How Long to Adjudicate? Unpacking the Controversial Electoral Bonds Scheme.

Political finance in India has long been the breeding ground for corruption, with the costs of elections spiralling ever higher and those in power honing their skills in manipulating the law and policy mechanisms at their disposal. One such attempt is the Electoral bonds scheme implemented in the quest to replenish the coffers of political parties for election campaign expenditures[1]. What was introduced in the name of transparency in 2017 has only amplified opacity. Here are how the lawmakers and the courts are ensuring that the grim reality of political funding remains shrouded from the public gaze and discourse.

The Genesis:

In contemporary politics, the coin of the realm is no longer the collective voice of the electorate, but rather the currency of cold, hard cash. This unsettling trend has led to a twofold problem – institutionalized corruption and political inequality. However, in 2017, the Union Government took a step towards combating this issue by introducing the Electoral Bonds Scheme (EBs) as a means of promoting transparency and accountability in political financing. Through this scheme, Indian citizens and incorporated companies could purchase a bond, issued by the State Bank of India, and donate it to political parties while maintaining their anonymity. The bearer instrument, with limited period validity, ensured the use of banking channels while shielding the identity of the donor from the public, the Election Commission(EC), and Income Tax Department (IT)[2].

Thrusting aside the opinion of RBI and EC: Before the forthcoming presentation of the EBs in the Parliament, the opinion of the Reserve Bank of India was solicited, which opposed the scheme by enlisting four compelling reasons. The very crux of such opposition was that the introduction of a new mechanism in the form of bearer bonds was superfluous, given that the extant banking instruments such as cheques, drafts, and digital modes can efficaciously accomplish the same. The RBI raised apprehensions regarding the possible misuse of these bearer bonds for purposes such as money laundering, as well as the potential to undermine the authority of the banknotes issued by the central bank. Additionally, the objective of transparency would not be attained since the purchaser of the bond need not necessarily be the contributor, as the bonds in question can be transferred to various hands before it is donated[3]. The Union Government instead of presenting counterarguments to address the concerns regarding Section 31 of the RBI Act, 1934, simply noted that the RBI had not understood the proposed mechanism and the advice had come quite late after the Finance Bill had already been printed.

Bypassing Rajya Sabha: The NDA government’s decision to hastily pass the controversial EBs impacting the dynamics of political funding in the form of a Money Bill under Article 110 which the Rajya Sabha has no power to reject or amend is an assault on the spirit of the Constitution[4]. Even when the advice of the Law ministry was sought, it remarked that EBs cannot, in a strict sense, be called a money bill. The passing of a financial bill claiming it to be a money bill is not just a matter of procedural irregularity where the Speaker of Lok Sabha can exercise his discretion certifying, but a matter of substantive illegality on which the judicial review must apply[5].

Political Parties not under RTI: Two amendments were brought in which violate citizens’ right to information about the political parties and their candidates thereby infringing upon the right to make a fairly-informed decision in the electoral process. One such amendment was to Section 29C of the Representation of The Peoples Act 1951, whereby political parties were exempted from sharing details of contributions received through electoral bonds with the ECI. The ECI has described this as a “retrograde step as far as transparency of donations is concerned” and called for its withdrawal[6]. Another amendment was to Section 182 of the Companies Act, 2013 which exempted companies from declaring their contributions to political parties but also removed the cap on corporate donations under which a company could not contribute more than 7.5% of its net profits for the previous three years. The ECI has opined that this opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties[7].

Further, in 2021, a single-member bench of the Central Information Commission (CIC) in reply to information about the electoral bonds encashed by various political parties decided that political parties were not covered within the definition of ‘public authority under provisions of section 2 (h) of the RTI Act. But when we look back at the CIC records, in 2013, the full bench including the Chief Information Commissioner, pointed to the public nature of political parties as they have been substantially financed by the Central Government and the role played by these political parties in our democratic setup and the nature of duties performed indicate their public character, bringing them in the ambit of section 2(h). But since this order was not complied with by the political parties and the Commission was bereft of the tools to get its orders complied with, the matter was appealed in the SC and is pending since 2015. Hence, without transparency in party activities, the EB scheme would not meet its objective as nothing would stop parties from collecting black money for election spending apart from those funds received through EBs.

