INTRODUCTION
The recent disclosure of details about 22,217 electoral bonds purchased between April 12, 2019, and February 15, 2024, by the State Bank of India (SBI) on March 13, 2024[1], followed by their forthcoming publication by the Election Commission within a week, aligns with the recent judgments by the Supreme Court in the case of the State Bank of India versus the Association of Democratic Reforms and others.
The Electoral Bond system, introduced through the Finance Bill of 2017, operates as both a Promissory Note and an interest-free banking instrument[2]. Since its inception by the then Finance Minister, Shri Arun Jaitley, the Bharatiya Janata Party (BJP) has faced persistent criticism and scrutiny from entities such as the Association of Democratic Reforms and the Communist Party of India, which have opted out of receiving funds through this mechanism. Concerns surrounding the system primarily revolve around its lack of transparency, a point emphasized in the Supreme Court’s decision, which deemed it detrimental to the Right to Information guaranteed by Article 19(1) of the Indian Constitution.
Despite criticisms, Electoral Bonds represent a significant reform initiative under the Modi administration, aiming to streamline the process of political donations from individuals and corporations to political parties. While challenges persist regarding transparency, the government contends that maintaining opacity is essential to protect the privacy of donors.
Although electoral bonds do not offer a comprehensive solution to the issues of corruption and illicit funding, they represent a progressive and structured approach towards standardizing election financing.
UNRAVELLING THE TALE OF ELECTORAL BONDS
Electoral Bonds serve as a mechanism through which both individuals and companies registered in India can contribute funds to political parties. These bonds are specialized promissory notes issued in denominations ranging from Rs. 1000 to Rs. 1 crore[3], exclusively by the State Bank of India (SBI) through designated branches.
Formally introduced in 2017 and notified in January 2018, electoral bonds have emerged as a pivotal instrument in facilitating electoral donations. Enacted as part of the Finance Bill of 2017 by the late Finance Minister, Shri Arun Jaitley, the scheme was classified as a money bill under Article 110 of the Indian Constitution.
Under the scheme’s technical framework, Indian individuals and companies registered in India, adhering to the KYC norms established by the Reserve Bank of India, can acquire Electoral Bonds. These bonds can be procured through digital platforms or in person at designated banking facilities.
Recipient eligibility is confined to political parties registered under Section 29A of the Representation of People’s Act, 1951, who have secured at least 1% of votes in the preceding general elections[4]. Political parties must encash these bonds through an SBI account within 15 days of issuance; failure to do so results in the bond amount being remitted to the Prime Minister’s Relief Fund.
Several legislative amendments were enacted to expand the scope of electoral financing after the introduction of Electoral Bonds. These included revisions to the Finance Act of 2017, which limited cash contributions to Rs. 2000, the abolition of the 7.5% limit on organizational donations outlined in the Companies Act of 2013, amendments to the Income Tax Act of 1961, and alterations to the Foreign Contribution Regulation Act to broaden the participation of foreign entities in electoral funding.
UNDERSTANDING THE EFFICACY OF ELECTORAL BONDS
Let us delve into how electoral bonds are one of the best amendments to electoral donations. However, it cannot be considered a panacea to solve the problems of illegal funding and the corruption prevalent in India’s political system. Every new system is bound to have several setbacks and loopholes, and we should focus on redressing them rather than just doing away with the scheme of electoral bonds, which is a boon to electoral funding.
Primarily, it is crucial to grasp the fundamental rationale driving the implementation of this initiative[5]. Electoral bonds were instituted with the aim of augmenting transparency in political financing. Despite the confidentiality maintained regarding donor identities, the State Bank of India and the Election Commission diligently monitor and document these transactions, thereby ensuring a level of oversight, although not absolute transparency. This system makes political funding standardized and structured, reducing the entry of cash into this system, which was the main source of illegal funding, corruption, and the entry of black money into the market. There were many instances where several political parties received funding from terror-linked organizations under the charade of religious funding, and several Middle Eastern and European countries provided cash funding to political organizations as a quid pro quo to establish illegal businesses in Indian territory. Funds that political parties receive through electoral bonds must all be disclosed to the Election Commission by submitting their annual statements. This creates a great deal of transparency and promotes accountability. These banking channels create a standardized way for political funding to take place and reduce opacity since all of these purchases are done through a systematic SBI channel, which is all recorded, and any information regarding the purchase, though confidential to the general public, is readily available with the SBI. As seen very recently, the State Bank of India (SBI) could unveil comprehensive data regarding electoral bond transactions, mandated by the directives of the Supreme Court. This significant development underscores a notable departure from past practices, particularly the era characterized by cash-based funding devoid of any traceable origins. The contemporary system ensures meticulous documentation and accessibility of information, exemplifying commendable efficiency. The expeditious availability of electoral bond particulars stands as a testament to the strides made in transparency and accountability within the electoral funding landscape.
