Supreme Court strikes down Electoral Bonds scheme

The Supreme Court on Thursday struck down the electoral bonds scheme that allows anonymous donations to political parties [Association for Democratic Reforms and Anr vs Union of India Cabinet Secretary and ors]..A five-judge Constitution bench of Chief Justice of India (CJI) DY Chandrachud and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra unanimously quashed the scheme as well as amendments made to the Income Tax Act and the Representation of People Act which had made the donations anonymous. The Court held that the electoral bonds scheme due to its anonymous nature is violative of right to information and thus hits free speech and expression under Article 19(1)(a) of the Constitution. "Electoral Bonds Scheme, proviso to Section 29(1)(c) as amended by Section 139 of Income Tax Act and Section 13(b) as amended by Finance Act 2017 is violative of Article 19(1)(a)," the judgment said.The Court ordered that the issuing bank of electoral bonds, that is State Bank of India (SBI) should issue details of the political parties which received electoral bonds and all the particulars received and submit them to Election Commission of India (ECI) by March 6.By March 13, the ECI shall publish such details on its official website.Political parties should thereafter return the Electoral bonds which have not been encashed and the issuing bank should then refund the amount to the donor's account, the Court ordered.There were two judgments, one authored by CJI DY Chandrachud and the other by Justice Sanjiv Khanna, both concurring.The Court held that the scheme will help the party in power to gain advantage. "Economic inequality leads to differing level of political engagements. Access to info leads to influencing the policy making and also leading to quid pro quo arrangements may also help a party by the party in power," the judgment said.The Court also held that electoral bonds scheme cannot be justified by saying that it will help curb black money in politics..[Watch pronouncement of judgment].The Court further said that while privacy of donors is important, transparency in political funding cannot be achieved by granting absolute exemptions.The bench had on November 2, 2023 reserved its judgment on the case concerning the legal validity of the scheme, after a three-day hearing.The Supreme Court while reserving its verdict had asked the Election Commission of India (ECI) to submit data up till September 30, 2023 regarding electoral bonds sold under the scheme..BackgroundThe electoral bonds scheme allows donors to anonymously send funds to a political party after buying bearer bonds from the State Bank of India (SBI).An electoral bond is an instrument in the nature of a promissory note or bearer bond which can be purchased by any individual, company, firm or association of persons provided the person or body is a citizen of India or incorporated or established in India.The bonds, which are in multiple denominations, are issued specifically for the purpose of contributing funds to political parties in its existing scheme.Electoral bonds were introduced through the Finance Act, 2017, which in turn amended three other statutes - the RBI Act, the Income Tax Act and the Representation of People Act - to enable the introduction of such bonds.The 2017 Finance Act introduced a system by which electoral bonds could be issued by any scheduled bank for the purpose of electoral funding. The Finance Act was passed as a money bill, which meant that it did not require the assent of the Rajya Sabha.Various petitions were filed before the top court challenging at least five amendments made to different statutes through the Finance Act, 2017 on the ground that they have opened doors to unlimited, unchecked funding of political parties.The petitions also raised the ground that the Finance Act could not have been passed as a money bill.The Central government in its counter-affidavit maintained that the electoral bonds scheme is transparent. In March 2021, the apex court had dismissed an application seeking a stay on the scheme..Follow coverage of the case here..[Read Judgment]