Something that goes hand-in-hand with elections is the sale of electoral bonds. With the Assembly elections in Bihar round the corner, the government has announced the sale (by State Bank of India) of the fourteenth tranche of electoral bonds from 19 to 28 October.
The electoral bonds scheme was introduced by the BJP-led government in 2018 with the promise of making the political funding process transparent.
The Quint published a series of reports raising questions over electoral bonds and flagging the threat they pose to democracy.
In 2018, a petition was filed in the Supreme Court by NGOs Common Cause and Association for Democratic Reforms, citing The Quint’s article revealing the opacity of the scheme but the matter is still pending in the court.
What is the Electoral Bonds Scheme?
The scheme allows individuals or corporations to purchase electoral bonds, which can then be provided to political parties. The bonds are bearer instruments, so the political parties just need to deposit them in their accounts to obtain the amount. The government claimed that the donors will remain anonymous.
Why the Electoral Bonds Scheme Is a Threat to Democracy
The BJP government said that the electoral bonds will keep the identity of political donors anonymous. But in reality it does not.
FIRST – The Quint through its investigation exposed that the bonds possess a unique hidden alphanumeric code that is visible only under Ultra-Violet light and not to naked eyes.
SECOND – The government tried to defend itself by saying that these unique hidden alphanumeric codes are not recorded by the State Bank of India (SBI). But the RTI revealed that SBI does record all these codes. This means that when these bonds are deposited by political parties in the SBI, the banks can easily track the purchaser of the bond. Hence, the government’s statement that the purchaser of bonds will remain anonymous, was misleading.
THIRD – Way back in May 2017, the Election Commission of India (EC) wrote a letter to the Ministry of Law and Justice raising three major objections on the sale of electoral bonds.
- The government amended Section 29C of the Representation of the People (RP) Act, 1951 so that political donations made through electoral bonds need not be declared to the Election Commission. Hence the public will never know how much was donated to political parties through electoral bonds.
- The electoral bonds paved way for shell companies to make political donations due to the amendment of Section 182 of Companies Act.
- With the amendment of Section 182 (3) of Companies Act, a company doesn’t have to declare its political contribution or the name of the political party in its profit and loss statement. In other words, it paved the way for black money to enter the political donation ecosystem.
FOURTH – The RTI documents revealed that in much of the correspondence with then Finance Minister Arun Jaitley, the erstwhile Reserve Bank of India (RBI) Governor Urjit Patel in 2017 insisted on issuing electoral bonds digitally as opposed to a scrip form. He cited that the latter would carry the threat of money laundering. However, the Finance Ministry overruled Patel’s concerns.
FIFTH – In addition to the RBI and the EC, the Ministry of Law and Justice (MoLJ) had also strongly objected to the issuance of electoral bonds on two grounds: one, it does not qualify to be a promissory note and second, it can be used as a currency and lead to money laundering.
In spite of just glaring objections raised by RBI, EC and MoLJ, the BJP government went ahead and introduced electoral bonds.
The annual audit reports filed by political parties to the Elections Commission of India for the Financial Year (FY) 2018-19 reveals that Bhartiya Janata Party bagged a whopping 57 percent (approx) of the total sale of electoral bonds, while the Congress party received 15 percent.
Why Is SC Not Hearing Electoral Bonds Matter?
The petitions against electoral bonds were filed in the Supreme Court in 2017 itself, soon after the scheme appeared in the Finance Act.
Unfortunately, it took the court two years to list the matter. When the then Chief Justice of India Ranjan Gogoi finally started conducting hearings in March 2019, the Lok Sabha elections were looming. This was why the main issue argued in the apex court at the time was whether or not to impose an interim stay on the scheme till its constitutionality was decided.
On 12 April, the Gogoi-led bench refused to stay the scheme, but ordered all parties to submit details of the electoral bonds received by them to the Election Commission in a sealed cover. The matter was supposed to be listed around June 2019, so that arguments on the constitutionality of the scheme were heard. But it was not listed again during Gogoi's tenure, which ended in November 2019.
His successor, current Chief Justice SA Bobde did briefly list the matter in January 2020 after an urgent application for an interim stay was moved by the petitioners - following even more revelations about the reservations and objections within the Election Commission, RBI and other institutions. But even Chief Justice Bobde refused to grant an interim stay. The case was supposed to be listed two weeks later, in the beginning of February, but it has not been listed since.
No further arguments on an interim stay or the merits of the case have been heard till now.
The concerns about electoral bonds - from the EC and RBI's fears of benami transactions, money laundering, to the information asymmetry in favour of the ruling party that the secret numbers creates - were known at the time of the previous substantive hearings. Therefore, the court could have considered putting a stay on the scheme back in April 2020.
Having decided against doing so, it was then incumbent upon them to ensure that the matter was listed soon and the serious constitutional questions answered. However, the apex court hasn’t done that as yet.
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