In electoral bond case, the Supreme Court ordered all political parties to furnish the details of the electoral bond in a sealed cover by May 31
• The Finance Bill, 2017, introduced “electoral bonds”. It is an instrument that is used to donate money to political parties.
• Every party that is registered under section 29A of the Representation of the Peoples Act, 1951 and has secured at least 1% of the votes polled in the most recent Lok Sabha or State election will be allotted a verified account by the Election Commission of India. Electoral bond transactions can be made only via this account.
• The Electoral Bond would be a bearer instrument in the nature of a Promissory Note and an interest free banking instrument capable of being purchased by an Indian citizen or a body incorporated in India.
• These are issued by Scheduled Commercial banks upon authorization from the Central Government to intending donors, but only against cheque and digital payments (it cannot be purchased by paying cash). The Bonds shall be issued in the denomination of Rs. 1,000, Rs. 10,000, Rs. 1 lac, Rs. 10 lacs and Rs. 1 crore from specified branches of SBI
• The bonds will be available for purchase for a period of 10 days each in the beginning of every quarter, i.e. in January, April, July and October as specified by the Central Government. An additional period of 30 days shall be specified by the Central Government in the year of Lok Sabha elections.
• Buyers of the bonds have to submit full KYC details at the time of buying. But the beneficiary political party is not required to reveal the identity of the entity that has given it the bond(s).
• Political parties will also have to inform election commission that how much money they got from Electoral bonds.
Issues with electoral bonds
- Introduced as finance bill: Electoral bonds were introduced by amendments made through the Finance Act 2017 to the Reserve Bank of India Act 1934, Representation of Peoples Act 1951, Income Tax Act 1961 and Companies Act and as such was not debated in the Rajya Sabha
- Transparency: Electoral bonds “increase the anonymity of political donations”. The bonds are not registered in the name of a specific person as a result donation through electoral bonds continue to provide anonymity to donors.
- Violation of the fundamental right to information: Ordinary citizens will not be able to know who is donating how much money to which political party.
- Generation of black money: Removal of the 7.5% cap on the net profits of the last three years of a company opens up the possibility of companies being brought into existence by unscrupulous elements primarily for routing funds to political parties through anonymous and opaque instruments
- Corporate-political nexus: The amendments made to Companies Act 2013 exclude the requirement of disclosure of names of political parties to whom contributions have been made. This may lead to “private corporate interests taking precedence over the needs and rights of the people of the State in policy considerations
- Exemption from Income tax: The contribution received by any eligible political party in the form of electoral bonds will be exempt from income-tax as per Section 13A of the Income Tax Act.
Electoral bond case
The scheme has been challenged in petitions filed by political party Communist Party of India (Marxist), and NGOs Common Cause and Association for Democratic Reforms (ADR)
CPI(M) petition alleges that the bonds have been kept “secretive” for the benefit of big corporate houses. Petition also alleged that the electoral bond was introduced as money bill to bypass the upper house
The NGO, which has challenged the validity of the scheme, has sought interim relief including that either the issuance of electoral bonds be stayed or the names of the donors be made public to ensure transparency in the poll process.
Government response: The government has been defending the scheme on the ground that it limits the use of cash in political funding, thus bringing more transparency, and provides a shield to donors by granting them anonymity.
The right of the buyer to purchase bonds without having to disclose his preference of political party is in furtherance of his right to privacy. According to the government, non-disclosure of the identity of the donor is the core objective of the scheme in order to safeguard the donor from political victimisation. Keeping the identity of the buyer of the bonds anonymous is an extension to his right to vote in secret ballot.
Election commission view: The Election Commission of India told the Supreme Court that it is not opposed to electoral bonds, but is in favour of revealing the names of donors for transparency.
Supreme court judgement
The Supreme Court turned down a plea for interim stay on electoral bonds. Though the apex court ordered all political parties who have received donations through electoral bonds till May 15, must submit details to the Election Commission of India in a sealed cover before May 30.
The Supreme Court also directed the finance ministry to reduce window of purchasing electoral bonds from 10 days to five days in April-May. The court further said it would examine in detail the changes made in law and ensure that balance does not tilt in favour of any party.