February 15, 2024 will go down in India’s history as a golden day. The Supreme Court has struck a decisive blow on behalf of democracy, which it has held as the basic structure of the Constitution. The five-member Constitution Bench, in a unanimous verdict, upheld every challenge to every aspect in the electoral bonds case, declaring the scheme unconstitutional. It ordered the SBI to stop issuing electoral bonds immediately and submit all information of the bonds sold, and the names of all the donors and recipients, to the Election Commission of India (ECI).
The Court said the scheme violates the right to information. It rejected almost every argument of the government’s lawyers with hard-hitting remarks like “Constitution does not turn a blind eye only because there is a possibility of misuse”. And “Curbing black money is not the only ground for electoral bonds”. In retrospect, the launch of the scheme through the Union budget of 2017 was itself intriguing. The late finance minister, Arun Jaitley, started with two promising statements: “Without transparency of political funding, free and fair elections are not possible”. And: “For the last 70 years, we have failed to achieve this transparency”. Our natural expectation was that his third sentence will achieve what he seemed to have set out to do.
Instead, he introduced a scheme that reeked of secrecy and opacity. The excuse was that donors want secrecy as they are afraid of reprisals (obviously from the ruling dispensation). Add to it, the amendment of Section 29(C) in RPA 1951, which has immunised donations through electoral bonds from scrutiny by the ECI, which allows corporates to transfer unaccounted money. The introduction of electoral bonds was not an isolated action. The Finance Act of 2017 introduced amendments to several laws, including the Reserve Bank of India Act, Companies Act, Income Tax Act 1961, Representation of the People Act, and Foreign Contribution Regulation Act, to pave the way for electoral bonds.
Three significant changes did not receive adequate attention. Firstly, the limit of 7.5 per cent of profits that a company could donate was not just raised but completely eliminated, allowing a company to donate 100 per cent of its profits to a political party. Even loss-making companies could now make political donations, potentially legitimising crony capitalism. It was heartening to see the SC comment on it. Moreover, Section 29B of the Representation of the People Act, 1951, prohibits political parties from accepting contributions from foreign sources, and Section 3 of the 2010 Foreign Contribution (Regulation) Act restricts foreign contributions to candidates, legislative members, political parties, and party office-holders. When, in 2014, Delhi High Court found that Congress and BJP had accepted foreign funds in violation of the FCRA 1976, the BJP government passed a retroactive amendment via a 2016 Finance Bill, replacing the 1976 Act with the modified 2010 statute. This move effectively shields any foreign financing of elections from scrutiny. This is a matter of great national concern.
Significantly, independent institutions like the RBI and ECI had raised serious doubts before the inception of the scheme. According to documents furnished by Huffington Post, the RBI had expressed its concerns to the government on the scheme by underlining that it would allow “unauthorised and non-sovereign entities to issue bearer bonds”, in turn undermining the “core principle of central banking legislation” (RBI Act). Additionally, it said the scheme would encourage money laundering and the introduction of electoral bonds was worthless since “existing banking instruments like cheque and demand drafts” could achieve the same purpose. However, the government remained unmoved in its path to achieve opaque political funding, ironically in the garb of transparency.
In 2017, the ECI in its letter to the law ministry warned that electoral bonds would help in hiding illegal donations and lead to mushrooming of shell companies to turn their black money to white. The government brushed off its concerns. It is important to remember that citizens’ right to know was settled by the apex court in 2003 when it mandated candidates to declare their financial dealings and criminal cases while filing nominations. The Supreme Court ruled that the right to know about public officials is derived from the constitutional right to freedom of expression.
Now that we are back to square one, let’s look at the available options to cleanse electoral funding. One option is to eliminate private funding altogether and introduce public funding for political parties. Another option would be to establish a National Election Fund to which all donors could contribute. The funds could be allocated to parties based on their electoral performance. This would eliminate the so-called concern about donors’ reprisals. During the hearing, the apex court, however, flagged a new issue — the possibility of misuse of money received by political parties for activities like funding terror or violent protests, and asked the Centre whether it has any control on the end use.
On two occasions, however, the Supreme Court had refused to stay the electoral bonds scheme as requested by a plea filed by the Association for Democratic Reforms. This had created despondency and apprehensions about the course the case would take. There were disturbing moments when constitutional bodies like the ECI and RBI took a u-turn on their earlier opposition to the scheme. I was appalled to hear the argument of the Solicitor General that citizens have no right to know the identity of donors/recipients. The Attorney General told the SC, in his written submissions, that the citizens’ right to know is subject to “reasonable” restrictions. How can keeping the potential quid pro quo between donors and the government a secret from the public be a “reasonable” restriction? These statements would behove a banana republic, not the world’s largest democracy.
This is a very significant judgment which will have a long-term effect on our electoral democracy. The Court has struck down not only the Electoral Bond Scheme but also all the provisions that were made to bring it into effect in the Income Tax Act, Companies Act etc.
I have always described the Supreme Court as the guardian angel of our democracy. This faith was, however, wavering lately. Now I add that it is the last refuge in a troubled democracy.
The writer is former Chief Election Commissioner of India and author of ‘India’s Experiment with Democracy — the Life of a Nation through its Elections’
SC verdict on Electoral Bonds will have long-term effect on electoral democracy
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16.02.2024
February 15, 2024 will go down in India’s history as a golden day. The Supreme Court has struck a decisive blow on behalf of democracy, which it has held as the basic structure of the Constitution. The five-member Constitution Bench, in a unanimous verdict, upheld every challenge to every aspect in the electoral bonds case, declaring the scheme unconstitutional. It ordered the SBI to stop issuing electoral bonds immediately and submit all information of the bonds sold, and the names of all the donors and recipients, to the Election Commission of India (ECI).
The Court said the scheme violates the right to information. It rejected almost every argument of the government’s lawyers with hard-hitting remarks like “Constitution does not turn a blind eye only because there is a possibility of misuse”. And “Curbing black money is not the only ground for electoral bonds”. In retrospect, the launch of the scheme through the Union budget of 2017 was itself intriguing. The late finance minister, Arun Jaitley, started with two promising statements: “Without transparency of political funding, free and fair elections are not possible”. And: “For the last 70 years, we have failed to achieve this transparency”. Our natural expectation was that his third sentence will achieve what he seemed to have set out to do.
Instead, he introduced a scheme that reeked of secrecy and opacity. The excuse was that donors want secrecy as they are afraid of reprisals (obviously from the ruling dispensation). Add to it, the amendment of Section 29(C) in RPA 1951, which has immunised donations through electoral bonds from scrutiny by the........
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