Legality of Electoral Bonds

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To win an election the most important thing any political party needs is, money. Right from printing pamphlets to the various advertisements of the political candidates, money is something which will keep their aspirations alive in this battle. This inevitably leads to the search for donations and eventually leads to the corruption in the system. Almost three years ago, the ruling Bhartiya Janata Party introduced an Electoral Bond Scheme, apparently to get rid of the black money system. The questions which arise are; whether this scheme really is effective, and what was the purpose intended by it? The Electoral Bond Scheme has several loopholes and has been challenged by a number of political parties and even the Reserve Bank of India and the Election Commission objected to it.

Electoral bonds are promissory notes, which any Indian citizen or company incorporated in India can purchase and then donate, to any political party he wishes to support. The catch in the entire transaction is that the donor’s name will be kept anonymous to the political party. The notification notifying the Scheme was published on 2nd January 2018. It was marketed as a cash alternative that could be purchased, individually or jointly, through selected branches of the State Bank of India, which will be further issued in multiple values of only Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore. Political parties that have received at least 1 per cent of the votes in the recent parliamentary or assembly polls are entitled to collect such bonds only through a bank account with the approved bank, and they are ought to encash the bonds within the 15 days of its issue date.

When we discuss the legality of Electoral Bonds, it becomes pertinent to observe in what context we discuss it; whether it is the legality of its existence that is in question or is it their origin itself. The Vidhi Centre for Legal Policy, in its Report of March 2018 stated that, “The introduction of the electoral bond scheme is part of what appears to be a growing trend away from transparency and accountability, two values which were already sparse in relation to Indian political parties”. The way in which the electoral bonds were brought into existence was not at all democratic.

The allegations against the government is how they dismissed the recommendations of Reserve Bank of India and Election Commission, to the effect that these Electoral Bonds Scheme will lead to increased flow in black money through shell companies and will reduce the faith in bank issued currency notes. The other severe criticisms also include the Law Ministry’s assent to the Centre to pass the Electoral Bond Scheme, bypassing the Rajya Sabha, which is apparently illegal and unconstitutional on the face of it, as was also stated by Huffington Post India. This series of events also revealed that the Prime Minister’s Office put a lot of pressure and influence on the Finance Ministry to break its own rule, for the sale of bonds and accordingly the Ministry gave a green signal for the special opening of sales on two different occasions, aside from the scheduled dates. Also, few documents obtained as a reply under the Right to Information Act clearly show that the Finance Ministry had been ‘advised’ by the PMO to open a special 10-day window for issuing Electoral Bonds, to which the Finance Ministry argued that the illegal selling was a “one-off exception”. The Government has, just to fulfil its objective and to bring Electoral bonds into existence, amended the Finance Act 2017, the Income Tax Act, the Reserve Bank of India Act, and the Representation of People Act. 

There has been an ongoing conflict between the people who support this move and those who do not. Those against the Scheme have not only criticized that the identity of the purchaser of electoral bond being kept anonymous, may lead to an influx of black money; they are also asserting that the scheme is intended to help large corporate houses donate money to the political parties without their identity being exposed. The supporters of the Scheme on the other hand, defend it by arguing that the idea of electoral bonds was never to incentivise major corporate houses to make political contributions without being named, infact the Scheme was intended for the individual donor, and to keep tabs on these scrupulous donations that might have been made without any checks and balances. It is well known that funding election campaigns of political parties is not a ‘voluntary’ activity. Corporate organizations need swift decisions and government officials need to look the other way. There are scores of ‘law-breakers’ in the vast web of laws and notifications.

When this issue went to the Supreme Court to adjudicate whether the application of the Scheme should be stayed, the Court turned down the plea for issuing an interim stay. The Apex Court said that the Indian Election Commission should keep a record of the money earned by the political parties through electoral bonds and the specifics of the donation received by the political parties must be given in a sealed form. The Court also indicated that it would review in depth the amendments made to the law to bring electoral bonds into existence to ensure that the balance would not tip in favour of either faction. Although experts are divided on whether the order offers a response to the question of transparency posed by the petitioners, they agree that the interim solution should ensure that there is some transparency. It will be important to see what stance the Election Commission is going to take when the final hearings on the matter begin.

The Electoral Bond Scheme implemented by the Government has so far not produced any desirable outcome; instead, it has further obscured the mechanism of political funding and its source, which was the most fundamental bit of information that voters ought to know, compromising their free will and violating the principles of free and fair elections. Finally, this Scheme cannot be rationalized until and unless substantial reforms have been made, with the support of both the executive and the associated organisations.

Author: Aryan Raj Kashyap, NALSAR University of Law.

Editor: Astha Garg, Junior Editor, Lexlife India.