New Delhi: The Supreme Court Thursday struck down the electoral bonds scheme for anonymous funding to political parties as unconstitutional.
A five judge Constitution bench comprising CJI D.Y. Chandrachud, and Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala, and Manoj Misra ruled that the scheme violated the right to information under Article 19(1)(a) of the Constitution.
The bench rendered its verdict on a batch of petitions that questioned the legal sanctity of the scheme on the grounds that it violated citizens’ right to information. They asserted that non-disclosure of information of political contributions promotes corruption and quid pro quo arrangements.
According to estimates, electoral bonds worth Rs 9,208 crore were sold in the six years between the notification of the scheme in 2018 and now. Of this, nearly 57 percent reportedly went to the ruling Bharatiya Janata Party (BJP).
The Supreme Court has now in a unanimous verdict declared the scheme as unconstitutional, while ordering the issuing authority — the State Bank of India (SBI) — to halt the issue of electoral bonds with immediate effect.
10 key observations in electoral bonds ruling
• “Information about funding of political parties is essential for the effective exercise of the choice of voting.”
• “At a primary level, political contributions give a seat at the table to contributors, i.e., it enhances access to legislators. This access also translates into influence over policymaking.”
• “There is also a legitimate possibility that financial contributions to a political party would lead to quid pro quo arrangements because of the close nexus between money and politics. Quid pro quo arrangements could be in the form of introducing a policy change or granting a licence to the person making financial contributions to the party in power.”
• “The Electoral Bonds scheme is not the only means for curbing black money in electoral financing. There are other alternatives which substantially fulfill the purpose and impact the right to information minimally when compared to the impact of electoral bonds on the right to information.”
• “The deletion of the mandate of disclosing the particulars of contributions violates the right to information of the voter since they would not possess information about the political party to which the contribution was made, which is necessary to identify corruption and quid pro quo transactions in governance—information which is necessary to exercise an informed vote.”
• “The ability of a company to influence the electoral process through political contributions is much higher when compared to that of an individual.”
• “A company has a much graver influence on the political process both in terms of the quantum of money contributed to political parties and the purpose of making such contributions.”
• “Contributions made by companies are purely business transactions made with the intent of securing benefits in return.”
• “(The provision permitting unlimited corporate contributions) authorises unrestrained influence of companies in the electoral process. This is violative of the principle of free and fair elections and political equality captured in the value of one person one vote.”
• “The electoral bonds scheme 2018 will have to be struck down as unconstitutional.”
What are electoral bonds
Electoral bonds were introduced by amending the patchwork of laws: the Income Tax Act 1961, Representation of the People Act, 1951 and the Reserve Bank of India Act, 1934.
These bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore. They can be purchased by any Indian citizen or by entities incorporated or established in India. They can only be bought from authorised branches of the State Bank of India, and the donor is required to pay the amount through a cheque or a digital mechanism to the authorised SBI branch. The donor can then give this bond to the party or parties of their choice. The political parties can choose to encash such bonds within 15 days of receiving them and fund their electoral expenses.
The amendment to the Representation of the People act 1951 exempted political parties from the requirement to record donations received through electoral bonds in their contribution reports to the Election Commission.
Before the amendments brought in through the Finance Act 2017, a company could not donate more than 7.5 percent of its average profit of the previous three years. The 2017 amendments removed the limit of seven and a half percent of the net profits on the amount contributed by political parties.
Another amendment to the Foreign Contribution (Regulation) Act, 2010 allowed foreign companies with subsidiaries in India to buy electoral bonds and donate them to the political party of their choice.
The essence of the scheme was that political parties were not required to maintain any record of the donations or the names and addresses of donors of these bonds. The scheme ensured that the identity of the donor remains completely confidential, since those details are only known to the issuing authority — the State Bank of India.
(Edited by Amrtansh Arora)