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Explained: Why the electoral bonds scheme has been challenged in Supreme Court

Supreme Court has dismissed petitions seeking to stay the sale of fresh electoral bonds ahead of Assembly elections in West Bengal, Tamil Nadu, Kerala, Assam and Puducherry. What are electoral bonds, and why were they challenged?

Written by Apurva Vishwanath , Ritika Chopra | New Delhi |
Updated: March 27, 2021 1:40:10 pm
SC refuses to stay the scheme ahead of upcoming Assembly elections, larger constitutional challenge pending. (Photo: File)

On Friday, the Supreme Court dismissed petitions seeking to stay the sale of fresh electoral bonds ahead of Assembly elections in West Bengal, Tamil Nadu, Kerala, Assam and Puducherry. Although the court said there is no justification to stay the current sale, the larger constitutional challenge to the electoral bonds scheme filed in 2017 is still pending.

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What is the pending challenge?

It was filed by the Association for Democratic Reforms, which works for electoral transparency and accountability, along with Common Cause, another non-profit. The court had admitted the plea and sought responses from the government and the Election Commission of India (EC). However the case has not been heard in detail since then. Apart from challenging the constitutionality of the electoral bonds scheme, the petitioners had asked the court to declare all political parties as public offices to bring them under the ambit of the Right to Information Act and compel political parties to disclose their income and expenditure.

Friday’s ruling came on another plea by the petitioners seeking a stay on the current sale, until the court decides on the pending petition.

What are electoral bonds?

Announced in the 2017 Union Budget, electoral bonds are interest-free bearer instruments used to donate money anonymously to political parties. A bearer instrument does not carry any information about the buyer or payee, and the holder of the instrument (which is the political party) is presumed to be its owner.

The bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, and State Bank of India is the only bank authorised to sell them. Donors can buy and subsequently donate bonds to a political party, which can encash the bonds through its verified account within 15 days. There is no limit on the number of bonds an individual or company can purchase. If a party hasn’t enchased any bonds within 15 days, SBI deposits these into the Prime Minister’s Relief Fund. A total of 12,924 electoral bonds worth Rs 6534.78 crore have been sold in 15 phases between March 2018 and January 2021.

When first announced in then Finance Minister Arun Jaitley’s Budget speech of 2017, electoral bonds were understood to be a way for companies to make anonymous donations. However, the fine print of the notification has revealed that even individuals, groups of individuals, NGOs, religious and other trusts are permitted to donate via electoral bonds without disclosing their details.

Why have they been challenged?

The point of contention is the anonymity provided to donors of electoral bonds. Through an amendment to the Finance Act 2017, the Centre has exempted parties from disclosing donations received through electoral bonds. In other words, they need not disclose these details in their mandatory contribution reports to the Election Commission every year.

This means voters will not know which individual, company, or organisation has funded which party, and to what extent. Before the introduction of electoral bonds, parties had to disclose details of all donors who have contributed more than Rs 20,000. According to transparency activists, the change infringes the citizen’s ‘Right to Know’ and makes the political class even more unaccountable.

“Moreover, while electoral bonds provide no details to the citizens, the said anonymity does not apply to the government of the day, which can always access the donor details by demanding the data from the State Bank of India (SBI). This implies that the only people in dark about the source of these donations are the taxpayers. It may also be noted that the printing of these bonds & SBI commission for facilitating the sale and purchase of the bonds is paid from the taxpayers’ money by the central government,” the ADR said in a recent statement.

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How popular are these bonds?

By virtue of the anonymity they offer to donors, electoral bonds have become the most popular route of donation. More than half the total income of national parties and the regional parties analysed by ADR for the financial year 2018-19 came from electoral bonds donations.

The BJP is the biggest beneficiary, having received Rs 1,660.89 crore, or 60.17% of the total Rs 2,760.20 crore received by parties via electoral bonds in 2017-18 and 2018-19.

What is the EC’s stand?

In its submission to the Standing Committee on Personnel, Public Grievances, Law and Justice in May 2017, the EC had objected to amendments in the Representation of the People Act that exempt political parties from disclosing donations through this route. In a letter to the Law Ministry the same month, the EC had asked the government to “reconsider” and “modify” the above amendment.

Asking the government to withdraw the new proviso, the EC had written, “In a situation where the contribution received through electoral bonds are not reported, on perusal of the contribution report of political parties, it cannot be ascertained whether the political party has taken any donation in violation of provision under Section 29(b) of the RP Act which prohibits the political parties from taking donations from government companies and foreign sources.”

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