Supreme Court’s Thursday verdict on electoral bonds: Here’s everything you need to know about the scheme

A five-judge bench of the Supreme Court on Thursday will rule on a batch of petitions challenging the validity of electoral bond schemes funded by political parties.

The scheme, notified by the government in 2018, was promoted as an alternative to cash donations to political parties as part of efforts to increase transparency in political funding.

according to a living method A bench comprising Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra reserved its verdict in the case on November 2 after hearing it for three days, the report said.

The petitioners in the case are Association for Democratic Reforms (ADR), Communist Party of India (Marxist) and Dr Jaya Thakur, challenging the amendments proposed in the Finance Act, 2017, which provided for the electoral bonds scheme paved the way.

What are electoral bonds?

Electoral bonds are monetary instruments similar to promissory notes that are payable to the holder on demand and bear no interest. Through this process, Indian citizens or corporate entities can provide funds to political parties, which can then cash them out.

The government implemented electoral bonds in 2018. This was introduced by the Narendra Modi-led NDA government in Gazette Notification No. 20 on January 2, 2018, to “clean up the political patronage system” in the country.

Electoral bonds were introduced to make political party funding more transparent by allowing political donors to purchase bonds from authorized banks and can only be redeemed by political parties through registered accounts within a specified period of time.

How to buy electoral bonds?

Any Indian citizen or company registered in India can purchase. Electoral bonds can be purchased from State Bank of India branches in one of the cities listed by the government.

The bonds are interest-free and individuals and businesses interested in buying them must first complete prerequisites such as the bank’s KYC (Know Your Customer) for identity verification. It can be purchased in various denominations, ranging from Rs 1,000 to Rs 1 crore.

The bond will not bear the name of the recipient and is valid for only 15 days, during which time it can be used to donate to political parties that meet certain criteria. Electoral bonds can only be redeemed through bank accounts designated by political parties.

Political parties registered under Section 29A of the Representation of the People Act, 1951 and obtaining not less than 1% of the votes cast in the last Lok Sabha or State Legislative Assembly elections are eligible for electoral bonds.

Benefits and concerns about electoral bonds

Supporters of electoral bonds say they promote transparency by ensuring parties receive donations through formal banking channels that can be audited. Additionally, the identity of the donor remains confidential, reducing the risk of retaliation or intimidation.

However, critics argue that the mechanism’s biggest shortcoming is the lack of transparency around funding sources. The identity of the donor is not disclosed to the public or the electoral commission, making it difficult to trace the source of political donations.

Critics argue that electoral bonds could be used to launder money into the political system. They said this undermined the principle of fair competition in democratic elections.

What is the petition asking for?

On October 10, the Supreme Court took note of the submissions made by lawyer Prashant Bhushan, representing ADR, that the matter needed to be adjudicated before the launch of the electoral bonds scheme for the 2024 general elections.

A petitioner in the PIL claimed in March 2023 that a total of Rs 12,000 crore had been disbursed to political parties through electoral bonds so far, two-thirds of which went to one major party.

The ADR filed a PIL over alleged corruption and subversion of democracy through illegal and foreign funding of political parties and lack of transparency in bank accounts of all political parties and filed an interim application seeking non-sale of electoral bonds. reopen.

In a written submission to the Supreme Court on behalf of the interventionist Civil Rights Trust, senior advocate Vijay Hansaria said the electoral bonds program allowed political parties to accept donations “behind the Iron Curtain away from the public eye” . “The provisions of the amended bill are contrary to the purported goal of achieving transparency in election finance,” Hansaria, who was assisted by advocate Sneha Kalita on the issue, said in written submissions.

He said the plan to donate to political parties through electoral bonds was a “totally opaque mechanism” akin to cash donations. The Supreme Court on October 16 said pleas challenging the validity of the electoral bonds scheme funded by political parties will now be decided by a five-judge bench and an authoritative verdict.

What the government said about electoral bonds

Attorney General (AG) R Venkataramani, in a statement filed in the Supreme Court on the matter, said that under Article 19(1)(a) of the Constitution, citizens have no right to information about the source of funds.

Arguing that the electoral bond scheme to fund political parties would help provide clean funding, Venkataramani said there could be no universal right to know “anything” without reasonable restrictions.

“The scheme extends the benefit of confidentiality to the contributors. It ensures and facilitates the contribution of clean funds. It ensures compliance with tax obligations. Therefore, it does not violate any existing rights,” the Attorney General told the Supreme Court.

The Center and the Election Commission had earlier taken opposing stances in court over political funding, with the government looking to keep donors anonymous while poll panels sought to reveal their names in the interest of transparency.

The Supreme Court in April 2019 had refused to stay the electoral bonds scheme and made it clear that the appeal would be heard in depth as the Center and the Election Commission had raised “serious questions” that “had a huge impact on the sanctity of the elections”. the country’s electoral process”.

On January 20, 2020, the Supreme Court refused to grant interim stay to the scheme and sought responses from the Center and the Election Commission on interim petitions filed by NGOs seeking stay of the scheme.

(Inputs from PTI)