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Law

Ahead of Polls, SC To Hear Pleas On Legality of Electoral Bonds

SC's hearing on the legality of electoral bonds, six years after its introduction, will have a bearing on the upcoming elections.

By - Ritika Jain | 31 Oct 2023 4:33 AM GMT

Six years after its introduction, the Supreme Court today will begin hearing challenges to the highly contested electoral bonds which allow anonymous donations to political parties. At the last hearing, more than two years ago in March 2021, the top court refused to stay the sale of electoral bonds.

The hearing is crucial ahead of the upcoming state elections in November and in the run-up to the general elections slated for 2024. The top court earlier this month said it would decide on the legality of the electoral bond scheme before the country goes to polls next year.

The 2019 Lok Sabha elections were deemed the most expensive in history, with a price tag of ₹55,000 crores. However, a recent study indicates that the upcoming elections could surpass this record with estimated expenses projected at ₹1.20 lakh crore. While the Election Commission (EC) is expected to cover approximately 20 per cent of these costs, political parties are anticipated to shoulder the majority of the expenditure, with a significant portion dedicated toward their campaign expenses.

Since its introduction, a total of 24,012 Electoral Bonds worth ₹13,791.8979 crores have been sold in 27 phases between March 2018 to July 2023 of which at least 23,823 bonds worth ₹13,768.011 crore have been redeemed.

Data analysed by NGO Association of Democratic Reforms (ADR) further suggests, “94.25% or ₹12,999 crore of the total value of bonds purchased were in the denomination of ₹1 crore indicating that these bonds are being purchased by corporates rather than individuals”.

Apart from ADR, NGO Common Cause, the Communist Party of India (Marxist) and Congress leader Jaya Thakur have challenged various facets of the electoral bonds scheme, especially its opacity.

A key characteristic of the Electoral Bonds is that the public doesn’t know which individual, or corporate has bought the electoral bonds. Since there is no cap to these bonds, the contribution can literally be limitless.

However, a day ahead of the hearing, Attorney General R Venkataramani—representing the Centre—submitted that a citizen could not claim a right to know about the funding of political parties under Article 19(1)(a) – the fundamental right to expression.

With the stage set, a constitution bench of five judges led by Chief Justice of India DY Chandrachud will hear arguments on this contentious issue for two days.

BOOM outlines what electoral bonds are and the challenges to this scheme.

What are electoral bonds?

An individual or a corporate entity can purchase a promissory note—an electoral bond—in denominations of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakhs and ₹1 crore to and donate the same to political parties. The bonds can be bought with a cheque or digital money transfer (no cash allowed) at select State Bank of India (SBI) branches by any KYC-compliant account holder.

The bonds do not bear the name of the purchaser and there is no cap on how many bonds a donor or corporate entity may buy. However, the Association of Democratic Reform (ADR) said the government of the day could easily trace donors by simply “demanding” the data from SBI.

Political parties—as registered under section 29A of the Representation of People’s Act, 1957 and has secured not less than one percent votes polled—can encash these bonds within 15 calendar days from the date of issue.

The political parties can then use the monies at their discretion. If, after 15 days, the bonds are not encashed then the bank transfers the same to the Prime Minister’s Relief Fund. ADR submitted that so far, 189 bonds amounting to ₹23.8869 crores or 0.1732% of all bonds were deposited in the Prime Ministers Relief Fund (PMRF).

This means, that political parties encashed 99.8268 per cent of the bonds they received during the twenty-seven phases.

ADR further suggested that amendments to the Finance Act 2017 “do not require political parties to mention the names and addresses of those contributing by way of electoral bonds in their contribution reports filed with the Election Commission of India annually.”

This [electoral bonds] will open doors to “unchecked, unknown funding to political parties” which may cause serious repercussions to Indian democracy, it said adding that EBs have “emerged as a vital instrument to both endorse and encourage opacity by not only opening the floodgates of indefinite and mysterious donations but also legitimizing the illicit money in our electoral and political process.”

Challenging the opacity of the electoral bonds system, ADR said a citizen has a right to know about the funding of a political party under Article 19(1)(a) – the fundamental right to expression.

Citizens do not have a right to know about funding to political parties: Centre

On Sunday, Attorney General R Venkataramani said a citizen does not have the right to know about funding of political parties. Addressing the key issue on the anonymity of donors, the government’s top lawyer said there cannot be a general right to know anything and everything without being subject to reasonable restrictions.

“Democracy is a wide concept and comprehends many aspects. Right to know for the general health of democracy will be too over-broad,” Venkataramani told the top court adding that the right to know as necessary for expression can be for specific ends or purposes and not otherwise.

Defending the Centre’s flagship scheme, Venkatramani said the electoral bonds “extend the benefit of confidentiality to the contributor” while fostering the contribution of clean money.

The AG stressed that while the scheme allowed the donor to be anonymous, it ensured and promoted the contribution of “clean money”. “It ensures abiding by tax obligations,” the AG’s submissions read. The scheme promotes transparency in political funding because the bonds could be bought and encashed at “by an eligible political party only through their accounts with authorised banks.”

What does the Election Commission say?

In May 2017, the poll panel told the Standing Committee on Personnel, Public Grievances, Law, and Justice that the amendments to the Representation of People’s Act exempting political parties from disclosing donations through electoral bonds was a “retrograde step”. Later that month, in a letter to the Law Ministry the poll panel asked the Centre to “reconsider” and “modify” the amendments.

Two years later, in an affidavit filed on March 25, 2019, the Election Commission flagged laws that were amended to allow political parties to receive donations from foreign corporations. The poll panel said this would potentially result in “unchecked foreign funding of political parties” that could lead to “Indian policies being influenced by foreign companies”.

In 2021, the election commission opposed any “stay” on the sale of electoral bonds but sought “transparency”. “Without electoral bonds, we will go back to the earlier cash system, which was unaccounted. EBs are one step forward, as all transactions are through banking channels,” senior advocate Rakesh Dwivedi had said.