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On February 15, the Supreme Court of India struck down the electoral bond scheme, a controversial funding arrangement for political parties introduced by the Narendra Modi government in 2017. In its 232-page judgment, a five-judge bench headed by Chief Justice DY Chandrachud announced the scheme. It was ruled “unconstitutional” because it legalized anonymous donations to political parties.
Thursday’s decision is a big blow to the ruling Bharatiya Janata Party (BJP). The party receives more than half of its funding through electoral bonds, making it India’s richest party.
This is the first time that Modi has emerged as an active promoter of political corruption. This decision is an opportunity for Congress party leader Rahul Gandhi, who has been continuously accusing the Modi government of nexus with big businessmen.
Incidentally, within a day of the decision, the Congress party learned that its bank accounts had been frozen. Party Treasurer Ajay Maken said that the Income Tax Department has frozen the accounts of both Congress and Youth Congress. “Democracy has frozen,” he said.
“The unconstitutional money collected by BJP will be used by them for elections, but the money collected by us through crowdfunding will be sealed!” Congress President Mallikarjun Kharge observed. According to the latest reports, in an interim relief for the party, he has been allowed to access his frozen accounts.
The Supreme Court’s decision comes a few months before general election voting in India. It remains to be seen what and how it will impact the upcoming elections.
Apart from quashing the electoral bond scheme, the top court has also directed government-affiliated State Bank of India (SBI), the bank named in the scheme, to disclose within three weeks the names of all donors since April 2019. The government has consistently supported this opaque scheme on the argument that it protects donors’ privacy.
Expectedly, opposition parties lauded the court’s decision, with Gandhi accusing the “corrupt Modi government” of making electoral bonds a “medium of taking bribes and commissions”. The Congress had repeatedly accused the Modi government of “undermining democracy” and disrupting the level playing field of electoral politics through the scheme.
In an earlier article in The Diplomat, I highlighted that the electoral bond scheme was legally bad and should be scrapped. Contrary to the government’s claims of calling it a “major electoral reform” that will bring “transparency” and replace dubious cash donations for political funding, the plan is actually shrouded in secrecy.
Since its launch in 2017, there have been 30 rounds of electoral bond sales, the latest of which took place on January 2 this year. The bonds were usually sold at specified times of the year, often before elections to state legislatures and Parliament.
Electoral bonds are like promissory notes. They were issued by select branches of SBI, and could be purchased by individuals or corporate organizations. Political parties, who received these bonds, could later encash them through a bank account within a stipulated period. It is noteworthy that the name and details of the donor were not disclosed on the bond.
This opened the way for someone with a verified bank account to purchase an electoral bond and then transfer it to an “anonymous” donor.
The Supreme Court struck down the bond scheme because the secrecy inherent in it violated the citizen’s right to know. It states that information about parties’ funding is essential for voters to make informed decisions. The court said that the citizen’s right to information is paramount and it supersedes the right to privacy of the corporate entity (donors).
The court’s decision has been welcomed by Right to Information (RTI) activists. Since 2014, when it came to power, the Modi-led BJP government has consistently worked towards weakening the rights-based law, RTI. The RTI law provides citizens with the right to seek information and accountability from officials.
The apex court’s landmark judgment had come in 2018 on petitions filed by four organisations, including the Association for Democratic Reforms (ADR) and non-profit Common Cause. The petitioners had alleged that the scheme opens “floodgates” to legitimize political corruption on a large scale.
ADR urged the court to stay the sale of electoral bonds on the eve of the 2019 general elections and again before the state assembly elections in 2021, but the court refused. After hearing the case for three days, it finally reserved its decision in November last year.
Reacting to Thursday’s decision, ADR’s Jagdeep Chhokar told The Diplomat that although he was “surprised” at the electoral bond decision, it would “help restore the faith of the Indian people in democracy, the rule of law and the Supreme Court.” will gain help in.” ,
In fact, the “historic” decision of the Supreme Court has surprised many people as in many recent decisions of the apex court it has been seen toeing the government’s line.
According to many observers, the court’s long delay in deciding the case not only facilitated but also promoted this opaque means of political financing and created an unfair playing field. According to available data, between 2017 and 2022, the BJP raised $623 million or 52 per cent of its total funding through electoral bonds. Meanwhile, all other parties received only $213 million in total. Therefore, BJP received three times more money than all the seven parties.
Incidentally, the Communist Party of India-Marxist (CPM) was the only party that refused to accept electoral bonds.
Importantly, the Modi government had strongly defended the electoral bond scheme and clearly stated that citizens do not have the right to know the source of political funds. In fact, in a written affidavit, Attorney General R. Venkataramani said that citizens do not have a general right to know “anything and everything”. He had claimed that secrecy was built into the scheme to protect the donors so that their identities are not exposed to all political parties.
This is exactly the provision of anonymity which has now been struck down by the Supreme Court. It states that financial contributions to political parties may lead to retaliation, which may be in the form of policy changes or granting of licenses. Recognizing the close relationship between money and politics, the court said, this important information about political funding will enable the voter to assess whether there is a connection between policymaking and financial contributions.
The court rejected the government’s argument that the bonds prevent the flow of black money into politics. Rather the court said that legal means of fund transfer like checks and drafts existed and electoral bonds were introduced only to ensure “anonymity” of the donor. Furthermore, it drew attention to “selective anonymity” in the form of SBI. Is under the government and has access to all the information of the government.
It is noteworthy that the court has struck down amendments to several laws brought by the Modi government to legalize financing through electoral bonds. These include the Companies Act 2013, Income Tax Act 1961, Foreign Contribution Regulation Act 2010 (FCRA), and the Representation of the People Act 1951. These changes exempted corporations and companies from disclosing political donations in their profit and loss accounts. It also enabled foreign companies with subsidiaries in India to finance political parties.
Restoring the original provisions in these Acts, the court said political parties will now have to inform the Election Commission about contributions exceeding 20,000 Indian rupees ($249). Also, political parties will once again be required to maintain records of donations received through electoral bonds.
Business entities also have to follow certain restrictions. They can donate only 7.5 percent of their average net profit in the last three financial years. It prohibits unlimited funding and funding for political gains by loss-making corporate houses.
After strong opposition from the opposition, the BJP government banned these amendments by calling them money bills or finance bills. Since the government did not have majority in the upper house of Parliament, it got these bills passed in the lower house, which has the exclusive right to pass finance bills.
The change in the Election Commission’s stance on the electoral bond scheme was particularly disturbing. It initially called it “opaque” and raised fears that the bonds could be misused by shell companies. In the past year, it reversed its stance of supporting the plan. It is noteworthy that the Election Commission is silent after the historic decision by the Supreme Court.
Former Reserve Bank of India Governor Urjit Patel had formally expressed his objection to the electoral bond scheme and warned that it could be misused for money laundering. The Modi government rejected his objections.
The BJP’s response to the court’s adverse decision has been very slow. Senior leader Ravi Shankar Prasad said that the bond is a serious effort to make elections transparent.
The reaction from opposition parties has been one of cautious enthusiasm. Over the past decade, the government has made a habit of overturning adverse decisions through executive ordinances.
