Shadow over democracy: The coercive nexus of electoral bonds, corporate funding, and political favours

Ever since Supreme Court declared electoral bonds as unconstitutional and stopped its usage, apprehensions have only grown – on whether the raids by enforcement agencies on corporates were linked to their donations to political parties.

The court in its judgment observed: “The reason for political contribution by corporates is open as sunlight. Even the learned Solicitor General did not deny during the course of the hearings that corporate donations are made to receive favours through quid pro quo arrangements.”

It took the Supreme Court to direct the State Bank of India, the sole issuer of electoral bonds, to disclose all the details, including the funding source and alphanumeric data matching the electoral bonds' buyers and recipient political parties.

Ultimately, it is the remit of the investigative agencies to confirm whether the opaque Electoral Bond scheme, far from being an electoral reform as claimed by the government, was actually promoting malfeasance as generally believed.

The Federal reporters, after studying the data disclosed by SBI and combing through various events, have put together this piece, leaving the conclusions to the readers.

Telangana: Red carpet for Kitex

One of the most striking findings was the relationship between the Kitex Group and the Bharata Rashtra Samiti (BRS). Kitex contributed Rs 25 crore in electoral bonds to BRS, a leading political party in Telangana, which was in power until recently. This contribution, split between the entity's subsidiaries, coincided with the electoral cycle and the group's substantial investments in Telangana — investments facilitated by high-level state patronage and promises of a business-friendly environment.

In 2023, Kerala-based Kitex, which deals in spices and textiles, donated Rs 25 crore worth of electoral bonds to BRS, headed by former Chief Minister K Chandrasekhar Rao (KCR). While Kitex Childrenswear Ltd donated electoral bonds worth Rs 6 crore, Kitex Garments Ltd donated Rs 16 crore.

Kitex is known to have enjoyed the ‘Most Favoured Company’ status in the state during the latter part of KCR's regime. Kitex Group Managing Director Sabu Jacob had acknowledged the effort of then Telangana Industry Minister KT Ramarao, who apparently arranged a special flight for his visit to Hyderabad so that the former could survey places where he could set up his factories.

Kitex set up a unit at Geesukonda in Warangal district and another at Seetharampur in Rangareddy district. The group was allotted 187 acres of land in Geesukonda and another 250 acres for the Seetharampur unit. It was allowed to acquire the land around Geesukonda despite strong protests from farmers who claimed that the compensation worth Rs 10 lakh per acre was inadequate as the market price was at least five times more. The two units are expected to produce 20 lakh garments per day.

Kitex invested in electoral bonds in two tranches to bankroll the BRS poll campaign. It bought bonds worth Rs 25 crore on July 19, 2023, and again on October 26, 2023. However, the BRS lost the assembly elections and the Congress came to power.

In an interview with a Malayalam news website, The Fourth, on March 19, Sabu Jacob claimed that he bought the bonds "out of fear," highlighting systemic issues in the electoral bond process.

Tamil Nadu: Martin at the top

Popularly known as the lottery king, Santiago Martin, based in the industrial town of Coimbatore in Tamil Nadu, bought electoral bonds worth Rs 1,368 crore, which was the highest donation made by an individual or a company. Martin, the director of as many as 110 firms, accounted for one-tenth of the total electoral bonds purchased from April 2019 to January 2024.

According to the Martin Foundation website, Santiago's first steps toward growth in the lottery industry began when he was 13. He developed and secured a large marketing network of buyers and sellers of lotteries in the South and the North-Eastern states, West Bengal and Punjab.

Martin's company gave the majority of its bonds to Trinamool Congress (the ruling party in West Bengal), DMK (Tamil Nadu), and YSR Congress (Andhra Pradesh), worth Rs 542 crore, Rs 509 crore, and Rs 154 crore, respectively. National parties BJP and Congress received Rs 100 crore and Rs 50 crore through bonds purchased by Future Gaming and Hotel Services, a Martin-owned company.

In 2019, the Enforcement Directorate launched a money laundering investigation against Martin. It alleged that his lottery company and its sub-distributors had criminally conspired to retain money through unsold lottery tickets and also claimed prizes on unsold lottery tickets to gain Rs 910 crore.

A year after the commencement of the ED probe, Martin first purchased bonds worth Rs 150 crore in October 2020. Five days later, on April 2, 2022, when the ED conducted raids on Future Gaming, Martin bought bonds worth Rs.100 crore.

When ED raided the company in October 2023, Martin bought bonds worth ₹65 crore.

West Bengal: Quite a lottery

Future Gaming and Hotel Services seems to have had a special bond with the Trinamool Congress and its leaders.

The TMC received the highest contribution of Rs 542 crore among all the parties across the country through electoral bonds from the company, which is also the state's sole distributor of 'Dear Lottery' among other such lotteries.

