Judgement on Electoral Bonds Scheme 2024

Electoral bonds are a financial instrument for donating money to political parties in India. Introduced in 2018 by the Government of India, these bond

Introduction: Judgement on Electoral Bonds Scheme 2024

In a landmark decision that has captured the attention of political analysts, activists, and citizens across India, the Supreme Court delivered its verdict on the contentious Electoral Bonds Scheme in 2024. Introduced by the Government of India in 2018, the scheme was devised as a method to fund political parties anonymously, with the stated intention of ensuring transparency and accountability in political donations, reducing the influx of black money into politics.

The Electoral Bonds Scheme allowed individuals and corporations to purchase bonds from designated banks and donate them to political parties of their choice, which could then redeem them for money. While the government defended the scheme as a step towards cleaner electoral financing, critics argued that it obscured the identity of donors, potentially leading to unchecked corporate influence and quid pro quo corruption, undermining the democratic process.

The Supreme Court's judgment in 2024 was highly anticipated, as it was expected to address fundamental questions regarding transparency, accountability, and the influence of money in politics. The decision was seen as a critical moment in India's ongoing struggle to balance the need for political funding with the imperative of maintaining the integrity and fairness of its electoral democracy.

This introduction sets the stage for a deeper exploration of the Supreme Court's reasoning, the implications of its judgment for political financing in India, and the broader impact on democracy and governance in the world's largest democracy.

Have you ever thought about where the money for those elaborate election campaigns, with their large posters and continuous advertisements, comes from? Imagine a system that permits substantial, anonymous donations to political parties with little to no transparency. This is where the Electoral Bonds Scheme comes into play—a tool used for funding political parties in India.

In a recent ruling, the Supreme Court found the Electoral Bonds Scheme (EBS) to be unconstitutional. The court argued that the scheme's secretive nature infringes upon the public's right to information, potentially paving the way for corrupt practices. This judgment on the constitutional legitimacy of electoral bonds is significant and worth understanding in detail.

Introducing the Electoral Bonds Scheme

Electoral bonds are a financial instrument for donating money to political parties in India. Introduced in 2018 by the Government of India, these bonds aim to ensure transparency in political funding, while maintaining donor anonymity.

In March 2017, changes were made to various laws through the Finance Act of 2017. These laws include the Representation of the People Act of 1951 (RoPA), the Reserve Bank of India Act of 1934, the Income Tax Act of 1961, and the Companies Act of 2013.

One of the outcomes of these amendments is that political parties are no longer required to maintain or disclose records of donations received via electoral bonds.

Additionally, these changes permitted the government to designate any scheduled bank to issue electoral bonds. It also did away with the maximum limit that a company could donate to a political party.

READ: What is Electoral bonds? - Everything Explained

Challenged Electoral Bonds Scheme in the Supreme Court

After the legislative amendments were introduced, two non-governmental organizations, the Association for Democratic Reforms and Common Cause, along with the Communist Party of India (Marxist), filed petitions in the Supreme Court in September 2017 and January 2018. They demanded the abolition of the Electoral Bonds system and challenged the legitimacy of the amendments.

Their argument was twofold: 

• firstly, they contended that the Finance Acts were improperly classified as money bills, a strategy they believed was used to bypass detailed scrutiny by the Rajya Sabha. 
• Secondly, the petitioners criticized the Electoral Bonds Scheme for its opacity in political financing, suggesting it could facilitate corruption.

Issues Framed by the Court

The Supreme Court, while deliberating on the petitions against the Electoral Bonds Scheme (EBS), framed several critical issues to assess the scheme's constitutionality and its implications on democracy and transparency. These issues are:

• Whether the Electoral Bonds Scheme is constitutionally valid or not.
• If the Electoral Bonds Scheme infringes upon the voters' right to information by allowing anonymous donations.
• Whether the scheme can justify donor anonymity on the grounds of protecting the donors' right to privacy.
• Whether the Electoral Bonds Scheme poses a threat to the democratic process by potentially compromising free and fair elections through its provisions.

