The Supreme Court on Thursday (15th February) struck down the electoral bonds scheme which was notified in 2018.
The 5-judge bench ruled that the Electoral Bonds Scheme is violative of Article 19(1)(a) and the Right to Information Act and has to be struck down as unconstitutional.
The Supreme Court has called for the disclosure of funding to political parties “as it curbs corruption whereas non-disclosure affects exercise of electoral vote”.
What is the Electoral Bonds Scheme?
The scheme was announced in 2017 by then Finance Minister Arun Jaitley during the Budget Session.
In 2018, the Central Government notified the scheme of Electoral Bonds to “cleanse the system of political funding in the country”.
The scheme allows any Indian citizen and entity to buy electoral bonds by way of donating to a political party of their choice.
As per the scheme, the Electoral Bonds can be issued/purchased for any amount in multiples of Rs 1,000; Rs 10,000; Rs 1,00,000; Rs 10,00,000 and Rs 1,00,00,000 from the specific branches of the State Bank of India (SBI).
The scheme mandated political parties to withdraw the bonds within 15 days and only such political parties which hate a vote share of a minimum of one per cent.
Eligible political parties could encash the bonds only through a designated bank account with the authorised bank.
What were the arguments against Electoral Bonds Scheme?
While the Centre stated that the scheme would allow scope for transparency and curb black money, it came under criticism for its anonymity.
Under the scheme, the purchaser of the bonds was not required to reveal their identity which essentially made donors and donations anonymous.
Petitions were filed in the Supreme Court challenging the Constitutional validity of the scheme, its legality and alleged violation of the right to information. Petitioners argued that this could pave way for kickbacks.
The petitioners also argued that the anonymity in donations would promote corruption and open doors to shell companies.
What did the Supreme Court verdict state?
The Supreme Court began delivering its verdict by stating that voters have a right to information which is essential for them to cast their votes.
“There is a legitimate possibility that financial contribution to a political party would lead to quid pro quo arrangements because of the close nexus between money and politics,” the bench stated.
The SC ruled that the “Electoral Bonds Scheme and the impugned provisions to the extent that they infringe upon the rights to information of the voter by anonymising contributions through electoral bonds are violative of Article 19(1)(a)”.
The Supreme Court also delivered its verdict in response to the Centre’s argument that the right to information is limited in regards to the scheme to curb the flow of black money.
“Providing anonymity to the contributor incentivises them to contribute through banking channels,” the Centre had argued.
To this, the bench stated in its verdict, “The electoral bonds scheme is not the only means for curbing black money in electoral financing. There are other alternatives which substantially fulfil the purpose.”
The SC ruled that the infringement of the right to information is not proportionately justified to curb black money in electoral financing.
On the issue of donor privacy, the Supreme Court ruled that the right to informational privacy extends to contributions to political parties and is a facet of political affiliation.
The court said that it would be impermissible to not grant the umbrella of privacy to political contributions only because a portion of the contributions (corporate donors) is made for other reasons.
It further stated that the right to privacy of political affiliation does not extend to those contributions which may be made to influence policies.
The bench also ruled that unlimited political contributions by companies cannot be permitted for fear of influencing the political process through contributions which is much higher as compared to individuals.
The CJI while pronouncing the judgment, stated that the Union of India had “failed to establish least restrictive measures of the electoral bonds scheme for political funding.”
The bench ruled that the Electoral Bonds Scheme vis a vis the Companies Act, Finance Act and Representation of the People’s Act is violative of Article 19(1)(a).
In this context, the Supreme Court directed banks to stop the issuance of Electoral Bonds and ordered the State Bank of India (SBI) to disclose information on electoral bonds issued and cashed out and share it with the ECI within three weeks.
The ECI has been ordered to publish the said details on the website by 31st March 2024.
Following are the directions given by the Supreme Court:
a) SBI shall stop the issuance of Electoral Bonds
b) SBI shall submit the details of electoral bonds purchased since the interim order of SC dated 12 April 2019 to date to the ECI. The details shall include the date of purchase of each electoral bond, name and purchaser of the bond and denomination of the bond purchased
c) SBI shall submit details of political parties which have received contributions through electoral bonds since the interim order of SC on 12 April 2019 till date to ECI. SBI is to disclose details of each electoral bond encashed by political parties which shall include the date of encashment and denomination of EB
d) SBI shall submit the above info to ECI within three weeks i.e. by 6 March 2024
e) ECI shall publish the said information within six days of receiving that is by 13 March 2024
f) Electoral Bonds within the validity period of 15 days but not encashed by political parties yet shall be returned to the purchaser through the issuing bank. The issuing bank shall refund the amount to the purchaser’s account.
What does the Supreme Court judgment mean?
Essentially, the Supreme Court has limited its ruling to the nature of the scheme rather than the scheme itself.
On 2nd November 2023, the Supreme Court while reserving its verdict had reportedly stated that the scheme suffers from “serious deficiencies”.
In this context and going by the details of the judgement, it can be assumed that with required amendments to the problem areas identified by the SC, the scheme can still be reintroduced.
To this effect, the SC while reserving its order had suggested that a new system could be put into place and that it was not preventing the government from introducing a transparent scheme.
So while the SC has struck down the existing electoral bonds scheme, it has also pointed out through its judgment very specific loopholes that could allow the Centre to come up with an alternative scheme or system for electoral donations to political parties.
How much did political parties benefit from the electoral bonds?
As per reports, the BJP has received Rs 5,271.97 crore through electoral bonds between 2017-2022 followed by the Congress which has received Rs 952.29 crore; AAP Rs 50 crore; TDP Rs 113 crore; YSRCP Rs 330 crore; JD(S) Rs 43 crore; JD(U) Rs 24 crore; RJD Rs 2.5 crore; Shiv Sena Rs 101 crore; NCP Rs 64 crore; BJD Rs 622 crore; DMK Rs 46 crore; AIADMK Rs 6 crore.
In 2022-23, the BJP received nearly Rs 1,300 crore through electoral bonds followed by the Congress which received Rs 171 crore.
The Samajwadi Party reportedly received no contributions through electoral bonds in 2022-23 where as the Telugu Desam Party received Rs 34 crore in this period.
With Rs 325 crore, the Trinamool Congress (TMC) received 99.4 per cent of its contributions through electoral bonds in 2022-23.
Electoral Bonds contributed over 99 per cent to the DMK with Rs 186 crore; 84 per cent to the BJD with Rs 152 crore and 70 per cent to the YSR Congress with Rs 52 crore in 2022-23.
The BRS received 71 per cent through electoral bonds with Rs 529 crore in the same time period. The Aam Aadmi Party (AAP) received Rs 36.4 crore in electoral bonds.
This shows that the regional parties have been the biggest beneficiaries of electoral bonds.
Notably, in 2021-22, the TMC received 97 per cent of its contributions from unknown sources with Rs 528 crore; Congress received 72 per cent with Rs 389 crore; the BJP received 60.56 per cent with Rs 1,161 crore and CPM’s income was 48 per cent with Rs 79 crore.
TMC’s contributions through electoral bonds increased from ₹42 crore in 2020-21 to ₹528 crore in 2021-22.
In November 2023, Solicitor General Tushar Mehta pointed out to the SC that the CPM had more than 50% of its income through unknown sources despite not accepting electoral bonds since 2017-18.
