Why electoral bonds scheme has been challenged in Supreme Court

The Supreme Court has fixed 31 October to hear a bunch of petitions challenging the Centre’s electoral bonds scheme. These pleas question the validity of the electoral bonds scheme as a source of funding for political parties.

What are electoral bonds? What are the concerns about the scheme? Let’s understand better.

What are electoral bonds?

An electoral bond is a bearer instrument like a promissory note that can be purchased by citizens or entities to donate funds to political parties. Such bonds are issued in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore at select branches of the State Bank of India (SBI).

Similar to bank notes, these bonds are payable to the bearer on demand and are interest-free, noted Business Standard.

Individuals, groups of individuals, corporations, NGOs, religious and other trusts can buy electoral bonds and donate money anonymously.

These bonds are available for purchase for 10-day periods each in the months of January, April, July and October. The Centre can specify an additional period of 30 days in the year of Lok Sabha elections.

The political parties can encash such bonds within 15 days of receiving them.

The electoral bond scheme was introduced in the Finance Bill, 2017. The Centre notified the electoral bond scheme on 2 January 2018 with the aim of enhancing transparency in political funding.

Criticism of the scheme

The petitions filed by NGOs  — Common Cause and Association for Democratic Reforms (ADR)  — and the Communist Party of India (Marxist) have challenged the validity of the scheme as “an obscure funding system which is unchecked by any authority”, reported LiveLaw.

Critics of the scheme point out that the Centre has removed the limit on the amount companies could donate to political parties – 7.5 per cent of their average net profits in the previous three years – through amendments to the Companies Act, 2013, paving the way for unlimited funding from firms, according to Indian Express.

Advocate Prashant Bhushan, appearing for petitioner NGO ADR before the apex court on Tuesday (10 October), said that amendments made via the Finance Acts of 2016 and 2017, both passed as Money Bills, have “opened the floodgates to unlimited political donations” through electoral bonds scheme.

“The amendments have removed the caps on campaign donations by companies and have legalised anonymous donations. The Finance Act of 2017 has introduced the use of electoral bonds which are exempt from disclosure under the Representation of the People Act, 1951, opening doors to unchecked, unknown funding to political parties,” The Hindu quoted him as saying.

Critics have also questioned the scheme over transparency claims. Advocate Shadan Farasat, representing another petitioner, told the Supreme Court on Tuesday that electoral bonds can be purchased only through bank transfer and not by paying cash.

“But the point is the purchaser of the bonds enjoys anonymity. The purchaser can then transfer the bonds to a recognised party anonymously… So, who has transferred how much to a political party is anonymised from the public domain. Who is donating to which political party is not known. There is a complete sanitisation of information to the public,” he said, as per The Hindu.

However, Attorney General R Venkataramani defended the transparency of electoral bonds, saying while the donors are not known to the public, the source of funds had to be revealed to the SBI, reported Times of India (TOI).

Vouching for its transparency, the Central government through Solicitor General Tushar Mehta had said in a previous hearing: “The prescribed methodology of receiving monies through electoral bonds is so transparent that it is impossible for political parties to get unaccounted or black money as donation”.

There are also concerns that the scheme favours the ruling party. As Anjali Bhardwaj, co-convenor of the National Campaign for People’s Right to Information, noted the Bharatiya Janata Party (BJP), the ruling party at the Centre, has received over 75 per cent of all electoral bonds, reported Indian Express.

It is alleged that as only the government-owned bank SBI issues these electoral bonds, the Centre could know the source of funding of its opponents, according to the newspaper.

Political parties have received Rs 10,791 crore through electoral bonds in 22 phases since 2018, as per an Indian Express report last November. More than 90 per cent of the bonds were in Rs 1 crore denomination as of 2022.

SC sets 31 Oct for the next hearing

A bench of Chief Justice of India (CJI) DY Chandrachud and Justices JB Pardiwala and Manoj Misra said it would hear the matter on 31 October and continue on 1 November, if required.

As per The Hindu, the top court will focus on two issues — the legality of the scheme and the violation of citizens’ right to information about the funding of parties.

Advocate Bhushan argued: “This (electoral bonds scheme) promotes corruption as the source of funding is anonymous, it is violative of Article 21 and the ‘non-decision’ in the case compounding the problem”.

To this, CJI Chandrachud responded, “We are here to decide the case”.

Bhushan also pressed the apex court to decide the validity of the scheme before the 2024 general elections.

With inputs from agencies

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