Explained: The Electoral Bonds Scheme And The Case Against It

The Narendra Modi government had brought the scheme in 2018 with the stated objective of enhancing transparency in poll funding

The petitioners have said the electoral bonds scheme was disturbing level playing field

New Delhi:

A Constitution bench of the Supreme Court will shortly announce its verdict on the validity of the electoral bonds scheme. The Narendra Modi government had brought the scheme in 2018 with the stated objective of enhancing transparency in poll funding. Detractors have, however, argued that the scheme's confidential nature promotes corruption and does not allow a level-playing field between parties.

What Is The Electoral Bonds Scheme?

According to the government's notification in 2018, the electoral bond is a bearer instrument in the form of a promissory note. An Indian citizen or an entity incorporated in the country is eligible to buy it. The bonds can be purchased for any value in the multiples of Rs 1,000 from specified branches of State Bank of India. The bonds are available for 10 days each in January, April, July and October. This period is specified by the Centre.

Payments to buy the bonds have to be made from a bank account that fulfils all Know Your Customer (requirements). These bonds don't carry the payee's name and have to be used for donations within 15 days of issue.

Only parties registered under Representation of the Peoples Act, 1951 (43 of 1951) and which got at least 1 per cent of the votes polled in the last general election or state election can receive donations through bonds. The party has to encash the bonds through a designated bank account.

The Idea Behind The Scheme

Soon after introducing the scheme in 2018, then Finance Minister Late Arun Jaitley had written a defence in a Facebook post. He had said the conventional practice of political funding in India was cash donations. "The sources are anonymous or pseudonymous. The quantum of money was never disclosed. The present system ensures unclean money coming from unidentifiable sources. It is a wholly non-transparent system," he had said.

Mr Jaitley had said that he believed that donations made online or through cheques "remain an ideal method". "However, these have not become very popular in India since they involve disclosure of donor's identity," he had said. The disclosure of the donors' identity, he had said, would make them go back to the cash option.

The electoral bond scheme, he said, ensures that all transactions of poll funding happen through banking instruments. The scheme, he said, was a "substantial improvement" over a cash donation system that was fully non-transparent.

"In fact the choice has now to be consciously made between the existing system of substantial cash donations which involves total unclean money and is non-transparent and the new scheme which gives the option to the donors to donate through entirely a transparent method of cheque, online transaction or through electoral bonds. While all three methods involve clean money, the first two are totally transparent and the electoral bonds scheme is a substantial improvement in transparency over the present system of no-transparency," he had argued.

The Legal Challenge

Soon after it was implemented, multiple parties challenged the electoral bond scheme in court. These included CPM, Congress leader Jaya Thakur and non-profit Association for Democratic Reforms. They argued that the confidentiality clause in the scheme came in the way of the citizen's right to information. Senior Advocate Prashant Bhushan, appearing for ADR, said the bonds promote corruption as they are opaque and anonymous. "The bonds do not allow a level-playing field between political parties which are ruling versus political parties which are in the Opposition or between political parties and independent candidates." He also said ever since this scheme was introduced, contributions made through this donation method had exceeded all other modes.

Senior Advocate Kapil Sibal pointed out that there is no cap on the amount of money that can be donated to political parties.

Advocate Shadan Farasat, appearing for the CPM, said the Left party has not accepted a single rupee through bonds. He argued that the 2018 scheme fails to pass the test of arbitrariness of Article 14 because the scheme takes away non-anonymous money and puts it as anonymous money.

The counsel for the petitioners also pointed out that earlier, Section 182 of the Companies Act allowed corporates to donate up to 7.5 per cent of net profit in a financial year to a political party. Companies needed to be at least three years old to donate and had to disclose the amount and name of the party to which it was donating. These conditions that ensured transparency in corporate donations were done away with under the new law, they argued.

The Government's Stand

Defending the scheme, Solicitor General of India Tushar Mehta said it was a deliberate attempt to ensure that funding received by political parties was clean money. He said disclosing the donor's identity could disincentivise the whole process. "Suppose, as a contractor, I donate to the Congress Party. I do not want the Bharatiya Janata Party (BJP) to know because it might form a government," he said. When the court asked how this confidentiality can be reconciled with the voters' right to information, Mr Mehta had replied that voters do not vote on the basis of who is funding which party but on ideology, principles, leadership and efficiency of a party.

Countering the right to information argument, Attorney General of India R Ventakaramani had said there "can be no general right to know anything and everything without being subjected to reasonable restrictions". "Secondly, the right to know as necessary for expression can be for specific ends or purposes and not otherwise," he had said.

What Do The Numbers Say

According to Election Commission data, the BJP received more than half of all electoral bonds bought between 2018 and 2022. According to disclosures by political parties, BJP received Rs 5,270 crore out of a total of Rs 9,208 crore -- 57 per cent of total electoral bonds sold. The main opposition Congress was a distant second, receiving Rs 964 crore or 10 per cent. West Bengal's ruling Trinamool Congress got Rs 767 crore in bonds -- 8 per cent of all bonds bought.