Electoral Bonds : Unconstitutionalised

Introduction

The Electoral Bonds Scheme, introduced with much fanfare in the 2017 Union Budget, marked a contentious attempt to revolutionise political funding in India by introducing anonymity. Implemented from 2018, the scheme sought to address the pervasive issue of illicit campaign financing by establishing a system of anonymous donations through bearer bonds. However, this experiment in financial opacity was short-lived, as the Supreme Court of India struck down the scheme in February 2024, citing concerns about transparency and undue influence.

The Mechanics of The Electoral Bonds

The Electoral Bonds Scheme functioned with the intention of introducing anonymity into political funding while maintaining some level of traceability.

• Eligibility to Purchase: Indian citizens and companies could purchase electoral bonds after completing Know Your Customer (KYC) formalities with the issuing bank. This ensured basic traceability of the donor.
• Denominations and Availability: Bonds were available for purchase in various denominations ranging from Rs. 1,000 to Rs. 1 crore during designated periods throughout the year. The availability window was further extended during election years.
• Encashment: Only registered political parties that garnered at least 1% of the votes in the previous national or state assembly elections were eligible to receive donations through electoral bonds. These bonds had to be encashed within 15 days of issue, failing which they were deposited with the Prime Minister’s Relief Fund.

A Flawed System: Transparency vs. Anonymity

While the scheme aimed to curb black money, its core feature of donor anonymity became a central point of contention. Critics argued that anonymity could lead to:

• Undisclosed Foreign Funding: Anonymity could potentially create a loophole for foreign entities to influence Indian elections without any public scrutiny. This raised concerns about potential manipulation of India’s political landscape by external actors.
• Unbridled Corporate Influence: An opaque system could empower corporations to make large, anonymous donations, potentially swaying political parties’ policies in their favor. This could lead to a corporatocracy where business interests unduly influence government decision-making, undermining democratic principles.

Supreme Court Verdict and Repercussions

The Supreme Court, in a landmark judgment on February 15, 2024, declared the Electoral Bonds Scheme unconstitutional. The Court’s reasoning hinged on two primary concerns:

• Violation of Right to Information: The Court held that anonymity for donors violated the fundamental right to information enshrined in Article 19(1)(a) of the Indian Constitution. This right empowers citizens to access information crucial to democratic processes, including the financial backing of political parties. An informed citizenry is essential for holding elected officials accountable and ensuring a healthy democracy.
• Erosion of Transparency and Accountability: An opaque political funding system could lead to undue influence on political parties, undermining transparency and accountability within the democratic system. The Court emphasised that voters have a legitimate right to know who finances political campaigns, allowing them to make informed choices and hold elected officials responsible. Without transparency, voters are left in the dark about the potential conflicts of interest that might influence policy decisions.

The Court’s verdict effectively dismantled the Electoral Bonds Scheme, leaving the question of political funding reform in India wide open. Moving forward, the focus will likely shift towards a new system that strikes a balance between transparency and curbing illegal donations. Potential solutions could involve stricter disclosure norms for political donations, limitations on corporate contributions, or an entirely new approach to campaign finance regulation, such as the implementation of a system of public funding for elections.

The Road to Transparency: The Court Mandates Disclosure

In its judgement, the Supreme Court recognized the immediate need for transparency in political funding. To dismantle the existing opacity, the Court issued a series of directives:

• Data Submission: The SBI was ordered to submit details of all Electoral Bonds transactions, including purchases and redemptions by political parties, between April 12, 2019, and February 15, 2024, to the Election Commission of India (ECI) within a strict time frame of three weeks. This data would provide crucial insights into the flow of funds during the period the scheme was operational.
• Public Access: The ECI was tasked with compiling the information received from the SBI and publishing it on their official website within a specific deadline to ensure public access to the disclosed details on political party funding. Public scrutiny of this data would empower citizens to hold political parties accountable for their financial dealings.

The Court’s firm stance, including the rejection of SBI’s plea for an extension and the warning of contempt proceedings for non-compliance, underscored the importance of adhering to the mandated transparency measures.

A Turning Point for Indian Democracy

The Supreme Court’s verdict on the Electoral Bonds Scheme marks a significant turning point in Indian politics. By dismantling the anonymity surrounding political funding, the Court has paved the way for a more transparent and accountable system of campaign finance. This landmark decision not only addresses immediate concerns about the Electoral Bonds Scheme but also sets a precedent for future reforms aimed at strengthening democratic processes in India.