Venkat Raman
Auckland, February 18, 2024
Soon after the Supreme Court of India struck down the government’s ‘Electoral Bonds’ unconstitutional and ordered that the scheme be scrapped, a leader of the ruling Bharatiya Janata Party (BJP) said that his Party was studying the verdict.
In a historic judgement, the Supreme Court, led by Chief Justice D Y Chandrachud ruled that the Electoral Bonds were unconstitutional and that they could not be argued as the best way to curb black money.
The Court said that the Electoral Bonds Scheme violated the rights of citizens to information and that it may lead to quid pro quo arrangements between political parties and donors.
It ordered the State Bank of India to stop issuing bonds and provide details of donations made to the Election Commission and publish the data on its website by March 13.
About the Electoral Bonds
The Federal government introduced The Finance Bill 2017 to Parliament.
Arun Jaitley, who was then the Finance Minister had capped the cash donation to political parties at ₹2000 (about $39.34) and had proposed to amend the Reserve Bank of India Act to facilitate the issue of Electoral Bonds by commercial banks for political funding.
The Proposal also suggested action against political parties that failed to submit tax returns.
Although political parties were exempt from income tax, the need to file tax returns was considered a built-in transparency in transactions.
The stanches of bonds were sold for 10 days in January, April, July, and October with an additional time frame of 30 days during the year of Lok Sabha elections (such as 2024).
The BJP government introduced the Electoral Bonds Scheme in 2018 which are bearer instruments like currency notes. They are sold in denominations of ₹1000 (about $19.67), ₹100,000 (about $1966.70), and ₹1 million(about $19,665). The bonds were available to individuals, groups and companies, and donated to the Party of their choice, which can then redeem them, free of interest, after 15 days.
Akin to a Promissory Note, and Electoral Bond is a non-interest-bearing instrument. Any corporate or Indian citizen to purchase the Electoral Bonds after fulfilling the Know Your Customer (KYC) norms of the RBI. These Bonds can be procured by a donor solely through the means of cheque or digital payments in the specified denominations from specific branches of the State Bank of India. Within 15 days of their issue, these Electoral Bonds can be redeemed in the designated account of a legally registered political party under the Representation of the People Act, 1951 which received at least 1% of the votes in the last general election.
The most attractive feature of these Electoral Bonds is their anonymity since they bear no identification of the donor and the political party to which it is issued. If the 15-day deadline is not met, neither the donor nor the recipient Party will receive a refund. The value of the Bond would be diverted to the Prime Minister’s Relief Fund.
The intention and the twist
Some Indian media reports (especially NDTV) quoted government sources as saying that the Electoral Bonds Scheme was introduced to reduce the magnitude of black money that was in circulation and that the Bonds would move the landscape of political funding from a murky situation to a better system.
“The other model under which Trusts distribute contributions received by companies and individuals to political parties has been studied in the past, but its challenges were too many. The Electoral Bonds Scheme was meant to give comfort to donors,” an NDTV Report said, again quoting informed sources.
According to the Election Commission of India, 28,030 Electoral Bonds worth ₹ 16,437.63 crore (about $3.23 billion) were sold until the end of 2022, with the BJP receiving about ₹ 10,000 crore (about $1.97 billion) from that amount.
The Judgement and After
The government is reported to be weighing options and will not, at this stage, move to overrule the Supreme Court ruling.
“The government is however worried about the return of black money and has noted that revealing the identities of the donors (as instructed by the Supreme Court), is against the laws of banking.
Ravi Shankar Prasad, a senior member of the BJP leadership team, said that the bonds were a part of his Party’s sincere efforts to make elections transparent, but that it would respect the court’s order. He reserved further comment, saying that the Supreme Court judgment ran into hundreds of pages which needed scrutiny.
The crux of the matter
In their submission to the Supreme Court, the petitioners had said that the Scheme had allowed political parties the right not to disclose contributions received through the sale of Electoral Bonds, meaning that companies could make unlimited fund transfers.
According to the Petitioners, the corporate funding allowed under the Electoral Bonds Scheme violated the principle of free and free elections and the Right to Information Act.
During the second hearing held in November 2023, the Supreme Court noted that the Bonds provide (only) selective anonymity since purchase records can be accessed by investigative agencies. This was in response to the government’s argument that absent provision for anonymous donations, a large volume of political funding could revert to black money. The government had also argued the provision for anonymous donation was needed to protect donors from “victimisation and retribution.”
The Congress Party welcomed the verdict, saying that it “reinforced the power of votes over notes and that “the right of the people to know has been placed above all clever legal arguments, to defend the illegal Electoral Bonds Scheme.”
The Aam Aadmi Party called the verdict an important step in ensuring transparent polls, and the Communist Party of India (Marxist), a petitioner in the case, said that Electoral Bonds were the “legalisation of political corruption.”
The CPM was the only Party that did not accept such donations.