The burden on the Taxpayer: It is a fact that the cost of administering Electoral Bonds such as banking fees, commissions, printing costs, and other charges are not inconsequential. When the Finance Ministry turned to SBI for managing this scheme, this point was brought up and the idea that donors donating should pay the fee was dropped. Further, the fact that the government wanted to keep this information restricted is evident, as a meeting involving the Finance Ministry [8], the Ministry of Law and Justice, and SBI’s law officers concluded that the official rules would not state that the government would use the Consolidated Fund of India to pay SBI’s banking commissions. Instead, this detail would be conveyed through administrative orders, which are typically not accessible to the public. It should be noted that the total amount collected through EBs has gone up to Rs 10,791 crores in 22 phases since its inception [9] and the brunt borne by the taxpayers is over ₹7.63 crores for the sale of Electoral Bonds [10]. Rubbing salt in the wound, an amendment to Section 13A of the Income Tax Act, 1961 exempted the contributions received by political parties through electoral bonds from being taxed.

SBI the ‘Weakling’: The design of the EBs imposes an uneven burden on institutions like the SBI, which are expected to remain impartial implementers, but in reality, they would succumb to political pressures. In November 2019, reports revealed how a secret number on each electoral bond [11] allows SBI to trace every transaction from the beginning to the end, which is contrary to the claim of donor anonymity, and how Government has also made SBI accept expired electoral bonds worth Rs 20 crores sold in the illegal window [12].

The Supreme Court’s Abdication: The Petitioners, Association for Democratic Reforms,[13] and CPI[14] have challenged the amendments made through financial bills, 2017-18 in the SC and it has been more than 5 years that this issue is pending before the Hon’ble SC considering the brief timeline mentioned below: On March 1, 2018, The 2016 and 2018 retrospective amendments have been challenged (vide W.P. (C) No. 434/2018) before the SC by ADR, On July 2, 2018, notice was issued and it was tagged with another case filed by ADR which is already pending since 2015 (WP (C) No. 333/2015), which seeks applicability of the Right to Information Act on political parties[15]

The 2016 amendment has already been challenged (WP (C) No. 880/2017), wherein notice was issued on 3 October 2017. The last order in these matters is dated 26 March 2021 (refusing to stay the electoral bond scheme)[16], whereas an order dated 12 April 2019, directed all political parties who had received donations through electoral bonds to submit the details of the receipts to the Election Commission of India[17]. The SC declined to stay the Centre’s Electoral Bond Scheme as it considered it a “weighty issue” having “tremendous bearing on the sanctity of the electoral process in the country” and would consider it only after an in-depth hearing[18].

Recently, the SC bifurcated the batch of petitions concerning the Electoral Bonds scheme into three sets, i.e., the challenge to EBs; the Issue of Political Parties under RTI; the challenge to the amendment to the Foreign Contribution Regulation Act, 2010,[19] and decided to hear them separately. Now the Constitutionality of the EBs is pending before a two-judge bench of the SC, which last heard the matter on 31 January 2023[20]. Again the issue that whether this should be referred to a constitutional bench has come up before the court and is listed on 11 April 2023[21].

Sealed Covered Jurisprudence: To the astonishment of many, the SC has called upon all political factions that have received donations from EBs to disclose information regarding their contributions in a ‘sealed cover’. The Reporters’ Collective has since delved into this matter and brought to light that a meagre number of 15 regional parties have received donations via these bonds, thereby raising concerns of potential financial scarcity. Unsurprisingly, the ruling party has emerged as the frontrunner with a commanding 67.9% share amounting to Rs 4,215.89 crores from 2017-18 to 2019-20. [22] It has been over 2 years since the sealed envelopes were presented to the SC, with no official revelations made thus far. This lack of disclosure could be indicative of either the legitimacy of the transactions or the court has yet to open the sealed envelopes.

