds in March and April, 2018.

(vii) A clear photocopy of all returns or reports, by whatever name called, submitted by your Bank to the Government of India regarding the sale and encashment of electoral bonds till date; and

(viii) A clear photocopy of all returns or reports, by whatever name called, submitted by your Bank to the Reserve Bank of India regarding the sale and encashment of electoral bonds till date."

Readers may click here to view the RTI documents and the preliminary analysis of the sale figures that the CPIO provided to me in June 2018. 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. (click here for the CPIO's latest communication) 

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 and the Reserve Bank of India (RBI) claiming 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 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. 

 Para #25 of RBI's July 2015 Master Circular states as follows:

"25. Customer Confidentiality Obligations

The scope of the secrecy law in India has generally followed the common law principles based on implied contract. The bankers' obligation to maintain secrecy arises out of the contractual relationship between the banker and customer, and as such no information should be divulged to third parties except under circumstances which are well defined. The following exceptions to the said rule are normally accepted:

1. Where disclosure is under compulsion of law
2. Where there is duty to the public to disclose
3. Where interest of bank requires disclosure and
4. Where the disclosure is made with the express or implied consent of the customer."

So when SBI is in a contractual relationship with its customers, according to the RBI, its CPIO cannot claim the protection of "fiduciary" relationship as well. A fiduciary relationship is a trust-based relationship. This position has been clearly explained by the Supreme Court of India. 

In December 2015, in the matter of Jayantilal Ratanchand Shah & Ors., vs. Reserve Bank of India [(1996) 9 SCC 650], the Hon'ble Supreme Court rejected RBI's claim that it stands in a "fiduciary" relationship with the Banks that it regulate. This ruling came in the context of information requests regarding non-performing assets (NPAs) and loan defaulters from public sector banks. The relevant paras from the judgement are reproduced below:

"58. In the instant case, the RBI does not place itself in a fiduciary relationship with the Financial institutions (though, in word it puts itself to be in that position) because, the reports of the inspections, statements of the bank, 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 an in terrorem [in fear] effect....

59. RBI is a statutory body set up by the RBI Act as India’s Central Bank. It is a statutory regulatory authority to oversee the functioning of the banks and the country’s banking sector....

60. RBI is supposed to uphold public interest and not the interest of individual banks. RBI is clearly not in any fiduciary relationship with any bank. RBI has no legal duty to maximize the benefit of any public sector or private sector bank, and thus there is no relationship of ‘trust’ between them. RBI has a statutory duty to uphold the interest of the public at large, the depositors, the country’s economy and the banking sector. Thus, RBI ought to act with transparency and not hide information that might embarrass individual banks. It is duty bound to comply with the provisions of the RTI Act and disclose the information sought by the respondents herein." 

62. The exemption contained in Section 8(1)(e) applies to exceptional cases and only with regard to certain pieces of information, for which disclosure is unwarranted or undesirable. If information is available with a regulatory agency not in fiduciary relationship, there is no reason to withhold the disclosure of the same. However, where information is required by mandate of law to be provided to an authority, it cannot be said that such information is being provided in a fiduciary relationship. As in the instant case, the Financial institutions have an obligation to provide all the information to the RBI and such an information shared under an obligation/ duty cannot be considered to come under the purview of being shared in fiduciary relationship."

 It is only obvious that the same ratio will apply to SBI in its relationship with the RBI and the Government of India. There can be no 'fiduciary' relationship between them. 

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 Apex Court's ruling on the nature of "fiduciary relationship" in Jayantilal Mistry. 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 chose to mechanically uphold the CPIO's decision- 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.

Of course, soon, I will 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. EBs have a validity of 15 days only. 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 (see 3rd attachment for the Gazette notification of the EB scheme). 

Through the Finance Act, 2017, the Government of India made the following changes to the statutory scheme of political party funding :

1) Cash donations to political parties must not be more than Rs. 2,000/- from one donor;

2) Donations of any amount may be made to political parties through cheques, bank drafts or electronic transfers by individuals and companies, associations, trusts etc.;

3) The RBI Act, 1934 was amended to provide statutory recognition of electoral bonds

4) The Income Tax Act, 1961 was 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;

5) 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; and

6) 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 mote 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. Thanks to the 2017 amendments which became operational in April 2018, a company can in theory donate its entire share capital to political parties soon after formation and then wind up. Limits on both time and amounts have been removed. Further, there is no duty place don 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).

So much for increased transparency in political party funding. Like I remarked a day after the EB idea was announced through the annual budget in February 2017, this is a backward leap to the era of secrecy and the new "transparent" system is proving it time and again.

CHRI trail of enquiry:    First Appeal |  FAA's Order | SBI CPIO’s corrected RTI reply