Author: Nimisha Anuragi, Dharmashastra National Law University, Jabalpur
Abstract
The introduction of the Electoral Bonds Scheme in 2018 significantly altered the political financing landscape in India. While the government claimed it was a step toward eliminating black money, the scheme was widely criticized for promoting opacity and endangering electoral transparency. The recent Supreme Court judgment declaring the scheme unconstitutional represents a landmark decision in electoral law. This article critically examines the legal framework of electoral bonds, analyses the Court’s reasoning, and evaluates the broader implications for India’s democracy.
Introduction
Political funding plays a crucial role in maintaining the integrity of democratic processes. Transparency in political donations is essential for ensuring informed voter participation and reducing corruption. The Electoral Bonds Scheme, introduced through the Finance Act, 2017, allowed anonymous donations to political parties, bypassing several provisions of established electoral laws.
This article explores the legal controversies surrounding the scheme, the key arguments made before the Supreme Court, and the judgment’s impact on electoral governance in India.
The Electoral Bond Scheme is a promissory note-style bond that is issued as a bearer banking instrument without the buyer’s name on it.
Understanding Electoral Bonds: Legal Framework and Mechanism
Electoral bonds were introduced through amendments to various statutes, notably the Reserve Bank of India Act, 1934, Representation of the People Act, 1951, Income Tax Act, 1961, and the Foreign Contribution (Regulation) Act, 2010.
Key Features of Electoral Bonds
Issued by State Bank of India (SBI): Available in denominations ranging from ₹1,000 to ₹1 crore.
Validity: Bonds are valid for 15 days from the date of issuance.
Eligibility: Only political parties registered under Section 29A of the Representation of the People Act, 1951, and securing at least 1% of votes in the last general elections are eligible to receive donations.
Anonymity: Donors remain anonymous, and neither the Election Commission nor the public can access donor information.
Legal Amendments Enabling the Scheme
The Electoral Bonds Scheme was made possible through amendments in several laws:
Representation of the People Act, 1951 removed the requirement for political parties to report donations below ₹20,000. The Income Tax Act, 1961 exempted electoral bonds from being considered taxable income. Foreign Contribution (Regulation) Act, 2010 allowed donations from foreign companies operating in India, raising concerns about foreign influence.
The Supreme Court Verdict
The Supreme Court of India, in the case of Association for Democratic Reforms v. Union of India and Others, W.P. (C) No. 333 of 2015, delivered a landmark judgment on February 15, 2024, declaring the Electoral Bonds Scheme, 2018 unconstitutional. In its judgment, the Supreme Court declared the Electoral Bonds Scheme unconstitutional, focusing on three primary legal grounds:
1. Violation of the Right to Information (Article 19(1)(a))
The Court reiterated that voters have a fundamental right to know the sources of political funding to make informed electoral choices. The scheme’s anonymity deprived citizens of this right, violating the principles laid down in PUCL v. Union of India (2003).
2. Undermining Electoral Transparency
The Court found that the scheme diluted critical provisions of the Representation of the People Act, 1951, which mandate transparency in political donations. It noted that the scheme created an uneven playing field, favoring larger parties with access to significant anonymous funds.
3. Foreign Influence and National Security Risks
Allowing donations from foreign companies through Indian subsidiaries opened doors for foreign influence in Indian elections, contravening the principles of the Foreign Contribution (Regulation) Act, 2010.
Relevant Case Laws and Judicial Precedents
1. PUCL v. Union of India (2003)
The Court held that voters have the right to know the antecedents of candidates contesting elections, including their financial assets and criminal records. This case laid the foundation for recognizing transparency in electoral processes as part of the right to information.
2. Association for Democratic Reforms v. Union of India (2002)
In this case, the Court emphasized that democracy thrives on an informed electorate. It mandated the disclosure of personal and financial details of political candidates, expanding the scope of the right to information.
3. Subramanian Swamy v. Union of India (2016)
The Court underscored the importance of transparency in public life, holding that the right to free speech and expression includes the right to receive and disseminate information.
Implications of the Judgment
The Supreme Court’s judgment in Association for Democratic Reforms v. Union of India (2024) has significant implications for India’s electoral system. By declaring the Electoral Bonds Scheme unconstitutional, the Court has brought much-needed transparency to political funding. Political parties will now be required to disclose their donors, ensuring accountability and allowing voters to make more informed decisions about which parties they support. This will reduce the potential for anonymous or illicit funds influencing elections.
Additionally, the ruling lays the groundwork for future electoral reforms. With transparency now mandated by law, it is likely that further legislative changes will address loopholes in political financing, ensuring stricter oversight of donations, particularly from corporations and foreign entities. This move helps protect India’s electoral sovereignty by curbing foreign influence, which was a significant concern under the previous scheme.
Moreover, the judgment significantly reduces the scope for corruption in the political system. The anonymity granted by electoral bonds made it easier for unaccounted money to flow into politics. With the Court’s ruling, the process becomes more regulated, fostering a cleaner and more ethical political environment.
In summary, the judgment strengthens the integrity of Indian democracy, safeguards against foreign interference, and ensures that political funding is more transparent and accountable. It sets a critical precedent for future electoral reforms and contributes to global discussions on improving electoral governance.
Conclusion
The Supreme Court’s decision to declare the Electoral Bonds Scheme unconstitutional is a landmark in India’s electoral jurisprudence. By emphasizing the right to information and the principles of electoral transparency, the judgment reaffirms the foundational values of democracy.
Moving forward, it is crucial for the government to introduce a transparent, accountable system for political donations that aligns with constitutional principles. This judgment serves as a reminder that democracy thrives on openness, and the electorate’s right to know is paramount in ensuring a fair electoral process.
FAQS
1. What are Electoral Bonds?
Electoral Bonds are anonymous financial instruments for donating to political parties, introduced in 2018.
2. Why were Electoral Bonds declared unconstitutional?
The Supreme Court ruled the scheme violated transparency and the right to information by allowing anonymous donations.
3. How does this affect political funding?
The ruling requires parties to disclose their donors, promoting accountability and reducing the flow of unaccounted money.
4. What was the concern with Electoral Bonds?
They allowed anonymous donations, potentially facilitating corruption and foreign influence in elections.
5. Will this judgment lead to more reforms?
Yes, it could trigger stricter regulations for political donations and enhance transparency.
6. Can foreign entities donate through Electoral Bonds?
Previously allowed, but the judgment prevents foreign influence in India’s elections by curbing such donations.
References
Constitution of India
Representation of the People Act, 1951
Income Tax Act, 1961
Foreign Contribution (Regulation) Act, 2010
Association for Democratic Reforms v. Union of India, W.P. (C) No. 333 of 2015
PUCL v. Union of India (2003), (2003) 4 SCC 399
Association for Democratic Reforms v. Union of India (2002), (2002) 5 SCC 294
Subramanian Swamy v. Union of India (2016), (2016) 7 SCC 221
Election Commission of India Reports on Electoral Bonds
Ministry of Finance, Government of India: Notifications on Electoral Bonds
