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Final Case study on Electoral Bonds Scheme
- 1. ELECTORAL BONDS “ ELECTORAL BONDS ARE UNCONSTITUTIONAL ” BAN ON - Supreme Court of India
- 2. The Beginning – Introduction of Electoral Bonds ❑ From 2004-14, 70% of money donated to political parties came from unknown, undisclosed sources. ❑ Without accountability in political funding, free and fair democracy is impossible. ❑ To increase the transparency in political funding, Electoral bonds introduced in Finance bill, 2017 and notified on 2nd Jan 2018 Former FM, Arun Jaitley During introduction of electoral bonds, Arun Jaitley said “ Even after 70 years of India had not been able to evolve a transparent Political funding system” – on 2nd Jan 2018 ❑ Electoral Bonds will bring substantial transparency in political donations against the present system of contributions in the election funding mechanism
- 3. What are Electoral Bonds ? ❑ Electoral bonds are interest-free bearer bonds or money instruments that can be purchased by companies and individuals in India from 29 authorized branches of the State Bank of India (SBI). ❑ Any Indian citizen or body corporate in India or Indian subsidiaries of foreign Companies can by Electoral bonds ❑ Any Political party with > 1% votes in previous Lok Sabha/State Assembly Elections. One SBI account must be specified to receive electoral bonds. ❑ Electoral bonds can be purchased, in a 10-day period in the beginning of each quarter i.e 1 – 10 January 1 – 10 April 1 – 10 July 1 – 10 October ❑ They can be purchased through a KYC-compliant account to make donations to a political party. The political parties have to encash them within a stipulated time of 15 days
- 4. How Electoral Bonds Works ? Electoral Bond Authorized SBI branch Bonds issued in multiples of 1000, 10000, 1 Lakh and 1 crore Authorized SBI branches; buy with cheque/digital payment (NO CASH) Purchasable at Donor – Company or Individual Buyers purchase bonds bearing only party name, Not buyer's name KYC details of buyer are collected by bank, but remain confidential EB physically handed over to party Political Party Donation to regd. parties with >1% vote share in last Lok Sabha/State Assembly election bonds must encashed within 15 days of receipt Authorized SBI branch Bonds redeemable only in authorized SBI account notified to EC
- 5. Affects on Other ACTS Reserve Bank of India ACT, 1934 COMPANIES ACT, 2013 Income Tax ACT, 1961 Representation of the People Act, 1951 Sec 11 of the Finance Act, 2017 amended Section 13A of the Income Tax Act exempting political parties from keeping a detailed record of contributions received through electoral bonds. Section 135 amended Section 31 of the RBI Act. This permitted the Union government to “authorize any scheduled bank to issue electoral bond[s].” Sec 137 introduced a proviso to Sec 29C of RoPA, exempting political parties from publishing contributions received through electoral bonds in “Contribution Reports.” These reports disclose contributions received by parties “in excess of twenty thousand rupees” from companies and individuals. Section 154 amended Section 182 of the Companies Act, 2013 which removed the upper limit on how much a company could donate to a political party. Previously companies could only donate up to 7.5 percent of three years of the company’s net profits.
- 6. Total number of Denominations printed as per Latest RTI Data Denomination Total Printed Total Sold Total Unsold % Unsold ₹ 1,000 2,65,000 159 2,64,841 99.94% ₹ 10,000 2,65,000 264 2,64,736 99.90% ₹ 1 Lakh 93,000 3,453 89,547 96.29% ₹ 10 Lakhs 26,600 8,523 18,077 67.96% ₹ 1 Crore 33,000 15,631 17,369 52.63% Total 6,82,600 28,030 6,54,570 95.89%
- 7. Total money raised by Political parties through Electoral Bonds BJP Congress TMC BJD DMK BRS YSRCP TDP Shiva sena Others NCP JD (s) JD (u) Samajwadi Party
- 8. Chronology of events in Electoral bonds case 2017 2017 Sep 14 2017 Oct 03 2018 Jan 02 2022 Nov 07 2023 Oct 16 2023 Oct 31 2023 Nov 02 2023 Feb 15 Electoral bond scheme introduced in the Finance Bill SC issues notices to CG and EC on PIL filed by the NGO Electoral bond scheme amended to increase sale days from 70 to 85 in a year where any assembly election may be scheduled Eve-judge Constitution bench headed by CJI D Y Chandrachud commences hearing on pleas against scheme SC delivers unanimous judgement annulling the scheme, calling it ‘unconstitutional’ NGO ‘Association for Democratic Reforms’ lead Petitioner, moves to SC challenging the scheme The Central government notifies electoral bond scheme. SC bench headed by CA.JI DY Chandrachud refers Pleas against Scheme to five-judge Constitution bench SC reserves verdict
- 9. UNION OF INDIA THE CASE STUDY (Respondent) Association for Democratic Reforms - (NGO) (The Lead Petitioner) (Motive – To establish right to freedom of expression in political funding for free and fair elections.) (Motive – To enhance transparency in political funding )
- 10. Petitoners Motive Shortly after the amendments were introduced, in September 2017, two Non-Governmental Organizations - Association for Democratic Reforms (ADR) and Common Cause and the Communist Party of India (Marxist) filed petitions in the Supreme Court challenging the amendments. Petitioners argued that the scheme allowed “non-transparency in political funding” and legitimized electoral corruption at a “huge scale.” Petitioners were represented by Prashant Bhushan, Kapiil Sibal, Shadan Farasat, Nizam Pasha, Vijay Hansaria
- 11. Respondents Motive Union of India Responded that Respondents were represented by Attorney General R. Venkataramani; Solicitor General Tushar Mehta ❑ Electoral Bond Scheme allows any person to transfer funds to political parties of their choice through legitimate banking channels instead of other unregulated ways such as direct transfer through cash ❑ The Union claimed that political parties largely received funds through cash donations, leading to an “unregulated flow of black money.” ❑ The Union assured that these issues would no longer hamper political funding because there is only one authorized bank—the State Bank of India—that can issue such bonds. Further, providing KYC details ensure accountability.