Arguments For Electoral Bonds

Supporters of the Electoral Bonds Scheme, including the Union government, have put forward several arguments in favor of the system:

Privacy Protection for Donors: The primary rationale behind the scheme, according to the Union, is to safeguard the identities of donors, thereby protecting them from potential retaliation or harassment by political parties they choose not to support. This anonymity is seen as a way to encourage more individuals and entities to contribute to political funding without fear of repercussions.

Digitization and Security of Political Funding: The scheme is promoted as a step towards the digitization of political contributions, making the process more secure. By transitioning away from cash transactions, the system aims to bring more transparency and accountability into political funding.

Promotion of Legitimate (‘White’) Money in Politics: One of the objectives of the Electoral Bonds Scheme is to ensure that political funding is done through legal and official channels. By routing contributions through banks, the scheme intends to clean up the funding process, ensuring that only legitimate, accounted-for money ('white money') is used in political finance.

Reduction of Malpractice and Tax Evasion: Since the bonds are cashed through a government-monitored bank account, it is argued that the scheme can help in curtailing malpractices associated with political contributions, such as tax evasion and the use of black money. This bank-based system is seen as a way to keep a check on the flow of funds, making the entire process more transparent and accountable to regulatory oversight.

Arguments Against Electoral Bonds

Critics of the Electoral Bonds Scheme, including the petitioners who challenged its legality, have raised several concerns regarding its impact on transparency, democracy, and political corruption:

Increased Corporate Influence and Corruption: Opponents argue that the scheme facilitates an increase in corporate funding to political parties, potentially leading to greater corruption and undue influence of wealthy donors and corporations on government policies and decisions. This, they claim, could result in policies that favor big donors over the public interest.

Undermining Voter Knowledge and Decision-Making: A core democratic principle is the voters' right to be informed about who funds political parties, as this knowledge can influence electoral choices and public trust in the political system. Critics contend that by anonymizing donations, the scheme deprives voters of crucial information about the financial backers of parties and their potential influence on policy and governance.

Lack of Transparency in Political Funding: The anonymity provided to donors through electoral bonds is seen as a step backward in efforts to make political funding more transparent. Without transparency, it becomes challenging to hold political parties accountable for their sources of funding, thus eroding the integrity of the electoral process.

Potential for Misuse Through Shell Companies: The scheme's provisions allow for donations to be made through companies, raising concerns that this could be exploited to funnel funds through shell companies, thereby obscuring the true source of political donations. This loophole could potentially facilitate the injection of unaccounted money ('black money') into the political system, undermining efforts to curb corruption and ensure clean electoral financing.

Judgment on Electoral Bonds Scheme

• Petitioner - Association for Democratic Reforms; Common Cause; Communist Party of India (Marxist)
• Respondent - Union of India; Election Commission
• Bench - Chief Justice of India DY Chandrachud, Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra
• Decided on - 15th Feb 2024

The Supreme Court made a significant decision by invalidating the 2018 Electoral Bonds Scheme, stating that it breached the right of voters to know, which is protected under Article 19(1)(a) of the Constitution. This landmark ruling emphasized the importance of transparency in political funding and the voters' right to information.

Following the judgment, the court immediately halted the sale of electoral bonds. It also mandated the State Bank of India (SBI) to provide detailed information about the electoral bonds sold from April 2019 until now to the Election Commission of India (ECI). This includes specifics on who bought the bonds and which political parties received them.

In addition to overturning the Electoral Bonds Scheme, the court repealed specific amendments to the Companies Act, the Income Tax Act, and the Representation of Peoples Act that had legitimized the scheme.

Lastly, the court directed the Election Commission to publicly share the information received from SBI on its official website within one week of receiving it, ensuring that the details of political funding through electoral bonds are accessible to the public. This move is aimed at fostering greater transparency in the financing of political activities, thereby strengthening democratic processes in the country.

Source: The Indian Express