Judgement on Electoral Bonds Scheme 2024

17 Feb 2024  Read 2627 Views

Ever wondered who funds those fancy election campaigns with big posters and endless ads? What if I told you that a system in place allows large, anonymous donations to flow into political funds with minimal transparency? Enter the Electoral Bonds Scheme – a mechanism that has been used to make donations to political parties in India.

In the latest judgment of the Supreme Court, the Court declared the Electoral Bonds Scheme (EBS) unconstitutional. It said this secrecy violates the right to information and opens the door to shady dealings. Let's unpack this judgment on the constitutional validity of electoral bonds for your better understanding.

The Legal Setup for Introducing the Electoral Bonds Scheme

1. In March 2017, the Finance Act of 2017 made amendments to several laws, including the Representation of the People Act, 1951 (RoPA), the Reserve Bank of India Act, 1934, the Income Tax Act, 1961, and the Companies Act, 2013. 

2. Through these amendments, political parties are exempted from the requirement to keep records of contributions and publish those contributions received through electoral bonds. 

3. Also, it allowed the Union to authorise any scheduled bank to issue electoral bonds and removed the upper limit on how much a company could donate to a political party. 

Who Challenged EBS in the Supreme Court?

Shortly after the amendments were made, in Sep 2017 and Jan 2018, two NGOs – Association for Democratic Reforms and Common Cause – along with the Communist Party of India (Marxist), filed petitions in the Supreme Court calling for the termination of the Electoral Bonds system and questioning the amendment. 

They argued that the Finance Acts were passed incorrectly as money bills to avoid closer examination by the Rajya Sabha. The petitioners also claimed that the Scheme allowed for a lack of transparency in political funding and left room for corruption.

Timeline of Electoral Bonds Scheme

Timeline of Electoral Bonds Scheme

Give a read to learn more about the Electoral Bonds Scheme.

Issues Framed by the Court

  1. Is the electoral bonds scheme constitutionally valid? 

  2. Does the ESB violate the voters' right to information?

  3. Can the Scheme allow anonymity with the view of protecting donors' right to privacy?

  4. Does the electoral bonds scheme threaten the democratic process and free and fair elections?

What are the Arguments For Electoral Bonds?

  • Union contended that the Scheme was made to keep donors' identities private, protecting them from retaliation by parties they didn't support. 

  • Electoral bonds aim to make political funding digitised and safe.

  • The Scheme is a method to ensure that 'white' money is used for political funding through banks. 

  • The bonds are cashed in through a government-monitored bank account, which helps reduce malpractice and tax evasion.

What are the Arguments Against Electoral Bonds?

  • Petitioners argued that the Scheme increased corporate funding, more corruption, and shady dealings with black money.

  • The voters should know where political parties get their money because it influences their decisions and actions.

  • With electoral bonds, it's hard to see who's giving money, which makes political funding less clear and goes against voters' right to know.

  • Also, the Scheme allowed donations to be made through shell companies.

Judgment on Electoral Bonds Scheme

Petitioner

Association for Democratic Reforms; Common Cause; Communist Party of India (Marxist)

Respondent

Union of India; Election Commission

Bench

Chief Justice of India DY Chandrachud, Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra

Decided on 

15th Feb 2024

 

The Verdict

  • The Constitutional Bench unanimously struck down the Union's 2018 Electoral Bonds Scheme and held that it violates the voters' right to information enshrined in Article 19(1)(a) of the Constitution. 

  • The Court also directed that the sale of electoral bonds be stopped with immediate effect. 

  • SBI was directed to submit details of the Electoral Bonds purchased from April 2019 to 15 February 2024, to the Election Commission of India, including details of the purchaser as well as the political parties to which the bonds were given. 

  • The Court has also repealed the amendments made to the Companies Act, the Income Tax Act, and the Representation of Peoples Act that validated the Scheme.

  • Further, the Court ordered the ECI to publish the information shared by SBI on its official website within one week of receiving the information.

Why was the Electoral Bonds Scheme Held Unconstitutional?

  • The Scheme doesn't give people the correct information. It hides the source from where political parties get their money. 

  • It also allows black money, foreign funding, and corporate influence in politics, which harms the public interest and sovereignty of the nation.

  • It treats different political parties differently based on how many votes they get, giving a big advantage to the ruling party and the big opposition parties but leaving out the smaller ones. 

  • It violates the principle of equality, making a difference between the people who give money and the people who vote – the ones giving money can make the parties do what they want, but the voters don't know what's going on.

  • It goes against the Constitution scheme of electoral reforms, which emphasises curbing corruption and keeping crime out of politics.

  • It conflicts with the Representation of Peoples Act of 1951, which requires political parties to disclose their contributions and expenditures.

Impact of Electoral Bonds Scheme Judgment on Democracy

The Supreme Court's decision is a big move for more transparency in political funding, which is really important for a strong democracy. By making electoral bond dealings less secretive, the Court is saying that people have the right to know about political money and that parties need to be responsible for how they handle their finances.

Conclusion

In a democracy, transparency is not a luxury but a necessity. The Court struck down the EBS, meaning anonymous donations are a no-go. Some argue this might hurt smaller parties who rely on anonymous donations. Others say it's a necessary step towards cleaner elections. The debate is on, and it's definitely something to keep an eye on!

RIP Anonymity, Hello Transparency! ️ (As Supreme Court Says So!)

About the Author: Anirudh Nikhare | 29 Post(s)

Anirudh did his Bachelor's in Law and has practical experience in IPR, Contracts, and Corporate. He is your go-to legal content writer turning head-scratching legal topics into easy-to-understand gems of wisdom. Through his blog, he aims to empower readers with knowledge, making legal concepts digestible and applicable to everyday life.

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