What is Electoral Bonds ? Supreme Court Verdict 2024
Electoral Bonds (EBs) represent a
unique form of financial instrument akin to promissory notes, offering an
avenue for any Indian citizen or domestically incorporated company to
contribute to political parties of their choosing. Facilitated through specified
branches of the State Bank of India (SBI), these bonds serve as a conduit for
channeling donations into the political sphere. Once acquired, these bonds can
be donated to eligible political entities, which, in turn, can encash them via
their designated bank accounts with authorized banks. It's crucial to note that
EBs come with a validity period of 15 days from the date of issuance and are
interest-free.
Denominations and Purchase Methods:
Electoral Bonds are issued in
multiples of ₹1000, ₹10,000, ₹1 Lakh, ₹10 Lakh, and ₹1 crore, providing a range
of options for contributors. They can be procured for any amount without an
upper limit, provided they are in the specified denominations. Acquisition of
EBs is facilitated through digital payment or cheque transactions, with cash
transactions being prohibited.
Legal Framework Amendments:
Several key legislative acts have
been amended to accommodate the Electoral Bonds Scheme:
Foreign Contribution Regulation
Act, 2010 (FCRA): Amendments to this act permit foreign companies with majority
stakes in Indian entities to make donations to political parties.
Representation of People Act, 1952 (RPA): Changes to this act exempt political
parties from the obligation of reporting donations received via EBs to the
Election Commission. Companies Act, 2013: Amendments to this act nullify the
applicability of Section 182, which previously mandated disclosure of political
donations in companies' annual financial statements, in the context of
electoral bonds.
Government Justifications:
The government has put forth
several arguments in support of the Electoral Bonds Scheme:
Tackling Black Money: The scheme
aims to curb the influx of black money into politics by routing donations
through formal banking channels, thereby enhancing transparency and
accountability. Donor Privacy: Safeguarding the privacy of donors is deemed
essential, fostering a conducive environment for contributions without fear of
reprisal, grounded in the fundamental right to privacy. Limits of Right to
Information: The government contends that voters' right to information is
confined to data possessed by the state, suggesting that the anonymity afforded
by the scheme does not impinge upon this right, as donor identities remain
undisclosed to the state. Safeguards for Investigations: In cases of criminal
inquiries, electoral bond donation details could be divulged under court
orders, striking a balance between preventing misuse and preserving donor
anonymity.
Supreme Court Ruling:
The Supreme Court has delivered a
verdict against the Electoral Bonds Scheme:
Invalidation of the Scheme: The
Court ruled that the scheme infringes upon voters' right to information
regarding political funding, as enshrined in Article 19(1)(a) of the
Constitution. Rejection of Legal Amendments: The amendments to various
legislative acts facilitating the electoral bonds scheme were declared null and
void, as they were found to compromise the transparency and integrity of the
electoral process. Concerns Highlighted by Institutions:
Reserve Bank of India (RBI) Objections:
RBI objected to the involvement of
non-SBI banks in issuing electoral bonds, citing risks to the credibility of
the financial system and potential violations of anti-money laundering
principles. It advocated for alternatives such as cheques or electronic
payments to achieve the objective of tax-compliant donations. Election
Commission of India Concerns:
Transparency Deficiencies: The
Commission flagged the lack of transparency stemming from anonymous EB
donations, which circumvent reporting requirements under the Representation of
the People Act and erase vital party-wise disclosure data mandated by the
Companies Act. Increased Black Money Risks: Unlimited corporate funding through
EBs raises the specter of illicit funds entering the political realm,
potentially facilitated by shell companies. Recommendations:
The Election Commission calls for
the removal of anonymity clauses and the reinstatement of reporting
requirements for EB donations. It also advocates for the reintroduction of caps
on corporate funding to mitigate the risk of black money infiltration.
Concerns Regarding Electoral Bonds
Lack of Transparency: The anonymity
of donors and recipients raises worries about hidden influences and the
potential for policy decisions being swayed by undisclosed interests.
Potential for Undue Influence: The
anonymity provided by Electoral Bonds opens the door to scenarios where donors
may seek favors in return for their contributions, creating possibilities for
quid pro quo arrangements.
Unequal Playing Field: Larger
political parties tend to benefit more from the system as they attract larger
anonymous donations, potentially skewing the political landscape in their
favor.
Misuse of State Machinery: There
are concerns that ruling parties may exploit their access to donor information
via the State Bank of India (SBI) to gain leverage, potentially compromising
the fairness of the electoral process.
Impact on Policy Decisions: The
fear exists that policies may be tailored to accommodate the interests of major
donors, potentially leading to governance that prioritizes the concerns of
wealthy contributors over the broader public good.
High Proportion of
High-Denomination Bonds: The prevalence of high-denomination bonds, accounting
for over 90% of the total, raises concerns about the magnitude of potentially
undisclosed donations.
Failure to Meet Global Standards:
The lack of transparency inherent in the Electoral Bonds system falls short of
international norms that advocate for full disclosure in political financing,
raising questions about India's commitment to transparency in governance.
Money Laundering Risk: The
anonymity afforded by Electoral Bonds creates opportunities for their potential
misuse in laundering illicit funds, posing risks to the integrity of the
financial system.
Setting a Precedent for Opaque
Funding: The adoption of Electoral Bonds sets a troubling precedent for
increased financial opacity within political systems, potentially undermining
trust in the democratic process.
In conclusion, the Electoral Bonds
Scheme has sparked contentious debate, with proponents advocating for enhanced
transparency and accountability in political funding, while critics raise
concerns about its potential to subvert democratic principles and facilitate
corruption. The Supreme Court's ruling and institutional recommendations
underscore the imperative of striking a balance between donor privacy and the
integrity of electoral processes.
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