Will the Electoral Bond Scheme Survive Judicial Scrutiny?

Chief Justice of India N V Ramana has told petitioners that a current case challenging the Electoral Bond Scheme, 2018, will be heard by the Supreme Court at the earliest. The Electoral Bond was challenged by Association for Democratic Reforms, Common Cause, and Communist Party of India (Marxist) claiming that it is distorting democracy. However,…

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Chief Justice of India N V Ramana has told petitioners that a current case challenging the Electoral Bond Scheme, 2018, will be heard by the Supreme Court at the earliest. The Electoral Bond was challenged by Association for Democratic Reforms, Common Cause, and Communist Party of India (Marxist) claiming that it is distorting democracy. However, the final date for the hearing has not been set by the CJI.

The current electoral bond scheme was established by amending four laws: the Foreign Contribution Regulation Act of 2010 (FCRA), the Representation of the People Act of 1951 (RoPA), the Income Tax Act of 1961, and the Companies Act of 2013. The electoral bonds scheme was first discussed in 2017 by then-Finance Minister Arun Jaitley as a strategy to restructure the country’s electoral funding. The Big Question however is: Will the electoral bond scheme survive judicial scrutiny?

According to Jagdeep Chhokar, founder member of the Association for Democratic Reforms (ADR), who played a key role in ADR’s move to bring political parties under RTI as well as in the Supreme Court order prohibiting convicted criminals from running for office. He has also served at IIM-Ahmedabad as a professor, dean, and director in-charge. He said, “In the first tranche of electoral bonds, something like 212 crore worth of electoral bonds were sold. Ninety-five per cent (95%) of them went to the ruling party. Now the percentage is about 60 to 70 per cent. The fact is that it permits anybody, let us say a company in the USA or elsewhere, to buy electoral bonds if it wants to get some decision made which will help them.”

Professor Chhokar further said, “They have no business in India but they expect that something may be possible. Therefore, they set up a subsidiary in India and that subsidiary is free to buy electoral bonds and give it to any political party because the subsidiary is an entity registered in India and under Company Law; it is like a citizen. It is therefore believed that these companies can influence our decision-making through donations. These are the dangers of electoral bonds.”

Source: ADR

On the constitutionality of the electoral bonds, Professor Chhokar maintained, There is a lack of transparency in the Indian political system. Now there is total opacity and the ruling party enjoys special dispensation. It means perpetuation of political party in power. It also means putting the nation at risk and it is for the court to decide what they want to do.

“We have also challenged the constitutionality of the electoral bonds. It was passed as part of a Money Bill. A Money Bill refers to money, which is to be spent from the Consolidated Fund of India. In this case, the government is not even mentioned in the scheme. XYZ will buy the bond, State Bank will sell the bond, and XYZ will give it to political parties A, B, C. Where does the government come into this? There is no way under the sun that it can be part of a Money Bill.”

He added, “It was put in the Money Bill so that it is not discussed in the Rajya Sabha where the government did not have majority at that point of time. It is unconstitutional and everyone who has said anything or written anything about it, have opposed it except, of course, the ruling party. But we have to wait and see what happens next.”

ADR in its Annual Report: 2020-21 has mentioned in detail about its fight against electoral bonds.ADR’s petition challenged Finance Act, 2017; Electoral Bonds and Removal of company’s limit to donate. The writ petition W.P (C) 880/2017 challenged the Finance Act, 2017 which was enacted as a money bill which introduced the electoral bond scheme for the purpose of electoral funding. The Act has also removed the previous limit of 7.5% of the company’s average three-year net profit for political donations.

“A company is no longer required to name the political parties to which such contributions are made. The donors’ name is also not revealed to the public. These amendments will result in opaqueness, heighten the odds of conflict of interest and also drastically increase black money and corruption. It will also lead to the creation of shell companies and rise of benami transactions to channelize the undocumented money into the political and electoral process in India,” the report stated.

“On 5th March, 2019 ADR and Common Cause filed the first application for stay against the sale/purchase of electoral bonds for Lok Sabha 2019 elections. In the stay application ADR had contended that enormous amounts of corporate funding would be received by political parties during the general elections and this would play a critical role in the elections. In response to ADR’s application, the Supreme Court in its interim order dated 12th April, 2019 directed all political parties to submit details of donations received via Electoral Bonds to the Election Commission of India in a sealed cover on or before 30th May 2019,” the Annual Report reads.

The Annual Report highlights, “On 29th November 2019, ADR and Common Cause filed a second application for stay against the sale/purchase of Electoral bonds to bring on record certain vital documents which have surfaced recently and have a strong bearing on the instant case.

On 26th October, 2020 ADR and Common Cause filed a third application for an urgent listing of the petition before the Supreme Court of India. The application for an urgent hearing was filed because;

  1. ADR’s petition was last heard by the Supreme Court on 20-01-2020 and hasn’t been listed since then, i.e., for the last 9 months, even though very significant questions concerning democratic functioning of the country are raised in the instant matter which requires urgent adjudication.
  2. Right before the Bihar Legislative Assembly Elections, the State Bank of India, in the XIV Phase of sale, issued Electoral Bonds through its 29 Authorized branches w.e.f. 19.10.2020 to 28.10.2020.
  3. Whereas the Electoral Bond Scheme dated 02-01-2018 clearly stipulates sale of electoral bonds in January, April, July and October months of each year; however, the window was not opened in April and July, but was opened in October’20, right before the Bihar Legislative Elections, 2020.

“On 9th March, 2021, ADR and Common Cause filed a fourth application for stay on any further purchase of Electoral Bonds before the then-upcoming state elections in West Bengal, Tamil Nadu, Kerala, Puducherry and Assam as it would further increase the illegal, illicit and anonymous political funding,” the report said.