What is the Electoral Bond Scheme that the Supreme Court has struck down? Who is the most financially supported? and issues clarified

The Electoral Bond Scheme, which permitted political parties to receive anonymous money, was abandoned by the Supreme Court on February 15.

The ruling was delivered by Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra, together with the five-judge CJI DY Chandrachud of the Supreme Court.

The Supreme Court declared that the Scheme might result in quid pro quo and breaches the right to information (RTI). “There are other ways to combat dark money than the electoral bonds program. Other options exist,” the Supreme Court said.

On November 2 of last year, the Chief Justice DY Chandrachud-led Constitution bench had set aside a ruling. The Supreme Court emphasized the need to lessen the monetary component of the election process in April 2019 when it rejected to halt the electoral bonds program.

On October 31 of last year, the Constitution bench—which consists of Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra—started hearing arguments on the case.

What is the Scheme for Electoral Bonds?
In the 2017 Union Budget, electoral bonds were established as a means of improving political financial transparency. The lack of transparency and anonymity of donors raised concerns. The obligatory disclosure remained at ₹20,000, while the monetary contribution cap was lowered from ₹20,000 to ₹2,000. These bonds may be purchased by private companies and given to political parties.

On January 2, 2018, the government announced it and offered it as a substitute for monetary contributions given to political parties in their capacity as parties. Essentially, electoral bonds are financial instruments that individuals or businesses may purchase from a bank and donate to a political party, which can then be exchanged them for cash.

To be eligible to obtain electoral bonds, political parties must be registered under Section 29A of the Representation of the People Act, 1951, and must have received at least one percent of the votes in the most recent general election for the Lok Sabha or state legislative assembly.

The announcement states that the only way for qualified political parties to cash electoral bonds is via accounts with approved banks.

“The purchaser would be allowed to buy an electoral bond(s) only on due fulfillment of all extant KYC norms and by making payment from a bank account,” said the Ministry of Finance. It won’t have the payee’s name on it. Electoral Bonds would only be valid for donations to political parties registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951), and which received a minimum of 1% of the total votes cast in the most recent general election for the House of the People or a Legislative Assembly. The bonds would have a 15-day expiration period.”

The corporate contribution ceiling and disclosure requirements were eliminated via amendments. These are promissory notes that are only offered by the State Bank of India, with values ranging from ₹1,000 to ₹1 crore. The bank is the sole entity that knows the identity of the donors. Political parties with bank accounts registered with the Election Commission are able to cash bonds. By modifying different laws to promote accountability and openness in political fundraising, the goal is to increase transparency in this area and stop financial abuse.

a number of changes made to a number of laws in an effort to improve accountability and transparency in political fundraising, such as the Companies Act, the Representation of the People Act, the Income Tax Act, and the Foreign Contribution Regulation Act.

Political Financing: Electoral Bond Contributions Predominate for the BJP
The Bharatiya Janata Party (BJP) reported to the Election Commission that it received around ₹1,300 crore in electoral bonds in 2022–2023; this information is based on their annual audited report. In the fiscal year 2022–2023, the party received donations of ₹2,120 crore, of which 61% originated from electoral bonds.

The Congress received ₹171 crore in financing from electoral bonds in 2022–2023 as opposed to ₹236 crore in 2021–2022.

The Government’s Supreme Court Affidavit
On October 29, the central government responded to appeals against the electoral bonds program in an affidavit. According to Attorney universal R Venkataramani, “citizens do not possess a general right to know the sources of electoral bonds.”

Venkataramani stressed that the “right to know” need to be subject to appropriate limitations and used only for such reasons. Concerning the wide reach of a “general right to know everything for undefined ends,” the government argued against it.

Issues Developed by Institutions and Opposition
The Association for Democratic Reforms (ADR) launched the electoral bonds lawsuit in 2017 and has since received many petitions from the Communist Party of India (Marxist), Congressman Jaya Thakur, and other concerned parties. It casts doubt on the legality of changes made to the Finance Acts of 2016 and 2017.

The petitioners contend that these modifications permit political parties to receive unrestricted, limitless money that is skewed toward the current administration. Concerns about corporate control over individual contributors are stoked by electoral bonds, which are often issued in large denominations. Moreover, the anonymity of donors adds to the mistrust. There are problems with transparency since money sent to political parties makes it difficult to trace corporate donations, violating people’ right to information and raising the possibility of corruption. These problems are made worse by recent amendments to the Companies Act.

On October 10, 2023, Prashant Bhushan, speaking on behalf of the non-governmental Association for Democratic Reforms (ADR), said that prior to using the electoral bond plan in the general elections of 2024, adjudication is required. He said that electoral bonds’ anonymous financing promotes corruption and infringes on individuals’ rights to live in a country free from corruption.

Regarding political finance, the government and the Election Commission took opposing positions in court. The EC promoted openness by disclosing donor names, whereas the government sought to preserve donor anonymity. On October 31, the Supreme Court is scheduled to start considering the group of pleadings.

Furthermore, information from an RTI submitted by activist Lokesh Batra revealed that the Election Commission, which is in charge of supervising elections, was not consulted when the Ministry of Finance made modifications to the plan. The Election Commission never provided its approval, just being “informed” of the modifications. There was unhappiness as a result of the Election Commission’s last-minute communication about the issuing of electoral bonds in December 2022.

The Reserve Bank of India (RBI) has also voiced disapproval of the plan in a number of areas, raising issues such as money laundering. Urjit R. Patel, the governor of the RBI at the time, had alerted the government about the possible abuse of electoral bonds, but they disregarded his warning. The government opposed RBI’s proposal that it should be the scheme executor rather than a commercial bank and that it should issue physical bonds. Concerns about accountability and transparency in the electoral bonds program have been brought up by the absence of interaction with these important organizations.