The Supreme Court of India has struck down the Electoral Bonds Scheme, declaring it unconstitutional. The scheme, introduced in 2018, allowed anonymous donations to political parties through the purchase of electoral bonds. However, the court found that the donor anonymity feature violated the citizens’ right to information about the sources of funding received by political parties.
What did the Court Decide?
The court decided that contributions made for political funding cannot be anonymous. Electoral bonds are no longer a valid mode for donating to political parties. The court emphasized that voters have the right to information about the sources of funding received by political parties.
The court expressed concerns that large corporate donors could potentially gain quid pro quo benefits, such as closer access to legislators and favorable policy decisions, through their anonymous contributions. It stated that by removing disclosure requirements, the scheme could adversely impact India’s electoral democracy. The court ruled that the absolute non-disclosure of funding sources is unacceptable and needs to be done away with.
Chief Justice D. Y. Chandrachud, while pronouncing the order on behalf of the five-judge bench, declared that the Electoral Bonds Scheme is arbitrary and against India’s constitutional principles, and therefore, needs to be struck down.
What are India’s Electoral Bonds?
Electoral bonds (EBs) in India are akin to bearer instruments or currency notes, sold in denominations ranging from ₹1,000 ($12) to ₹10 million ($120,000). They can be purchased by individuals, groups, or corporations and anonymously donated to political parties of their choice, which can be redeemed them interest-free after 15 days.
While parties must disclose donors contributing over ₹20,000 ($240) in cash, the identities of those donating via EBs remain undisclosed, regardless of the amount. This anonymity provision has made EBs an extremely popular method of political funding, accounting for 56% of all funding according to the Association for Democratic Reforms (ADR), a civil society group.
As of January 2024, individuals and companies had purchased ₹165.18 billion ($2 billion) worth of EBs since their introduction. However, this secrecy has raised concerns about undemocratic practices and potential corruption.
Why Were They Contentious?
Critics, including the Association for Democratic Reforms (ADR) and other civil society groups that challenged the electoral bonds scheme in the Supreme Court, have focused on the system’s opacity and the unlimited donations from companies it allowed.
They argued that companies could exploit the cloak of anonymity to try and influence political parties and policymaking through their donations. The lack of any cap on the size of donations meant there was no limit on the potential influence corporations could wield.
Criticisms were primarily centered on corporate donations, as individuals had already been able to make unlimited donations under the previous system, though they had to declare their names for gifts over ₹20,000 ($240). Under the earlier regime, there were restrictions on the size of corporate donations based on their revenue and profits, and companies had to disclose their names for contributions exceeding ₹20,000.
The Election Commission had expressed similar reservations to the government before the electoral bonds system was announced, but their concerns were overruled. Critics argue that the anonymity provisions and absence of donation limits enabled corporations to exert undue influence on the political process, potentially undermining the principles of a truly democratic system.
Why BJP Introduced It?
The electoral bonds were introduced with the Finance Bill (2017). On January 29, 2018 the Narendra Modi-led NDA government notified the Electoral Bond Scheme 2018.
According to the Narendra Modi-led government, electoral bonds were being introduced to ensure that all the donations made to a party would be accounted for in the balance sheets without exposing the donor details to the public.
The government said that electoral bonds would keep a tab on the use of black money for funding elections. In the absence of electoral bonds, donors would have no option but to donate by cash after siphoning off money from their businesses, the government said.
Despite some controversies, the system carry some great advantage, including:
- All electoral bonds issued are to be redeemed by a bank account that the Election Commission of India has disclosed; hence the malpractice is strengthened.
- The widespread use of electoral bonds can help to hold back political parties who operate with the goal of simply collecting funds from the public. It is because only registered parties attaining at least 1% of the votes in the general election can receive electoral funding.
- Electoral bonds work with the government goal to make election funding entirely safe and digitized. Therefore, any donation going above RS 2000 is not legally required to be in the form of electoral bonds and cheques.
- All transactions of electoral bonds are carried out via cheques or digitally.
Who Can Receive Funding Via Electoral Bonds?
Political parties that meet the following criteria can receive funding via electoral bonds:
- The party must be registered under Section 29A of the Representation of the People Act, 1951.
- The party must have secured at least 1% of the votes polled in the most recent Lok Sabha (national) or State Assembly elections.
Eligible political parties need to open a designated bank account with the authorized bank for electoral bonds after obtaining verification from the Election Commission of India (ECI). The bond amounts purchased by donors are deposited into this verified account within 15 days of their purchase.
The political party must encash the bonds within the stipulated 15-day window. If the bonds are not encashed within this period, the amount is transferred to the Prime Minister’s Relief Fund.
It’s important to note that electoral bonds are not available for purchase throughout the year. They are issued for a period of 10 days each in the months of January, April, July, and October, with a gap of four months between each issuance window. However, during Lok Sabha (national) election years, the bonds are available for a longer duration of 30 days.
BJP, TMC, Congress Top Beneficiaries
In the political financing landscape of India, electoral bonds have emerged as a significant tool. Despite the controversies, they remain a substantial source of funding for political parties.
The BJP stands as the largest beneficiary of the electoral bonds scheme. According to the data released by the State Bank of India (SBI), the party has amassed a staggering ₹6,060.5 crore through this channel. The top donors include prominent companies such as Megha Engineering, Qwik Supply Chain, and Vedanta, with contributions exceeding ₹100 crore each.
Following the BJP, the All India Trinamool Congress (TMC) has secured a significant amount of ₹1,609.50 crore via electoral bonds. This substantial sum underscores the party’s strong financial backing and highlights the role of electoral bonds in fueling its political campaigns.
The Congress party, while trailing behind the BJP and TMC, has also benefited from the electoral bonds scheme. The party’s total collection stands at ₹1,421.9 crore, with contributions from various corporate entities. This funding is crucial for the party’s sustenance and electoral competitiveness.
Conclusion
While the concept of electoral bonds was unique to India, several other countries have implemented various campaign finance reforms to address similar concerns over political funding transparency. For instance, the United States has strict disclosure requirements for political donations, with contributions above a certain threshold being made public. In contrast, Canada allows anonymous donations up to a specified limit, striking a balance between transparency and privacy.
The scrapping of the electoral bonds scheme by India’s Supreme Court has reignited debates around the need for comprehensive reforms to ensure transparency and accountability in political funding, while also protecting the privacy of donors. As the country gears up for upcoming elections, the role of corporate money and undisclosed donations in influencing the political process remains a contentious issue.
