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  • Electoral Bond: Modi Government Exposed!

    Published on March 29, 2024

    From Our Political Correspondent

    New Delhi: Transparency is the soul of Democracy. In a democracy the people are supreme and they have the Right to Information of the deeds of their elected government. India is applauded for its vibrant democracy and Right to Information. Indian constitution ensures its people the right to know about the political process under which they elect their government. So it’s their right to know about the people who they vote to power. The voters have the genuine right to know who fund their candidates. This means the administration headed by the elected Prime Minister needs to ensure transparency in electoral funding. But contrary to the constitutional obligation the Modi administration at the Centre brought in Electoral Bond system which was strictly secretive. As per the law passed in parliament with respect to the Bond, the donor and recipient details were to be kept concealed.

    However, the Supreme Court of India has scraped the controversial Electoral Bond through an order on February 15 of this year observing the “Electoral Bonds Scheme is unconstitutional and illegal. It violates the right to information, freedom of speech and expression under Article 19(1)(a) of the Constitution. It can lead to quid pro quo.” The Court also observed that the scheme contradicted the rights of the voters to know the donors and the corresponding recipients of the Bonds.   

    The trajectory of Electoral Bond:

    While presenting the union budget for FY 2017-18 the then Finance Minister Arun Jaitley proposed the electoral bond scheme “to evolve a transparent method of funding political parties which is vital to the system of free and fair elections.”

    An electoral bond is a bearer instrument payable to the bearer on demand. The electoral bond, as the minister described, will not have any information of the parties in the transaction, providing complete anonymity and confidentiality to the parties.

    In fact, it was a well thought out decision of those in power to bring in a system for political donation which is totally opaque and inaccessible to the public.  The preparations  to bring in such a system started with the introduction of the new finance act on 14 May 2016, the Finance Act, 2016 which amended Section 2(1)(j)(vi) of the Foreign Contribution Regulation Act, 2010 (FCRA).  Previously, foreign companies were prohibited from donating to political parties under the FCRA and the Foreign Exchange Management Act, 1999. But the amended FCRA allowed foreign companies who have a majority share in Indian companies to donate to political parties.

    On 31 March 2017, the Finance Act, 2017 amended 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. Section 11 of the Finance Act, 2017 amended Section 13A of the Income Tax Act exempting political parties from keeping a detailed record of contributions received through electoral bonds. Section 135 amended Section 31 of the RBI Act allowing the Union government to “authorise any scheduled bank to issue electoral bond[s].”

    Section 137 introduced a proviso to Section 29C of RoPA, exempting political parties from publishing contributions received through electoral bonds in “Contribution Reports.” These reports disclose contributions received by parties “in excess of twenty thousand rupees” from companies and individuals.

    Section 154 amended Section 182 of the Companies Act, 2013 which removed the upper limit on how much a company could donate to a political party. Previously companies could only donate up to 7.5 percent of three years of the company’s net profits.

    Amendments Challenged:

    Not much later, on September 2017 and January 2018, Association for Democratic Reforms (ADR) and Common Cause, two known NGOs and Communist Party of India (Marxist) filed separate petitions in the Supreme Court challenging the amendments.  Their contention was that the Finance Acts were unlawfully passed as money bills to prevent higher scrutiny by the  Upper House i.e. Rajya Sabha. Petitioners also argued that the scheme permitted “non-transparency in political funding” and legitimised electoral corruption at a large scale.

    The Contours of the Electoral Bond:

     On January 2, 2018, the Union Ministry of Finance issued a notification introducing the Electoral Bond Scheme, 2018. Under the Scheme, Selected branches of the State Bank of India (SBI) were authorised to issue electoral bonds in denominations of ₹ 1,000, ₹10,000, ₹1,00,000, ₹10,00,000, and ₹ 1,00,00,000.  The Bonds were to be sold for 10 days in January, April, July, and October each year. The identity of the purchaser remains anonymous to everyone, except the SBI, who must record the buyer’s Know Your Customer (KYC) details.

    Political parties which secured more than one percent votes “in the last general election to the House of the People or a Legislative Assembly” are eligible to accept the electoral bonds and  encash  them within 15 days of receiving. After the stipulated period the funds of the unredeemed bonds will be deposited to the Prime Minister’s Relief Fund. 