To call a nation a Democracy doesn’t just simply mean equality of vote to everyone (even though it is greatly valued); what matters is Free and Fair elections implying elections which are transparent, inclusive, and accountable, and provide equitable opportunities to compete. The EBs despite its institutional framework aimed at regulating campaign finance, is replete with various inadequacies and vulnerabilities, which is the antithesis of the object with which it was implemented. Those with law-making power are busy enriching their campaign needs through EBs, on the other hand, the courts where the last ray of hope resides, committing inordinate delay in such a profuse constitutional issue which affects the basic structure, i.e., free and fair election, compels us to conclude that the role of the Supreme Court as a Sentinel on the Qui Vive is fading.

[The above-mentioned views are personal]

The author is an LLM. Candidate at

The National Law School, Bengaluru.

He can be reached at sai.pavan@nls.ac.in

[1] See Generally Niranjan Sahoo, ‘Decoding India’s electoral bonds scheme’, (ORF, 30 Novemeber 2019) <https://www.orfonline.org/expert-speak/decoding-indias-electoral-bonds-scheme-58260/> accessed 23 March 2023.

[2] See Generally Vasudev Devadasan, ‘Financing the General Elections: Electoral Bonds and Disclosure Requirements under the Constitution’, (Indian Constitutional law and Philosophy, 19 April 2019), <https://indconlawphil.wordpress.com/tag/electoral-bonds/> accessed 23 March 2023.

[3] Nitin Sethi, ‘Electoral Bonds: Seeking Secretive Funds, Modi Govt Overruled RBI’, (Huffpost, 17 November 2019), <https://www.huffpost.com/archive/in/entry/rbi-warned-electoral-bonds-arun-jaitley-black-money-modi-government> accessed 24 March 2023.

[4] Under Indian constitutional scheme, for a bill to be enacted into a law, it has to be approved by both Houses of the Parliament, i.e., the Lower House and the Upper House (Rajya Sabha). There is one exception to this general rule. A bill certified as a ‘money bill’ by the Speaker of the Lower House can be enacted into a law by the Lower House alone, without any approval from the Upper House.

[5] See Raja Ram Pal v Hon’ble Speaker, Lok Sabha (2007) 3 SCC 184; Also see Pratik Datta, Shefali Malhotra and Shivangi Tyagi, ‘Judicial Review and Money Bills’, (2017) 10 NUJS L Rev 217.

[6] Akarshita Dhawan and Himaja Bhatt, ‘RTI On Political Parties – Towards A More Democratic Democracy’ [2014] 3(1) NUJ 18.

[7]Jagdeep S. Chhokar, ‘Saying ‘Political Parties Need Not Reveal Funding Sources’ Kills the Spirit of RTI Act’ (The Wire, 25 December 2021), <https://thewire.in/rights/political-parties-public-interest-means-reversing-gains-made-rti-act> accessed 23 March 2023. See generally ADR’s report: ‘Political Party under RTI’<https://adrindia.org/sites/default/files/Political%20Parties%20under%20RTI%20Act.pdf> accessed 24 March 2023.

[8] Nithi Sethi, ‘Billionaires Buy Electoral Bonds, Netas Get Funds, Taxpayers Pay Bank Charges’, (HuffPost, 29 January 2020), <https://www.huffpost.com/archive/in/entry/electoral-bonds-taxes-used-for-sbi-bank-charges> accessed 23 March 2023. (Also read the Huffpost’s 6 Part series on Electoral Bonds.)

[9] George Mathew, ‘Electoral Bonds: Govt pays Rs 9.53 crore as SBI commission, printing costs’, (Indian express, 7 December 2022), <https://indianexpress.com/article/cities/mumbai/electoral-bonds-govt-pays-rs-9-53-crore-as-sbi-commission-printing-costs-8293384/> accessed 25 March 2023.

