ndsharma's blog

A five-judge Constitution bench of the Supreme Court is hearing about the legality of Electoral Bonds. The bench is headed by Chief Justice of India D Y Chandrachud and comprises Justices Sanjiv Khanna, B R Gavai, J B Pardiwala and Manoj Misra. The matter relates to the Electoral Bonds scheme of 2018. It has been pandind in the Supreme Court almost from 2028, in spite of the petitionrs’ requests to expedite its hearing.

Supreme Court had decided on December 6 last year whether to refer the case of Electoral Bonds to a larger bench. The Court’s decision came while hearing a batch of petitions filed by the Association for Democratic Reforms (ADR) in 2017 and the Communist Party Of India (Marxists) a year later, among others. They challenged Amendments to the Finanace Act, 2017, the Reserve Bank of India Act, the Foreign Contribution Regulation Act (FCRA) 2010, the Companies Act, the Income Tax Act, and the Represeantion of the People Act that facilitated the Electoral Bonds scheame. Their argument was that it undermined the right to know as well as the Election Commission of India guidelines on the political funding. Prof. Jagdeep S. Choker. co-founder of the ADR was dissatisfied with the progrss of the case since 2018.

The Electoral Bonds scheme, notified first time by the Union Government on January 2, 2018 was considered as a clever step towards emaciating the opposition parties. Neither would it lead to greater transparency in the funding of political parties (as claimed by Finance Minister late Arun Jaitley) nor would it check the flow of black money into the electoral process. Even Election Commission had expressed apprehensions at the move. It had even written to Government expressing apprehension.

The objection to the scheme mainly was that it might lead to the use of black money in electoral politics. In his keynote address at a conference of Association for Democratic Reforms (ADR), then Election Commissioner O P Rawat observed that ‘the recent amendments in the election and income tax laws make it clear that any donation received by a political party through an Electoral Bond has been taken out of the ambit of reporting in the Contribution Report which political parties have to submit to the EC. Implications of this step can be retrograde as far as transparency is concerned. Furthermore, where contributions received through Electoral Bonds are not reported, a perusal of contribution reports will not make it clear whether the party in question has taken any donations in violation of Section 298 of the Representation of the People Act, which prohibits political parties from taking donations from Government companies and foreign sources.’

​Only the State Bank of India (SBI) can issue the Electoral Bonds  in the denominations of Rs 1000, Rs 10,000, Rs one lakh, Rs ten lakh and Rs one crore. A total of 53 branches of SBI have been authorised to sell the Bonds – one branch in the capitals of all the States and Union Territories – more than one branch in some States. An individual or body can purchase these Bonds from the designated branches after fulfilling the KYC (Know Your Customer) requirements. However, the Bonds will not carry the name of the purchaser.

The byer can donate these Bonds to a political party which is registered with the Election Commission and has received not less than one per cent of the votes in the last Lok Sabha or Assembly election. The party can encash the Bonds only by depositing these in its bank, registered with Election Commission, within 15 days after the issuance of the Bond. If not deposited within 15 days, the amount of the Bond will go to the Prime Minister’s Relief Fund.

Election Commission had expressed the apprehension that abolition of relevant provisions of the Companies Act of removing a cap of 7.5 per cent of profit for political donations can lead to money laundering by setting up of shell companies for diverting funds for donations to political parties.