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Notified on January 2, 2018, the scheme introduced instruments through which anyone in the country could donate money to political parties anonymously. This is not the first time the scheme has ended up before the top court since its inception in 2017.
What are electoral bonds?
First announced during the Union Budget session in 2017, “electoral bonds” are interest-free “bearer instruments”, which means that they are payable to the bearer on demand, similar to a promissory note.
Essentially, electoral bonds allow Indian citizens or a body incorporated in India to purchase bonds, enabling anonymous donations to political parties.
Usually sold in denominations ranging from Rs1,000 to Rs1 crore, these bonds can be bought from authorised SBI branches through accounts complying with KYC norms. Following this, the political parties can choose to encash the bonds within 15 days of receiving them and fund their electoral expenses.
However, they aren’t available for purchase throughout the year and can only be purchased between 10-day windows falling in the months of January, April, July, and October.
Importantly, electoral bonds can only be used to donate to political parties registered under Section 29A of the Representation of the Peoples Act, 1951, securing at least 1% of the votes polled in the last election to the House of the People or a Legislative Assembly. Section 29A of the RPA deals with the registration of associations and bodies as political parties with the Election Commission.
Why were electoral bonds introduced?
The Centre’s rationale behind introducing the electoral bonds scheme was to “cleanse the system of political funding in the country” and bring about “transparency in electoral funding in India”.
In the Union Budget speech on February 1, 2017, then-Finance Minister Arun Jaitley said, “Even 70 years after Independence, the country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections…Political parties continue to receive most of their funds through anonymous donations shown in cash.”
To tackle these problems, Jaitley proposed electoral bonds while suggesting that the amount of money that a party could accept in cash from anonymous sources be reduced from Rs 20,000 to Rs 2,000.
Consequently, the Finance Act(s) of 2016 and 2017 amended four separate legislations to make way for the electoral bonds scheme, including the Foreign Contribution Regulation Act, 2010; the RPA, 1951; the Income Tax Act, 1961; and the Companies Act, 2013.
In 2017, the first batch of petitions was filed by two NGOs, Common Cause and the Association for Democratic Reforms (ADR), to strike down amendments made through the Finance Acts of 2016 and 2017, passed as money bills, which “opened doors to unlimited political donations, even from foreign companies,” thereby legitimising electoral corruption on a huge scale. The pleas also argued that the bonds ensured complete non-transparency in political funding.
Arguing that the scheme shouldn’t have been introduced “illegally,” bypassing the Rajya Sabha’s approval, the petitioners sought a stay on the scheme.
What has the court ruled previously?
On April 12, 2019, a three-judge SC bench, in an interim order, directed political parties receiving donations through electoral bonds to submit the details of the bonds to the ECI.
Subsequently, while dismissing a prayer to stay the sale of fresh bonds in March 2021, a three-judge SC Bench headed by then CJI SA Bobde disputed the petitioner’s contention regarding the “complete anonymity” of bond purchasers. “It is not as though the operations under the scheme are behind iron curtains incapable of being pierced”, the court said, dismissing petitions seeking to stay the sale of fresh electoral bonds ahead of Assembly elections in West Bengal, Tamil Nadu, Kerala, Assam, and Puducherry.
Additionally, the SC said that bonds had been issued in the past, between 2018 and 2020, “without any impediment,” and it had already ordered “certain safeguards” by way of its April 2019 interim order.
The “safeguards” the court was referring to here were “requiring all the political parties who have received donations through Electoral Bonds to submit to the Election Commission of India in sealed cover” along with particulars of the donors for each bond, including the amount of each bond and credit details received against each bond, like bank account details and the date of crediting the amount.
Although the court said there is no justification to stay the current sale, the larger constitutional challenge to the electoral bonds scheme filed in 2017 is still pending, the court observed.
In April 2022, then CJI NV Ramana assured the petitioners that the SC would take up the matter for hearing when advocate Prashant Bhushan mentioned the matter while seeking an urgent hearing, contending that a Kolkata-based news company paid Rs 40 crore to avoid a raid. “It’s distorting democracy,” Bhushan had contended.
What remains to be decided now?
On October 16, while presiding over a three-judge bench, CJI Chandrachud referred the case to a five-judge bench comprising him and Justices Sanjeev Khanna, BR Gavai, JB Pardiwala, and Manoj Misra.
Although the petitioners had nudged the court to refer it to a Constitution Bench even earlier, the SC hadn’t shown its inclination to do the same. In fact, on October 10, the CJI-led bench listed the case for final hearing on October 31, without referring it to a larger bench.
In the present case, the top court will be dealing with four petitions, filed by ADR, CPI(M), Congress leader Jaya Thakur, and a PIL by one Spandan Biswal.
Besides challenging the constitutionality of the electoral bonds scheme, the petitioners have asked the court to declare all political parties as public offices to bring them under the ambit of the Right to Information Act and compel political parties to disclose their income and expenditure.
What has the ECI’s stance been?
In its submission to the Standing Committee on Personnel, Public Grievances, Law, and Justice in May 2017, the ECI objected to the amendments in the RPA exempting political parties from disclosing donations received through electoral bonds while describing the move as a “retrograde step”. In a letter written to the Law Ministry the same month, the Commission even asked the government to “reconsider” and “modify” the above amendment.
On March 25, 2019, as part of the ongoing challenge to electoral bonds in the SC, the ECI filed an affidavit flagging the issue of laws being changed to allow political parties to receive contributions from foreign companies, allowing “unchecked foreign funding of political parties” which could lead to “Indian policies being influenced by foreign companies”.
What has the Centre’s stance been?
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On Sunday, Attorney General R Venkataramani told the Supreme Court, by way of written submissions, that the citizens’ right to know is subject to reasonable restrictions.
Stating that “there can be no general right to know anything” without “reasonable restrictions”, the AG responded to the petitioner’s prayer for a “declaration that citizens have a right to know as an aspect/facet of the right to freedom of expression,” based on which they have the right to access the details of contributions to political parties.
Defending the Centre’s scheme, the AG said that it “extends the benefit of confidentiality to the contributor” and promotes the contribution of clean money. Adding that the scheme adheres to tax obligations, he said that it doesn’t fall foul of any existing rights.
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