BY- Aditya Sharma
Student of Chandigarh University
INTRODUCTION
Electoral bonds were introduced in India by the government to provide funding for political party campaigns during elections. The issuance of electoral bonds was intended to be transparent to ensure accountability. Essentially, electoral bonds are funds or a certain amount of money donated to political parties without disclosing the donors’ names to the public or anyone else. The initial concept of transparent issuance of electoral bonds was introduced in 2017 by the government to facilitate donations to political parties via banking channels. However, this was heavily criticized by the opposition due to the non-disclosure of donors’ names, raising concerns about anonymity and corruption. Under this system, individuals, groups, or companies could donate any amount of money to a political party anonymously. These bonds function as promissory notes without disclosing the donor’s name to anyone, including the government or the Election Commission of India.
The recent data released by the Election Commission of India, as demanded by the Supreme Court of India on March 15, revealed that some of the country’s largest companies were the top funders of political parties under the electoral bond system. Under the guidance of Finance Minister Arun Jaitley, this system was introduced with the main motive of cleaning up the system of political funding, which he observed had not been transparent even after 70 years of independence. He proposed the electoral bond system to establish a transparent method of funding political parties, necessary for fair elections in the country.
ELECTORAL BOND SCHEME 2018
On January 2, 2018, the Finance Ministry issued guidelines introducing the Electoral Bond Scheme of 2018. Under this scheme, the State Bank of India was directed to sell electoral bonds. These bonds could be purchased in denominations of ₹1000, ₹10,000, ₹1,00,000, ₹10,00,000, and ₹1,00,00,000 from the State Bank of India. Bonds were to be sold in January, April, July, and October each year. The identity of the purchaser was kept anonymous, known only to the State Bank of India, which was responsible for recording the buyer’s KYC (Know Your Customer) details.
Political parties that received more than 1% of the votes in the last general elections or legislative assembly elections were eligible to receive electoral bonds. Political parties were required to encash the bonds within 15 days of receiving them; otherwise, the amount would be transferred to the Prime Minister’s fund.
The purchaser, known as the donor, could approach the notified bank to purchase the bond, either through cheque or other means, with their identity completely hidden. The donor was free to donate the amount to the political party of their choice. Political parties had accounts with the Election Commission of India through which they could encash the bonds, and all transactions were conducted through these accounts.
Only political parties registered under Section 29A of the Representation of the People Act, 1951, and securing more than 1% of the votes in general or legislative assembly elections were eligible to receive electoral bonds. Any citizen or group of persons residing in India could purchase electoral bonds from the State Bank of India, individually or as a group, with the mandatory condition of fulfilling KYC requirements to make donations to political parties.
Documents required for purchasers to buy electoral bonds included an application form, paying slip, proof of citizenship, and KYC documents. Donors contributing through electoral bonds were exempted from tax obligations under Sections 80GG and 80GGB of the Income Tax Act, 1961. Political parties were required to receive donations as per the provisions of Section 13A of the Income Tax Act.
Advantages/Benefits of Electoral Bonds
- To reduce corruption, it was the duty of the Election Commission of India to redeem every electoral bond through a bank account.
- Electoral bonds strengthened political parties by ensuring they attained more than 1% of the votes in elections, enabling them to better serve the public.
- The main aim of electoral bonds was to digitize and secure election funding.
- Electoral bonds enhanced public accountability and transparency as political parties could claim bonds from designated bank accounts.
- Since payments for electoral bond funds were made digitally or via cheque, it discouraged cash payments and preserved donors’ anonymity.
Case Law
Facts of the Case
This case involved the electoral bond scheme introduced by the government, intended to ensure transparency in political funding and reduce the influence of black money in elections. Critics argued that by allowing anonymity, the scheme undermined transparency. Concerns were raised about large corporate donations potentially influencing political decisions and policies.
The total value of electoral bonds sold was ₹9,208 crore. Approximately 90-95% of electoral bonds were purchased by corporations, with a majority issued at the denomination of ₹1 crore.
Issues of the Case
Petitioners filed a suit under Article 32 of the Constitution of India challenging the constitutional validity of the electoral bond scheme and related provisions of the Finance Act, 2017. Amendments to the Reserve Bank of India Act, 1934, Representation of the People Act, 1951, Income Tax Act, 1961, and Companies Act, 2013 were also challenged.
The petitioners primarily challenged the introduction of the Finance Act as a money bill under Article 110 of the Indian Constitution. They questioned whether unlimited funding to political parties, as explained in Section 182(1) of the Companies Act, violated the principle of free and fair elections and Article 14 of the Constitution.
They also contested whether the non-disclosure of donor information to political parties under the electoral bond scheme and amendments to Section 29C of the Representation of People Act, Section 182(3) of the Companies Act, and Section 13A(b) of the Income Tax Act were violative of the right to information under Article 19(1)(a) of the Constitution.
Court’s Judgment
On February 15, the Supreme Court declared the electoral bond scheme unconstitutional, along with amendments relevant to Section 29C of the Representation of People Act, Section 182(3) of the Companies Act, and Section 13A(b) of the Income Tax Act.
The court held that the bond scheme violated Article 19 of the Constitution of India as it obstructed the voter’s right to know the source of political party funding. It also noted an urgent need to curb black money in electoral financing, the primary purpose for which the scheme was introduced.
The court observed that the amendment to Section 182 allowed both profit-making and loss-making companies to make unlimited donations to political parties. This large-scale donation to political parties during elections, without checks, violated the principles of free and fair elections.
The court issued directives to the State Bank of India to cease issuing electoral bonds and to provide details of bonds purchased from April 12, 2019, onwards to the Election Commission of India, including the names of purchasers and the denominations of bonds. The Election Commission of India was ordered to publish this information on its official website by March 13, 2024.
CONCLUSION
The electoral bond system represents a significant shift in India’s approach to political funding. While it holds promise for enhancing transparency and reducing black money, the scheme’s effectiveness is debated due to concerns over anonymity and potential misuse. Ongoing legal scrutiny and public disclosure will shape the future of electoral bonds, determining their role in fostering a cleaner electoral process.
FAQs
- What is the Supreme Court’s ruling on the electoral bond scheme?
- The Supreme Court declared this scheme unconstitutional.
- What are electoral bonds?
- They are financial instruments introduced under the guidance of Finance Minister Arun Jaitley in 2018, allowing individuals or groups to donate through an account to their chosen political party.
