What is Electoral Bonds ? Supreme Court Verdict 2024

 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.

What is Electoral Bonds ? Supreme Court Verdict 2024

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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