On February 15, 2024, a five-judge Constitution bench of the Supreme Court (SC), headed by the CJI declared the Modi government’s 2018 Electoral Bond Scheme (EBS) as unconstitutional. The four major considerations behind this order are:-
The scheme legitimizes the use of black money in political funding; it lacks transparency and keeps identity of the donor anonymous thereby violating the constitutional right to freedom of speech and right to information (Article 19(1)(a)); it gives rise to ‘quid pro quo’ – a legal jargon for a person in the position of power granting favor in exchange for bribe; it denies equality of opportunity to the voters to exercise their freedom to vote in an effective manner (Article 14).
The EBS was announced by the then Finance Minister, Arun Jaitely in the Union Budget for 2017-18 presented on February 1, 2017. It was approved on March 31, 2017 as part of the finance bill and implemented from January 2, 2018.
The electoral bond is a bearer instrument in the nature of a Promissory Note that is payable to the bearer on demand and is interest-free. The bond can be purchased by any citizen of India – singly or along with other individuals – or a body incorporated in India. The instrument is issued in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore and its sale is opened once in every quarter for 10 days, and for a month ahead of general elections or as notified by the government. They are valid for only 15 days.
To purchase the instrument, the donor has to submit the Electoral Bond Application (EBA) Form along with the deposit slip, citizenship and KYC documents and cheque or demand draft at any authorized State Bank of India (SBI) Branch. The instrument can also be bought online through NEFT/RTGS visiting the SBI website.
The donor can give the bond to a party of his choice. Only registered political parties that secured at least 1 percent of the votes polled in the last general elections are eligible to receive this instrument. The bond can be en-cashed by eligible parties only through bank accounts in the SBI. The withdrawals from the account are used for meeting their election expenses. All parties are required to maintain accounts of receipts and expenditure and submit them to the EC.
Now, the argument that EBS legitimizes the use of black cash is untenable. This is because a person or an entity keen to buy bonds can pay for it only by cheque or electronic transfer, implying that the amount used for the purpose has an address. It is visible to the authorities who can ask, if need be, further questions on its source and ascertain whether tax has been paid on it. When the donation is made from a known source of income through banking channels and the money is fully accounted for and legitimate, the question of legitimizing it (allegedly through EBS) does not arise.
The second argument on the Scheme lacking transparency and keeping identity of the donor anonymous too is without any valid basis. The authorized bank from where the donor purchased the bonds has all the particulars viz. citizenship, KYC of the latter. Though the information is not in the public domain, this can always be accessed, if need be, by authorized agencies viz. Income Tax Department, Central Bureau of Investigation (CBI), Enforcement Directorate (ED) and so on, in criminal cases under directions of the court.
The issue of anonymity had also cropped up in 2017 also. In a letter dated September 14, 2017 addressed to Arun Jaitley, then Governor, Reserve Bank of India (RBI), Urjit Patel had insisted on issuing bonds in “Demat” form only and the RBI to be the only issuing authority whereas, the Ministry of Finance (MoF) wanted these to be in physical form and issued by the SBI as well. The RBI also wanted a unique identifier and an additional security feature-based ID to be incorporated in the bond.
Issuing a bond in Demat form ensures that the information on the buyer/donor is indestructible, unlike a physical document which can be destroyed. Besides, making RBI the issuing authority would ensure that the Government of the day won’t enjoy the sole discretion regarding its use. Undoubtedly, Patel’s proposal was better. However, just because a better option was on the table, it can’t be inferred that the EBS in any way compromised on the fundamental requirement of knowing the identity of the donor.
The SC insists that the information should be in public domain so that every voter can take informed decisions under a level playing field. A voter’s exercise of her vote in a particular way depends on a host of factors including the candidate, policies and programs of the party she belongs to and so on. Who gives how much donation to a party? How is this relevant to arriving at a decision? The court is trying to see a connection which doesn’t exist.
A third argument advanced by the SC for striking down EBS is that the contribution is based on a “quid pro quo”. Its reasoning is: while, making contribution to a political party, the company expects that on getting elected, the party will oblige it by way of favorable policies or giving preferential treatment in award of contract and so on. But, there is a catch. The deal will get consummated only if the party receiving the contribution wins. But, that is not known at the time, when the company gave the money.
The “quid pro quo” arrangement holds only in a situation where a company gives bribe to a party already in power in exchange for a favor to give a boost to its business; for instance, the liquor scam in Delhi. It can’t be applied to contribution made by donors for the purpose of funding elections. It should only be taken in the nature of ‘expression of support’ to the political party.
As for the equality of opportunity to the voters, the SC has argued that unlimited corporate funding to political parties (enabled by amendment to the Companies Act in 2017) confers an unfair advantage to companies vis-à-vis another section of the population: a student, a daily wage worker, an artist, or a teacher who can only make small contribution. The comparison here is not on all fours.
A company is a composite entity representing a large number of shareholders. For a conglomerate like Reliance Industries Limited (RIL), the shareholders run into crores. Even if such a company contributes say Rs 1000 crore, on per person basis, the contribution will translate to a small amount comparable to what an individual does. It would be wrong to argue that there isn’t a level playing field.
In view of the above, there was no valid reason to doubt the credibility of EBS. It helped in increasing the role of “legitimate” sources in funding elections even as authorities know who such donors are. Yet, with the striking down of the Scheme, it is back to business as usual as was happening prior to 2018; then, there was widespread use of black or unaccounted money and complete lack of transparency in the process of funding elections.