- 12. Objections from RBI and ECI Objections of Reserve bank of India ❑ On 2nd January 2017 The RBI wrote a letter to the Joint Secretary in the Ministry of Finance on the proposal of the Government of India to enable Scheduled Banks to issue electoral bearer bonds for the purpose of donations to political parties before the Finance Act 2017 was enacted ❑ The proposal militated against RBI’s sole authority for issuing bearer instruments which has the potential of becoming currency. Electoral bonds can undermine the faith in banknotes issued by the Central Bank if the bonds are issued in sizable quantities ❑ The identity of the person or entity purchasing the bearer bond will not be known. This would impact the principles of the Prevention of Money Laundering Act 2002 Objections of Election commission of India ❑ On 26th May 2017, ECL had shared a letter to the union Government warning against the “repercussions/impact on the transparency aspect of political finance/funding.” ❑ Further, they submitted that exempting political parties from sharing details regarding contributions would keep information on foreign funding in the dark. The affidavit stated, “unchecked foreign funding of political parties in India, which could lead to Indian policies being influenced by foreign companies.”
- 13. The Challenge in the Supreme Court ❑ On 12 April 2019, a bench led by Chief Justice Ranjan Gogoi, with Justices Deepak Gupta, and Sanjiv Khanna directed all political parties to submit details of donations, donors, and bank account numbers in a sealed cover to the ECI. The Bench refrained from imposing a stay on the implementation of the scheme stating that “such weighty issues would require an in-depth hearing.” ❑ Following this Order, the petitioners approached the Court on multiple occasions. An application for an urgent hearing was filed in November 2019, then again in October 2020 before the Bihar elections. ❑ On 16 October 2023, the petitioners approached the Court during mentioning, to hear the case prior to the 2024 General Elections. A Bench led by Chief Justice D.Y. Chandrachud, with Justices J.B. Pardiwala, and Manoj Misra referred, noting the “importance of the issue” referred the case to a five-judge Constitution Bench.
- 14. Supreme Court Observations Violation of Right to Information ❑ The scheme allowing anonymous political donations violates the fundamental right to information under Article 19(1)(a) of the Constitution. ❑ Section 29C of the Representation of the People Act, 1951, exempting disclosure for donations through electoral bonds Unlimited Corporate Donations ❑ Unlimited Corporate funding to political parties infringes the principle of free and fair elections and violates Article 14 Backdoor Lobbying Risks ❑ Opponents argue that scheme facilitates backdoor lobbying and potential quid pro quo arrangements between corporations and political parties. ❑ They allege that there are circumstantial evidences suggesting corporations have made donations in exchange for favorable treatment or policies Limited Anoymity ❑ It has been argued that electoral Bonds, While touted as anonymous instruments , Lack complete anoymity
- 15. The Conclusion ❑ the Court unanimously struck down the Union’s 2018 Electoral Bonds (EB) Scheme. On 15 February 2024 – Supreme court of India ❑ The Bench held that the Scheme violated the voters’ right to information enshrined in Article 19(1)(a) of the Constitution ❑ The Court also directed that the sale of electoral bonds be stopped with immediate effect. ❑ SBI was directed to submit details of the Electoral Bonds purchased from 12 April 2019 till date, to the ECI. ❑ Further, the Court ordered the ECI to publish the information shared by SBI on its official website within one week from the receipt of the information Done By – K.Niteesh Amar