SC Declared Electoral Bonds Scheme as Unconstitutional

General Studies Paper-2

Context: The Supreme Court has struck down the Electoral Bonds Scheme.

About the Judgement

• The apex court said that the Scheme is violative of the Right to Information under Article 19(1)(a). They also infringe on the principle of free and fair elections as stipulated in the constitution.
• SC also quashed the amendments made to the Income Tax Act and the Representation of People Act which made the donations anonymous.
• The SC also criticised the legal provision that allowed unlimited political contribution, saying it allowed companies with deep pockets to influence policy.
• The SBI shall submit details of electoral bonds purchased since April 12, 2019, to date to the Election Commission.

What is an Electoral Bond?

• Government of India notified the Electoral Bond scheme in 2018.
• An electoral bond is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India.
• The citizen or corporate can then donate the same to any eligible political party of his/her choice. 

Why was it Introduced?

• The government contended that it would make political donations transparent while also protecting the identity of the donor.
• The electoral bonds would keep a tab on the use of black money for funding elections.

How does it Work?

• The bonds are issued in multiples of Rs 1,000, Rs 10,000, Rs 100,000 and Rs 1 crore.
• The receiver can encash the bonds through the party’s verified account. The electoral bond will be valid only for fifteen days.
• The electoral bonds are available for purchase for 10 days at the beginning of every quarter. 
• Eligibility:Any party that is registered under section 29A of the Representation of the Peoples Act, 1951 and has secured at least one percent of the votes polled in the most recent General elections or Assembly elections is eligible to receive electoral bonds.
• Anonymous Donation:The electoral bonds will not bear the name of the donor. Thus, the political party might not be aware of the donor’s identity.
• Tax exemption: A donor will get a deduction and the recipient, or the political party, will get tax exemption, provided returns are filed by the political party.

Concerns with Electoral Bonds

• Anonymity of Donor:Concerns arose due to donor anonymity and lack of disclosure.
• The cash donation limit was reduced from ₹20,000 to ₹2,000, while mandatory disclosure remained at ₹20,000.
• Further Amendments:Amendments removed the cap on corporate donations and disclosure obligations.
• The petitioners argue that these changes allow unlimited, unchecked funding for political parties, with a bias toward the ruling government.
• Corporate Dominance:Electoral bonds, mainly issued in high denominations, raise concerns of corporate dominance over individual donors, and the anonymity for donors further fuels suspicion.
• Lack of Transparency:Transparency issues exist, as funds transferred to political parties make it challenging to track corporate contributions, infringing upon citizens’ right to information and creating corruption risks.

Conclusion

• All election funding should be made completely transparent so that voters know who is funding whom.
• A set of rules on limiting funding shall be brought to prevent private interests from unduly influencing elections or Governments.
• Elections should be amore level playing field so that good politicians, candidates and parties with less funds also stand a chance of competing in elections.