[10] The Hindu Bureau, ‘Electoral Bonds of over ₹10,700 crore purchased since 2018, says activist’, (The Hindu, 27 November 2022), <https://www.thehindu.com/news/national/electoral-bonds-of-over-10700-crore-purchased-since-2018-says-activist/article66188126.ece> accessed 25 March 2023.

[11]Nithi Sethi, ‘SBI Lied In RTI Replies On Electoral Bonds’, (Huffpost, 28 January 2020), <https://www.huffpost.com/archive/in/entry/state-bank-of-india-rti-electoral-bonds> accessed 25 March 2023.

[12]ADR’s report: ‘Electoral Bonds and Opacity in Political Funding’, (6 January 2023) <https://adrindia.org/sites/default/files/Background_Note_Electoral_Bonds_Nov_2022.pdf> accessed 25 March 2023

[13]Association for Democratic Reforms v UOI W.P.(C) 880 of 2017. <https://www.scobserver.in/wp-content/uploads/2021/10/Electoral-Bonds-Writ-Petition-by-Association-for-Democratic-Reforms-ADR.pdf> accessed 28 March 2023.

[14] CPI’s Petition Link <https://www.scobserver.in/wp-content/uploads/2021/10/ElectoralBonds-CPI_M_Writ_Petition.pdf> accessed 28 March 2023.

[15] K Raveendran, ‘Supreme Court again abdicates responsibility by refusing to act against electoral bonds’ (Leaflet, 2 April 2021) < https://theleaflet.in/supreme-court-again-abdicates-responsibility-by-refusing-to-act-against-electoral-bonds/> accessed 29 March 2023.

[16] ‘Supreme Court’s Refusal To Stay Electoral Bonds Undermines Transparency In Electoral Process’, (Livelaw, 27 March 2021)< https://www.livelaw.in/columns/supreme-courts-refusal-to-stay-electoral-bonds-undermines-transparency-in-electoral-process-171836> accessed 29 March 2023.

[17] Mehal Jain, ‘SC Directs Political Parties to Submits The Details Of All Donations Received Through Electoral Bonds To Election Commission By May 30, (Livelaw, 12 April 2019)

<https://www.livelaw.in/top-stories/sc-electoral-bonds-orders-144225> accessed 25 March 2023.

[18] MD Tasnimul Hassan, ‘Why the inordinate delay in SC’s hearing of FCRA and electoral bonds cases is of concern’ (Leaflet, 15 February 2022) https://theleaflet.in/why-the-inordinate-delay-in-scs-hearing-of-fcra-and-electoral-bonds-cases-is-of-concern/accessed 29 March 2023.

[19] Padmakshi Sharma, ‘Supreme Court Bifurcates Petitions In Three Sets, Decides To Hear Each Set Separately’, (Livelaw, 31 January 2023) <https://www.livelaw.in/top-stories/electoral-bonds-case-supreme-court-bifurcates-petitions-in-three-sets-decides-to-hear-each-set-separately-220304?infinitescroll=1> accessed on 24 March 2023.

[20] WP (C) 333/2015; <https://www.scobserver.in/cases/association-for-democratic-reforms-electoral-bonds-case-background/> accessed 28 March 2023.

[21] Padmakshi Sharma, ‘Supreme Court To Consider If Electoral Bonds Case Should Be Referred To Constitution Bench’, (Livelaw, 21 March 2023)<https://www.livelaw.in/top-stories/supreme-court-to-consider-if-electoral-bonds-case-should-be-referred-to-constitution-bench-224341> accessed 27 March 2023.

[22] Shreegireesh Jalihal, Poonam Agarwal & Somesh Jha ‘Debunking a ‘Sealed’ Myth: Only 17 Political Parties of 105 In EC List Got Electoral Bonds’ (Article 14, 6 June 2022) <https://article-14.com/post/debunking-a-sealed-myth-only-17-political-parties-of-105-in-ec-list-got-electoral-bonds-629d7a3bd1d5a> accessed 28 March 2023.