    Opposition to Electoral Bond:

    On 25 March 2019, the Election Commission of India (ECI), one of the respondents, filed an affidavit opposing the Electoral Bond Scheme. The affidavit claimed that the scheme is contrary to the goal of transparency in political finance. It also claimed that the ECI had shared a letter to the Union Government on 26 May 2017, warning against the “repercussions/impact on the transparency aspect of political finance/funding.” Further, they submitted that exempting political parties from sharing details regarding contributions would keep information on foreign funding in the dark. The affidavit stated, “Unchecked foreign funding of political parties in India, which could lead to Indian policies being influenced by foreign companies.”

    On 1 April 2019, the Union government submitted a rejoinder claiming that the EBS was “a pioneer step in bringing electoral reforms, to ensure that the spirit of transparency and accountability in political funding is maintained.” The Union claimed that political parties largely received funds through cash donations, leading to an “unregulated flow of black money.” The Union assured that these issues would no longer hamper political funding because there is only one authorised bank—the State Bank of India—that can issue such bonds. Further, providing KYC details ensure accountability.

    The challenge in the Supreme Court

    On 12 April 2019, a bench led by the then Chief Justice Ranjan Gogoi(nominated to Rajya Sabha after retirement by the Modi Govt.), with Justices Deepak Gupta, and Sanjiv Khanna directed all political parties to submit details of donations, donors, and bank account numbers in a sealed cover to the ECI. The Bench did not impose any stay on the implementation of the scheme stating that “such weighty issues would require an in-depth hearing.”

    Following this judgement the petitioners approached the Court on multiple occasions. An application for an urgent hearing was filed in November 2019, then again in October 2020 before the Bihar elections.

    In early 2021, ADR approached the Court seeking a stay on the scheme, before the commencement of a fresh round of bond sales. This application was allowed by a Bench led by Chief Justice S.A. Bobde, with Justices A.S. Bopanna, and V. Ramasubramanian. On 26 March 2021, the Bench denied any stay on the application of the scheme. They held that the “apprehension that foreign corporate houses may buy the bonds and attempt to influence the electoral process in the country, is…misconceived.” The Bench also sternly discouraged the petitioners from approaching the Court, stating that “there cannot be repeated applications seeking the same relief.”

    On 16 October 2023, the petitioners approached the Court during mentioning, to hear the case prior to the 2024 General Elections.  A Bench led by Chief Justice D.Y. Chandrachud, with Justices J.B. Pardiwala, and Manoj Misra referred, noting the “importance of the issue” referred the case to a five-judge Constitution Bench.

    On 31 October 2023,  a five-judge Constitution Bench led by CJI Chandrachud, with Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala, and Manoj Misra heard arguments over three days. Petitioners argued that the electoral bonds scheme increased corporate funding, black money circulation, and corruption. They argued that voters have a right to information about political parties’ source of funding, as it informs the policies and views of that party. The Union contended that the scheme was designed to guarantee confidentiality and the right to privacy of the donors, who were otherwise exposed to retribution from political parties that they didn’t fund.

    On 2 November 2023, the Constitution Bench reserved judgement.

    On 15 February 2024, the Court unanimously struck down the Union’s 2018 Electoral Bonds (EB) Scheme. The Bench held that the Scheme violated 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 12 April 2019 till date, to the ECI. This will include details of the purchaser as well as the political parties that the bonds were given to. Further, the Court ordered the ECI to publish the information shared by SBI on its official website within one week from the receipt of the information (by 13 March 2024).

    Summary the Court Order:

    The Electoral Bond Scheme, the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional; and

    b. The deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violate of Article 14.

    c. The issuing bank shall herewith stop the issuance of Electoral Bonds; SBI shall submit details of the Electoral Bonds purchased since the interim order of this Court dated 12 April 2019 till date to the ECI. The details shall include the date of purchase of each Electoral Bond, the name of the purchaser of the bond and the denomination of the Electoral Bond purchased;

    d. SBI shall submit the details of political parties which have received contributions through Electoral Bonds since the interim order of this Court dated 12 April 2019 till date to the ECI. SBI must disclose details of each Electoral Bond encashed by political parties which shall include the date of encashment and the denomination of the Electoral Bond;

    e. SBI shall submit the above information to the ECI within three weeks from the date of this judgment, that is, by 6 March 2024;

    f. The ECI shall publish the information shared by the SBI on its official website within one week of the receipt of the information, that is, by 13 March 2024; and Electoral Bonds which are within the validity period of fifteen days but that which have not been encashed by the political party yet shall be returned by the political party or the purchaser depending on who is in possession of the bond to the issuing bank. The issuing bank, upon the return of the valid bond, shall refund the amount to the purchaser’s account.

    “An irresponsible person is a person who makes vague promises, then breaks his word, blames it on circumstances and expects other people to forgive it.”

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