Constitutionality Of The Electoral Bond Scheme: A Closer Examination

The implementation of the Electoral Bond Scheme in India has sparked significant debate and legal challenges, particularly concerning its constitutionality and impact on the transparency of political funding. Championed as a means to cleanse the system of political funding, the scheme introduced bearer instruments akin to promissory notes, allowing anonymous donations to political parties. However, the scheme's legality faced intense scrutiny, leading to a landmark Supreme Court ruling. This article delves into the case description, the contours of the Electoral Bond Scheme, challenges to the amendments, and the final Supreme Court verdict.

Case Description 

Former Union Finance Minister Arun Jaitley, in his 2017-18 Union Budget, lamented the lack of a transparent method for funding political parties after seven decades of independence. He proposed the Electoral Bonds Scheme as a remedy to cleanse the political funding system. Electoral bonds functioned as bearer instruments, providing complete anonymity to the parties involved in transactions, aiming to enhance transparency. 

The Legal Framework to Introduce the Electoral Bond Scheme

The introduction of the Electoral Bond Scheme involved significant amendments to various laws. The Finance Acts of 2016 and 2017 amended several key statutes, including the Foreign Contribution Regulation Act, 2010, the Representation of the People Act, 1951, the Reserve Bank of India Act, 1934, the Income Tax Act, 1961, and the Companies Act, 2013. These amendments relaxed regulations on political funding, allowing for increased anonymity and reduced transparency in political contributions. 

Challenges to the Amendments 

The amendments faced legal challenges, with petitions filed in the Supreme Court by Non-Governmental Organizations and political parties. Petitioners argued that the Finance Acts were wrongfully passed as money bills to avoid scrutiny, and the scheme facilitated non-transparency and legitimization of electoral corruption on a large scale. 

The Contours of the Electoral Bond Scheme, 2018 

The Electoral Bond Scheme, introduced in 2018, allowed for the purchase of bonds in various denominations from authorized branches of the State Bank of India (SBI). The purchaser's identity remained anonymous, known only to the SBI, which recorded Know Your Customer (KYC) details. Political parties meeting certain criteria were eligible to accept donations through electoral bonds, which had to be encashed within a specified period. 

Election Commission of India on the Electoral Bonds Scheme 

The Election Commission of India opposed the scheme, citing concerns about transparency in political finance and the potential influence of unchecked foreign funding on Indian policies. However, the Union government defended the scheme as a pioneering step in electoral reforms aimed at ensuring transparency and accountability in political funding. 

The Challenge in the Supreme Court

Legal challenges to the Electoral Bond Scheme culminated in a series of hearings before the Supreme Court. The Court directed political parties to disclose donation details and later constituted a Constitution Bench to hear arguments from both sides. Petitioners contended that the scheme increased corporate funding, black money circulation, and corruption, while the Union government argued for donor privacy and confidentiality. 

The Supreme Court Verdict 

After extensive hearings, the Supreme Court unanimously struck down the Electoral Bond Scheme, citing violations of voters' right to information under Article 19(1)(a) of the Constitution. The Court ordered the immediate cessation of bond sales, directing the SBI to disclose bond purchase details and instructed the Election Commission to publish this information on its website.

Updates on Electoral Bonds Disclosure 

The State Bank of India (SBI), through its Chairman Dinesh Kumar Khara, informed the Supreme Court that it has submitted complete details of electoral bonds, including unique alpha-numeric details, to the Election Commission of India (ECI). These unique numbers allow matching of buyers and recipient political parties. The bank revealed information such as the name of the purchaser, bond denomination, and specific bond numbers, as well as details of bond redemption by political parties.

The Supreme Court had instructed the SBI to disclose all details regarding electoral bonds, including alphanumeric numbers corresponding to each bond. The Court clarified that its earlier judgment mandated full disclosure, including purchaser and recipient names, bond denominations, and transaction dates. Additionally, the Election Commission was directed to promptly upload the details received from the SBI on its website upon receipt.

Background 

The Supreme Court had previously declared the electoral bonds scheme unconstitutional and manifestly arbitrary in a ruling on February 15. SBI, seeking an extension to furnish information about electoral bonds to the Election Commission (EC), was denied by the Court, which directed full disclosure by March 12. Accordingly, SBI provided electoral bond details to the ECI, which were published on March 14. Further information, including redemption amounts per political party, was released by the ECI on March 17, submitted to the Court in a sealed cover in November 2023.