How political parties secure funding for elections has been a controversial subject for decades, especially as there were few norms for parties to disclose their sources. Electoral bonds were instituted in 2017, with the aim of enhancing transparency in political funding. These bonds were introduced through amendments to The Representation of the People Act, 1951; The Income-tax Act, 1961; and The Companies Act, 2013 through the The Finance Act, 2017. The first bonds, launched in 2018 had three objectives:
- Substituting anonymous cash with bearer bonds facilitated through State Bank of India.
- Confining donations to registered political entities.
- Safeguarding the anonymity of the donor while revealing the recipient political party.
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Features
| Denominations | Available in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore. |
| Eligibility | Indian citizens and entities incorporated in India could purchase them. |
| Purchase Process | Bonds could only be bought from authorized State Bank of India branches using cheque or digital payment. |
| Donation process | Donors could anonymously give the bond to their chosen political party. |
| Redemption | Parties could encash the bonds within 15 days to fund their election expenses. |
Economic Ramifications
| Escalation in political funding | The cumulative sales of electoral bonds surpassed ₹9,857 crore between 2018 and 2022, indicating a substantial influx of funds. |
| Advantage for major parties | National parties secured the majority of bonds owing to their extensive networks and influence. |
| Absence of guaranteed clean funds | Despite constraints on anonymity, the origin of funds utilized for bond purchases remained ambiguous. |
Criticism
Critics of the scheme, however, tabled multiple apprehensions regarding the scheme's structure as follows:
| Transparency limitations | Section 29C of The Representation of the People Act, 1951 requires political parties to declare all donations above ₹20,000. The Finance Act, 2017 amended this section so that political parties are not required to divulge the identities of donors or the origins of funds utilized to procure bonds. |
| Heightened opacity | Section 182 of The Companies Act, 2013 capped political donations by companies and required them to divulge how much and to whom they donated money. The Finance Act, 2017 removed the cap and disclosure requirements. |
| Imbalanced playing field | Political entities with superior access to corporate funding gained a strategic advantage. The BJP alone secured 57% of all electoral bonds, followed by the Congress at 10%. |
A lawsuit was filed in 2017 with the Supreme Court of India, as opposition parties and activists contended that the scheme violated principles of transparency and equality. The highest court of the land struck down the scheme on 15 February 2024 as unconstitutional.
Supreme Court Judgement
The Supreme Court's verdict, delivered on 15th February 2024 by a 5-member Constitutional Bench headed by the Cheif Justice of India, struck down the amendments, making the following observations:
- Voters have a right to know the sources through which political parties receive funds, in order to decide whom to vote for.
- Political contributions have the effect of giving donors influence over elected representatives and hence the laws and policies they make.
- The possibility arises that parties and their donors will make quid pro quo arrangements, in the form of policies or licenses favouring the donor's interest over the public interest.
- Not requiring donors and parties to disclose particulars of contributions violated the voter's right to know.
- Electoral Bonds impacted the right of the public to know about political parties more than pre-existing means of political contributions.
- Companies have greater influence over the electoral process than individuals as they can donate more. Electoral bonds gave them even more influence.
- While a person's contribution may be driven by sincere belief in the party, corporate contributions are purely business transactions with the intent of securing favours in return.”
- Permitting unlimited corporate contributions (which were earlier capped at 7.5% of company profits) violated the principle of free and fair elections under Article 19(1)(a) of the COnstitution of India.
- Electoral bonds thus also violated the principle of equality before the law of all citizens under Article 14 of the Constitution.
- As the electoral bonds scheme 2018 violated the right to equality, the scheme was unconstitutional.
Conclusion
Refuting the Union of India's assertions, the court ruled that "Curbing black money and ensuring anonymity of donors can't be grounds to defend electoral bonds or need for transparency in political finding". The ruling requires State Bank of India to stop issuing fresh electoral bonds, and to submit details of all electoral bonds purchased to date to the Election Commission, which must in turn publish all this information on its website by March 13th, 2024.
Political contributions in India must now revert to status quo ante, even as 2024's general elections approach. The most important consequences are:
- Political parties must declare all contributions above ₹20,000, received by any means
- Companies cannot donate more than 7.5% of their profits to political parties
- Companies must divulge all information about political contributions, including the source of funds