The company's lottery proved lucky for some party leaders. In the case of incarcerated TMC strongman Anubrata Mondal, the "lottery luck" smiled frequently, raising suspicion about his connection with this particular brand of lottery.

While investigating a cattle-smuggling case, the CBI investigated Mondal and his daughter Sukanya's bank accounts and found that the father-daughter duo had won the lottery five times in three years since 2019. The ED later arrested him in the multi-crore cattle smuggling case in November 2022.

Senior Mondal bagged the 'Dear Lottery's' first prize of Rs 1 crore in December 2021. He also won a lottery prize of Rs 10 lakh in 2019. During the same year, his daughter, too, won two back-to-back 'Dear Lottery' prizes amounting to Rs 51 lakh. Ruchika Gupta, wife of TMC leader Vivek Gupta, also won Rs 1 crore as the first prize in the 'Dear Lottery' in August 2022.

West Bengal-based Keventer Group's three firms, Keventer Food Park Infra Ltd, MKG Enterprises Ltd, and Madanlal Ltd, contributed Rs 578 crore to various political parties through electoral bonds. The BJP was the major beneficiary of their contribution.

The group was embroiled in a controversy in 2017 when the TMC government in West Bengal divested 47 per cent of its share in a dairy firm called Metro Dairy to a company owned by the group. Congress leader Adhir Ranjan Chowdhury filed a PIL (public interest litigation) in 2018 alleging that the state government had undervalued Metro Dairy. But the Supreme Court dismissed the PIL in 2022, upholding the disinvestment.

In 2018, the ED also initiated an inquiry against the group. In March 2021, it raided the group's premises. Since 2019, the group's firms have been the major contributors to political parties through electoral bonds.

An analysis of the bonds purchased revealed that, shortly after the ED raids, the group's firm, MKG Enterprises Ltd, purchased a shaft of bonds (in July 2021) and donated the money to the TMC.

Another West Bengal-based company, AIFB Agro Ltd., purchased bonds worth Rs 92.3 crore from 2021 to 2024. The company's Noorpur plant came under the GST scanner in 2020 and faced excise-related issues in the 2022-23 fiscal year. Last heard, the GST-related issues have been put on the backburner.

Kerala: Lulu, MRF make contributions

Lulu India's shopping mall, owned by Malayali billionaire MA Yusuf Ali, purchased bonds worth Rs 2 crore on January 10, 2022, and the recipient was the BJP.

In another case, days before the inauguration of the Lulu Mall in Lucknow, which was presided over by UP Chief Minister Yogi Adityanath in July 2022, MRF Ltd donated Rs 1.5 crore to the BJP via bonds purchased on May 8, 2022, which was encashed on May 22, 2022.

Karnataka: Mega deals

Bengaluru-based Sri Kumaraswamy Mineral Export Pvt Ltd (SKMEPL) purchased bonds worth Rs 8.3 crore in October 2023, which were donated to the Congress party. A few months later, in January 2024, the Karnataka government, where the Congress is in power, allowed SKMEPL to conduct iron ore auctions for around 5.28 lakh tonnes from its Ramanadurga mines in Karnataka.

Vedanta Ltd, a multinational mining company, purchased bonds worth Rs 10 crore (Rs 1 crore each 10 times in July 2023) to be donated to the Congress. By November 2023, Vedanta was allowed to set up a mineral beneficiation plant in Megalahalli Village in Chitradurga District. The cost of the project is estimated to be around Rs 225 crore. The primary goal of the proposed project is to optimise the extraction and processing of iron ore sourced from the designated mining site.

GVPR Engineers Ltd, a Hyderabad-based company, faced protests from local farmers while setting up a private port in Honnavar, in coastal Karnataka. Subsequently, GVPR Engineers made political donations by purchasing bonds and donating Rs 5 crore to the BJP and the Congress.

HPPL, a subsidiary of GVPR Engineering Ltd, secured the contract for this port project under the Centre's Sagarmala project, so it required approval from both the Union and state governments. The survey work commenced in January 2024 to facilitate the progress of the project, whose total estimated cost stands at Rs 600 crore.

In another case, Bengaluru-based real estate company Prestige Developers bought Rs 30 crore worth of electoral bonds through its subsidiaries in April 2023. The recipient was the BJP. Prestige Group acquired 62.5 acres of land in Indirapuram Extension, Ghaziabad, from the Uttar Pradesh government, where the party is in power.

With inputs from The Federal team: Jinka Nagaraju in Hyderabad, Samir K Purkayastha in Kolkata, Pramila Krishnan in Chennai, Naveen Ammembala in Bengaluru, and Rajeev Ramachandran in Kochi.