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SC strikes down electoral bonds scheme as ‘unconstitutional’

Why in News ?

  • In a unanimous decision, the five-judge panel of the Supreme Court, led by the Chief Justice of India (CJI), deemed the Electoral Bonds scheme as “unconstitutional” while scrutinizing its legality.
  • The Court concluded that the practice of anonymous electoral bonds breaches the right to information and Article 19(1)(a) of the Constitution.
  • As a result, the Bench has instructed the State Bank of India (SBI), the issuing bank, to cease the issuance of electoral bonds. Additionally, SBI is mandated to provide the Election Commission of India (ECI) with detailed information regarding the purchase of electoral bonds.

What are Electoral Bonds?

Aspect

Electoral Bonds

Definition

Electoral bonds are interest-free “bearer instruments” similar to promissory notes, payable to
the bearer on demand.

Introduction

Electoral Bonds were introduced with the Finance Bill 2017 and were officially notified on
January 29, 2018.

Eligibility of
Donors

• Any citizen of India or entities incorporated or established in India can purchase these
Bonds.
• Citizens can buy electoral bonds either singly or jointly with other individuals

Eligibility of
Political Parties

Only political parties registered under Section 29A of the Representation of the People Act,
1951, and securing not less than 1% of votes polled in the last general election to the House of
the People or the Legislative Assembly of the State, are eligible to receive electoral bonds.

Functioning of
the Electoral
Bond Scheme

The State Bank of India (SBI) issues electoral bonds in January, April, July, and October.
• Available in denominations from Rs 1,000 to Rs 1 crore.
• Donors can buy electoral bonds and transfer them as a donation to the accounts of
political parties while keeping their identity confidential.
• Political parties establish specific accounts verified by the Election Commission of India
(ECI) to encash the electoral bonds.
• The bonds are valid for 15 days, during which the political parties must encash them in
the designated accounts.

SC Verdict on Electoral Bonds Scheme

Issue 1: Violation of Right to Information

➢ SC Verdict: The electoral bonds scheme infringes upon the right to information under Article 19(1)(a), ensuring
freedom of speech and expression.
➢ SC Rationale: Money’s significant role in politics creates a link between economic inequality and political
influence, necessitating transparency in political funding for informed voting.

Issue 2: Legitimacy of Restricting RTI for Curbing Black Money

➢ SC Verdict: Restricting the right to information can only be justified by reasonable restrictions outlined in Article
19(2), excluding curbing black money.

➢ SC Rationale: The restrictions imposed by the electoral bonds scheme fail the court’s proportionality test, as
curtailing the right to information is not justified to combat black money.

Issue 3: Right to Privacy vs. RTI Infringement

➢ SC Verdict: The right to privacy regarding political affiliation doesn’t extend to corporate contributions aiming to
influence policies, but to genuine political support.

➢ SC Rationale: Concealing corporate contributions could obscure the motives behind financial support from other
segments of the population.

Issue 4: Constitutionality of Unlimited Corporate Contributions

➢ SC Verdict: Amended Section 182(3) of the Companies Act 2013, allowing unlimited political contributions by
companies, is unconstitutional under Article 14.

➢ SC Rationale: Corporate contributions primarily seek reciprocal benefits, with corporations possessing greater
influence over the political process compared to individuals.

What are the Implications of the Judgment?

Enhanced Transparency and Accountability:

➢ The judgment mandates transparency regarding political funding.
➢ It ensures public access to information on funding sources and amounts through electoral bonds.
➢ This facilitates public scrutiny and holds parties accountable for their actions.

Reduction of Money and Corporate Influence:

➢ The judgment diminishes the sway of money and corporate power in politics.
➢ Donors can no longer conceal their identities and agendas behind anonymity.
➢ Political parties are less susceptible to the influence of vested interests, prioritizing public welfare.

Leveling the Playing Field:

➢ All political parties stand on an equal footing.
➢ Discrimination based on vote share or popularity is eliminated.
➢ Smaller and regional parties can compete with ruling and major opposition parties, offering genuine voter choice.

ADR Report on Electoral Bonds’ Influence in Political Funding

The Association of Democratic Reforms (ADR), a Delhi-based NGO, has released a comprehensive report focusing on
electoral bonds and political party donations spanning from 2016-17 to 2021-22.
• Total Donations Overview: Seven national and 24 regional political parties collectively amassed ₹16,437.63 crore
in donations during this period.
• Dominance of Electoral Bonds: Electoral bonds emerged as the primary source of political funding, constituting
a significant 55.9% of the total donations received.
• Contributions from Corporate and Other Sources: Donations from the corporate sector accounted for 28.07% of
the total, with the remaining 16.03% sourced from other avenues.

• Rise in Donations:
➢ Notably, there was a substantial 743% surge in donations received through electoral bonds for national parties
between 2017-18 and 2021-22.

➢ In contrast, corporate donations experienced a comparatively modest increase of 48% during the same period.

Way Forward Conclusion:

The Supreme Court’s ruling on electoral bonds represents a significant milestone in upholding the constitutional

Proposal

Description

State Funding of
Elections

The Indrajit Gupta Committee suggests partial state funding for recognized political parties, citing successful implementations in countries like Germany, Japan, Canada, and Sweden.

Explore National
Electoral Fund

Proposes the establishment of a National Electoral Fund as an alternative to electoralbonds, allowing all donors to contribute. Funds would be allocated based on partyvotes, ensuring donor anonymity and combating black money.

Cap Anonymous Donations

The Law Commission of India recommends capping anonymous donations to politicalparties at either Rs. 20 crores or 20% of total funding, aiming for greater transparency.

Ban Cash Donations

Advocates for a complete prohibition of cash donations from individuals or companiesto political parties, with the current limit set at donations below Rs. 2000.

Audit Political Party Accounts

The Venkatachaliah Committee calls for strict regulatory frameworks for auditing anddisclosing party income and expenditure, enhancing financial transparency.

Implement Global Best Practices

Learning from global examples, including the USA’s Publicity Act, UK’s Elections andReferendums Act 2000, EU regulations, France’s corporate funding ban, and Brazil andChile’s responses to corruption scandals involving corporate donations.

principles and democratic values of the nation. This landmark decision deems the electoral bonds scheme unconstitutional and in violation of citizens’ rights to information, equality, and the constitutional framework for electoral reforms. Additionally, the judgment mandates the State Bank of India (SBI) to disclose details of electoral bonds redeemed by political parties to the Election Commission of India (ECI), which will subsequently publish them on its website by March 31, 2024.

➢ This ruling is poised to improve the transparency and accountability of political financing, diminish the influence of money and corporate interests in politics, and create a more equitable landscape for all political entities. 

 

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