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Business News/ News / India/  Axe falls on electoral bonds; disclosures coming soon amendments as unconstitutional
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Axe falls on electoral bonds; disclosures coming soon amendments as unconstitutional

It directed the State Bank of India to stop issuing electoral bonds and submit details of all such bonds purchased since the court’s interim order of 12 April 2019 to the Election Commission of India by 6 March.

Electoral bonds that are within the validity period of 15 days but have not yet been encashed by political parties must be returned to the purchaser, the court said. Photo: ANIPremium
Electoral bonds that are within the validity period of 15 days but have not yet been encashed by political parties must be returned to the purchaser, the court said. Photo: ANI

New Delhi: The Supreme Court (SC) on Thursday brought the axe down on the electoral bonds scheme and ordered publication of its transaction details, ending the controversial model touted as a way to clean up campaign finance but criticized for its secrecy.

In a unanimous judgement, a constitution bench headed by Chief Justice D.Y. Chandrachud said amendments made to laws governing elections, taxation and corporate donations to facilitate the rollout of the scheme were unconstitutional and violated citizens’ right to information.

The apex court directed State Bank of India (SBI), the sole issuer of electoral bonds, to stop it immediately, and asked the bank to submit names of bond buyers, the dates of purchase and amounts donated to the Election Commission (EC) by 6 March; the EC must publish these on its website by 13 March.

Introduced in the 2017 Union budget, the scheme allows citizens and local companies to purchase these bonds to donate any amount to political parties of their choice. Like other bearer instruments, it does not carry the name of the buyer or payee, no ownership information is recorded, and its holder is presumed to be its owner. While the government has claimed that such anonymity is critical to prevent retribution to donors, critics have called it a violation of citizens’ right to know who is funding whom.

The judgement may have significant implications on campaign finance, particularly in light of the forthcoming general election, likely to be announced in the second week of March.

“This will restore people’s faith in democracy," S.Y. Quraishi, a former chief election commissioner, told PTI. “This is the greatest thing that could have happened. This is the most historic judgement that we have got from the Supreme Court in the last five-seven years. It is a great boon for democracy."

The total amount generated through electoral bonds between March 2018 and January 2024 stood at 16,518.11 crore, according to the Association for Democratic Reforms (ADR), one of the petitioners in the case. Official data for FY24 will be available only after parties file annual audit reports for the year.

Also Read: What a Nobel laureate can teach us about the economics of electoral bonds

Opposition parties, which were vocal critics of the scheme since its inception, welcomed the judgement. In a post on X, Congress party leader and former finance minister P. Chidambaram said, “The right of the people to know has been placed above all clever legal arguments marshalled to defend the illegal electoral bonds scheme," terming it a great victory for transparency, the right to know and a level playing field in elections.

The Aam Aadmi Party called it an important step in ensuring transparency in election funding. “It is important for the country’s democracy that it is known which person is giving how much money to which political party," Delhi cabinet minister Atishi said.

Meanwhile, the ruling Bharatiya Janata Party (BJP), the biggest beneficiary of the scheme, sought to downplay the verdict, saying every decision of the apex court should be respected. The BJP received 6,566.13 crore between 2017-18 and 2022-23, according to the data provided in the SC order. Spokesperson Nalin Kohli said the Opposition is politicizing the issue as it does not have any alternative to Prime Minister Narendra Modi’s leadership and the positive work done by his government.

The five-judge constitution bench that delivered the judgement included Chief Justice Chandrachud and justices J.B. Pardiwala, Sanjiv Khanna, Manoj Mishra and B.R. Gavai. Justice Khanna provided a separate opinion, but with a similar conclusion.

The court also said electoral bonds not yet encashed within the validity period of 15 days must be returned by political parties. The issuing bank will then refund the amount to the purchaser’s account. The EC must publish all these details on its website by 31 March.

The scheme is not the only means to curb black money, and there are alternative methods, the court said. It found amendments to certain sections of the Representation of the People Act, the Companies Act and the Income Tax Act violative of the right to information under Article 19(1)(a) of the Constitution.

“There is also a legitimate possibility that financial contributions to a political party would lead to quid pro quo arrangements because of the close nexus between money and politics. The electoral bond scheme and the impugned provisions to the extent that they infringe upon the right to information of the voter by anonymizing contributions through electoral bonds are violative of Article 19(1)(a)," said Chief Justice Chandrachud.

“By prohibiting contributions from loss-making companies, the ruling aims to mitigate the risk of undue influence or corruption in the political process," said Rohit Jain, managing partner at Singhania & Co. Jain said parties can, however, continue to receive contributions from corporations within the confines of regulations governing corporate donations to political entities, often involving corporate social responsibility funds or philanthropic initiatives.

On how the government could respond, Shreyshth Sharma, partner, SKV Law Offices, said, “The government has several avenues for legal redressal and strategies it might employ in response to the Supreme Court’s decision. Routing it through Parliament to make the verdict redundant is not going to cut ice. The government could challenge the judgement with a review petition or subsequently even through a curative petition. Introducing a new law, as the current government has done in the past, could be an option, providing it respects the principles of judicial independence and the separation of powers."

Soon after its launch, the electoral bond scheme faced challenges in the SC from various parties and organizations, including ADR and the Communist Party of India (Marxist). Petitioners argued that the amendments allowed unlimited, unchecked funding for political parties, with a bias toward the ruling party. They raised concerns about corporate dominance in political financing and the anonymity of donors, which hindered transparency efforts and posed corruption risks.

Legal experts said the order would not have any impact on bonds encashed earlier.

“This means there are no direct legal consequences for any political party regarding already cashed electoral bonds. However, valid electoral bonds (issued within 15 days), which have not been encashed, must be promptly returned by all political parties, with the bond amount refunded to the purchaser’s account," said Sanjeev Kumar, a partner at Luthra and Luthra Law Offices India.

Kumar further noted that the judgement does not bar political funding, but has only removed the anonymity features of the electoral bond scheme. Political parties will still be allowed to receive direct funds subject to the provisions of various legal acts and laws.

With inputs from PTI.

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ABOUT THE AUTHOR
Krishna Yadav
Krishna, a lawyer turned journalist, is a key member of Mint's corporate team. He covers major legal battles in Delhi's courtrooms, with a focus on finance, markets, and policy. Additionally, he crafts easy-to-understand explainers for complex stories and holds a PG Diploma from the renowned Asian College of Journalism.
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Published: 15 Feb 2024, 12:49 PM IST
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