Author: Areesha Beg of Dr. B.R. Ambedkar National Law University, Sonepat
Introduction
In a historic verdict, the Supreme Court has struck down the controversial electoral bond scheme, declaring it to be a threat to the integrity and transparency of democratic elections. The Electoral Bond Scheme (EBS) has been the focus of prolonged debate and strict legal scrutiny for many years. Opponents claimed that the program encouraged corporate influence, encourages corruptions, and weakens the transparency that is necessary for a strong democracy. Furthermore, the judgment underscores the Right to Information (RTI) as a pillar of democracy, emphasizing that these secret schemes can have a tremendous impact on the general public by creating a situation in which private interest impact political decisions rather than the interests of the public.
What is Electoral Bond?
Background
The electoral bond scheme was launched in the year 2017. The then finance minister Arun Jaitley introduced it as money bill in the Lok Sabha. The scheme was envisaged as a solution to tackle the menace of black money in political funding. The introduction of scheme was made through amendments of various existing laws such as the Representation of People Act, 1951, Income Tax Act, 1961 and the Companies Act, 2013. The introduction of scheme as money bill helped it escape various parliamentary scrutinizes and examination by Rajya Sabha which has less power to amend Money Bills. During debates in Lok Sabha, finance minister defended the scheme, stating that it would bring transparency to political funding.
Mechanism
Electoral bonds are similar to promissory notes. Any individual, company, or organization willing to donate could buy electoral bonds in exchange of which they would get a paper. The note did not have any information of parties i.e the donor or the receiving political party. The political party to whom the donation was made. The payee can encash the bond within a set period of time after which the bond would be automatically transferred to the Prime Minister’s Relief Fund.
Purchase of bonds: electoral bonds could be purchased by any Indian citizen pr entity incorporated or established in India. Bonds were available in denominations of Rs 1000, 10000, 1 lakh, 10 lakh, and 1 crore.
Authorized Bank: Bonds could be issued by State Bank of India (SBI) in first 10 days of the months of January, April, July, and October as may be specified by the Central Government.
Validity: Electoral Bonds were valid for 15 days from date of issuance. During this period they could be donated to the registered parties.
Eligibility: Parties which obtained at least 1% of the total votes in the last general election for Lok Sabha or State Legislative Assembly were eligible to receive electoral bonds.
Anonymity: The identity of the donors was kept confidential as the bonds did not carry the donor’s name. It did not even carry any additional information apart from the date on which it was issued and the amount donated.
Criticism and Controversies
Lack of transparency: The electoral bond scheme failed to ensure transparency, as the identities of the donors remained anonymous. This increased the chances of black money circulations and allowed corporate entities to exert undue influence on political parties.
Quid-pro-quo: The electoral bonds resembled a quid-pro-quo transaction between the political parties and corporate entities with potential implications that could be understood in two ways. First, political parties would receive substantial donations from large corporate entities. In return these companies were provided big government contracts and projects. For example, Navyug Engineering Company, a Hyderabad based infrastructure company which purchased electoral bonds worth Rs 55 Crores between 2019 and 2022 was given the contract of building a tunnel in Uttarakhand without even examining the company’s capabilities in developing infrastructures. As a result, the tunnel collapsed while it was under construction. Second, the scheme allowed corporate entities which were already facing legal issues, to leverage their donation to the party in power, whether at Centre or State as a means to seek. This dual-faceted nature of the electoral bond scheme raised serious concerns about corruption, lack of accountability, and the erosion of democratic principles.
Secrecy and Government Access: Another major concern with the electoral bond scheme was the secrecy surrounding the information related to the donors. It was released during the proceedings that the electoral bond had a unique number on it. This unique number connected the purchaser of the bond to the party that encashed it. The central government somewhere had the influence on the State Bank of India. The critiques argued that the Central government used SBI as a shield to hide its dubious dealings. Furthermore, the SBI at several points delayed the proceeding by failing to provide necessary information to the Supreme Court
Violation of Right to Information: Right to information is a fundamental right under Article 19(1) of the Indian Constitution. The Supreme Court held that the scheme violated the right to information as the information about the transactions between the donor and political parties were not disclosed to the public.
The Supreme Court Judgment
The February 2024 judgment held the electoral bonds scheme as unconstitutional emphasizing on the lack of transparency and violation of right to information of citizens. The amendments made to the Finance Act 2017, and the Companies Act, 2013 which permitted unlimited funding of the political parties by the corporate entities were held to be violative of Article 14 of the Indian Constitution. The Supreme Court asked the SBI to disclose all the information regarding the electoral bonds. The details submitted by the SBI showed the level of funding to each political party. Of all the parties the Bhartiya Janata Party received highest funding of Rs 6060 crore through electoral bonds followed by Trinamool Congress and the Congress Party.
Conclusion
The Supreme Court’s decision to declare the electoral bonds scheme unconstitutional marks a pivotal moment in India’s journey towards a more transparent and accountable political funding system. The lack of transparency, the potential quid-pro-quo, and the secrecy surrounding donor information have all contributed to undermining the very principles of democracy it sought to uphold.
The ruling highlights the importance of transparency and Right to Information as essential pillars of a functioning democracy. For political funding to be fair and equitable, it must be conducted in a manner that is open and accessible to the public. Only then can citizen trust that their leaders are acting in the best interest of the people.
Frequently Asked Questions (FAQs)
How does the electoral bond scheme affect the Right to information (RTI)?
The scheme undermines RTI by keeping donor identities secret. This lack of transparency makes it difficult for citizens to know who is financing political parties, which is essential for informed voting and holding parties accountable.
In which case did the Supreme Court declare the Electoral Bond Scheme Unconstitutional?
In February 2024, the Supreme Court in the case of Association for Democratic Reforms & Anr. v. Union of India & Ors held that the electoral bonds scheme is unconstitutional and violative of Article 19 of the Indian Constitution.
What are the alternatives to the electoral bonds scheme for political funding?
A better alternative to the electoral bonds scheme are electoral trusts. Electoral trusts were set up under Electoral Trusts Scheme, 2013. Similar to electoral bonds, electoral trust is allowed to receive voluntary contributions from individual, corporate, or organizations but it requires to maintain an account of the donors and their contribution, funds distributed to political parties etc. it requires to furnish details of the companies donating to them. The companies are also required to reveal any contributions made above Rs 20000 and cannot contribute more than 7.5% of their profits to political parties. The parties used to get funding through electoral trust before the electoral bonds scheme.
Sources
https://www.scobserver.in/cases/association-for-democratic-reforms-electoral-bonds-case-background/
https://indianexpress.com/article/india/in-the-list-firm-in-uttarakhand-tunnel-collapse-others-with-a-dodgy-record-9217031/
https://www.thehindu.com/data/electoral-bonds-data-bjp-received-rs-6060-crore-highest-among-all-parties/article67951830.ece
https://api.sci.gov.in/supremecourt/2017/27935/27935_2017_1_1501_50573_Judgement_15-Feb-2024.pdf