Electoral bonds hold significant promise for political funding, notwithstanding their recent invalidation by the Supreme Court on constitutional grounds. This ruling does not inherently discredit the system; rather, it underscores the necessity for amendments to tailor it to the specific requirements of the Indian political framework. An important suggestion for this scheme to progress would be a systematic time-to-time disclosure of electoral bond data by the State Bank of India and a supervisory board to be created, consisting of a retired Supreme Court Judge, a retired bureaucrat who would work in close connection with a small team of the Enforcement Directorate and the Central Economic Intelligence Bureau along with the State Bank of India, tracing the sources of electoral funding and creating a comprehensive report in regards to the yearly funding.
THE DICHOTOMY OF CONFIDENTIALITY VERSUS TRANSPARENCY
Electoral Bonds, as a scheme, work on the basic principle of achieving an equilibrium between confidentiality and transparency. Confidentiality advocated by the ruling government and transparency promoted by the Communist Party of India and the Association of Democratic Reforms are the central themes underpinning this electoral funding scheme.
Electoral Bonds, when introduced in 2018, barred cash donations to a limit of Rs. 2000, yet any kind of cash donation should not be entertained when there is already a facility to purchase electoral bonds for an amount as low as Rs. 1000, keeping the option of cash opens an unnecessary way to promote corruption.
Secondly, and according to me, the most important issue pertinent here is regarding the transparency of electoral bonds, whereby the petitioners have preached upon the issues of violating the right to information as per Article 19(1)(a) and the violation of Article 21, which promotes corruption and quid pro quo benefits, as stated by learned counsel, Mr Prashant Bhushan[6], but another aspect of the lack of transparency is the preference of donors to keep their identity discrete. In India, we adhere to the principle of the secret ballot system, ensuring the anonymity of voters during elections. Similarly, when individuals contribute to political parties, they value the confidentiality of their decisions. Disclosing donor details can jeopardize their privacy, subjecting them to potential risks such as political violence and victimisation as stated by our Solicitor General, Mr. Tushar Mehta[7], in his argument before the honourable Supreme Court. It is important to highlight that donor information is securely stored and can be disclosed, as evidenced by the recent submission of electoral funding details to the Election Commission by the State Bank of India.
It is crucial to recognize that while certain individuals perceive electoral bonds as benefiting one political party, how they have enhanced the efficiency of political funding deserves commendation. Legislative bodies need to enact suitable amendments to the electoral bond scheme to ensure a prudent balance between opacity and transparency in political financing.
CONCLUSION
As said by Mr. Jaitley in his 2017 budget speech:
Nayi duniya hai, naya daur hai, nayi umang hai
Kuchh the pehle ke tareeke, to hain kuchh aaj ke dhang
Roshni aake andheron se jo takraegi
Kaale dhan ko bhi badalna pada, aaj apna rang[8],
As previously discussed, Electoral Bonds may not provide a comprehensive solution to issues surrounding black money and illicit funding. Nonetheless, they represent a significant advancement in addressing these concerns and enhancing the efficacy of electoral financing. Through the resolution of the issues above and the establishment of a supervisory board, the scheme can be more aptly aligned with India’s current political milieu. Attaining a harmonious balance between confidentiality and transparency is imperative for the electoral bond scheme to function effectively, thereby progressing towards an ideal system of political funding. As the adage goes, “Rome was not built in a day,” implying that meaningful change requires time, numerous amendments, and adjustments to ultimately achieve perfection.
Author(s) Name: Digveejay Upadhyay (The West Bengal National University of Juridical Sciences, Kolkata)
Reference(s):
[1]ECI publishes details of electoral bond data on its website, (Business Standard, 16March 2024) <https://www.business-standard.com/india-news/ec-publishes-details-of-electoral-bond-data-on-its-website-see-full-list-124031401172_1.html>accessed 6 April 2024
[2]Supreme Court Declared Electoral Bond Scheme Unconstitutional, (ONLYIAS by PHYSICS WALLAH, 16 March 2024) <https://pwonlyias.com/electoral-bond-scheme/> accessed 6 April 2024
[3]Ministry of Finance, Department of Economic Affairs, NOTIFICATION, (THE GAZETTE OF INDIA: EXTRAORDINARY, 2 January 2018) <https://www.scobserver.in/wp-content/uploads/2021/10/Electoral-Bonds-Scheme-2018.pdf> accessed 8 April 2024
[4]Ibid
[5]Electoral Bonds explained: Transparency and anonymity in political funding, (THE TIMES OF INDIA, 20 March 2024) <https://timesofindia.indiatimes.com/india/lok-sabha-elections-2024-electoral-bonds-explained-transparency-and-anonymity-in-political-funding/articleshow/108646815.cms> accessed on 8 April 2024
[6]Association for Democratic Reforms &Anr.Versus Union of India & Ors.[2024]The Supreme Court of India3 S.C.R. 417 : 2024 INSC 209
<https://main.sci.gov.in/supremecourt/2017/27935/27935_2017_1_1501_50573_Judgement_15-Feb-2024.pdf> accessed on 9 April 2024
[7]Ibid
[8]Union Budget 2017: Full speech of Finance Minister Arun Jaitley, (THE TIMES OF INDIA, 1 Feb 2017)
<https://timesofindia.indiatimes.com/business/india-business/union-budget-2017-full-speech-of-finance-minister-arun-jaitley/articleshow/56913593.cms> accessed on 9 April 2024
