Relevance: GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation

Key phrases: Electoral bond scheme, Representation of the People Act 1951, Chief Justice M.C. Chagla of the Bombay High Court, Justice P.B. Mukharji of the Calcutta High Court, Promissory notes

Why in News ?

• Recently, many political activists asserted that ensuring citizens have access to information, especially material on political funding, is an essential feature of a democracy.
• They said, the electoral bond scheme has envenomed the democratic process, by destroying altogether any notion of transparency in political funding.
• The Supreme Court flagged the possibility of misuse of money received by political parties through electoral bonds for ulterior objects like funding terror or violent protest.

What is the Electoral Bond Scheme?

• The electoral bond scheme is designed to allow an individual, or any “artificial juridical person”, including body corporates, to purchase bonds issued by the State Bank of India during notified periods of time.
• These instruments are issued in the form of promissory notes, and in denominations ranging from ₹1,000 to ₹1 crore.
• Once purchased, the buyer can donate the bond to any political party of their choice and the party can then encash it on demand.
• The purchasers are not obliged to disclose to whom they presented the bond, and a political party encashing a bond is compelled to keep the donor’s identity secret.

Some Supreme Court Observations:

• In one order, the Supreme Court asserted that the bonds were not, in fact, anonymous.
• Voters interested in finding out the identity of political donors, the court said, could simply perform what the order described as “match the following.”
• According to the Court, since both the purchase and the encashment of bonds are made through banking channels, all it would take for a person to glean the identity of a donor was for her to look through every corporation’s financial statement — these records, the Court said, ought to be available with the Registrar of Companies.
• However, Court flagged the possibility of misuse of money received by political parties through electoral bonds for ulterior objects like funding terror or violent protests

Government Arguments

1. Voters have no fundamental right to know how political parties are funded.
2. The scheme helps eliminate the role of black money in funding elections.
3. Anonymity of the donor is necessary to protect him from political victimisation.
4. Only parties registered under the Representation of the People Act 1951 could receive donations through electoral bonds, and they also should have secured more than 1% of the votes polled in the previous elections.
5. The Election Commission of India is also not opposed to the bonds but only concerned about the aspect of anonymity.

Arguments in Against

1. The Supreme Court has consistently held that voters have a right to freely express themselves during an election and that they are entitled to all pieces of information that give purpose and vigour to this right.
2. To participate in the electoral process in a meaningful manner and to choose one’s votes carefully, a citizen must know the identity of those backing the candidates.
3. What is more, a series of restrictions that were in place before the scheme’s introduction have now been done away with .
   • For example, amendments have been made removing a previous prohibition that disallowed a company from donating anything more than 7.5% of its net profits over the course of the preceding three years.
   • Mandate that a company had to have been in existence for at least three years before it could make donations (a requirement that was aimed at discouraging persons from using shell corporations to funnel money into politics) was also lifted.
4. As affidavits filed by the Election Commission of India in the Supreme Court have demonstrated, the scheme, if anything, augments the potential role of black money in elections — it does so by, among other things, removing existing barriers against shell entities and dying concerns from donating to political parties.
   • The Reserve Bank of India also reportedly advised the Government against the scheme’s introduction.

Way Forward

• The worries over the electoral bond scheme, however, go beyond its patent unconstitutionality. This is because in allowing anonymity it befouls the basis of our democracy and prevents our elections from being truly free and fair. ar and decide on the programme’s validity.
• A delay in adjudication, as we have seen in a plethora of cases that are pending consideration, invariably presents a fait accompli. In this case, the damage from the pendency is all the starker, because the integrity of the electoral process is at stake.
• Judges of yore warned as far back as in 1957 of the threats posed by limitless corporate funding of elections. Chief Justice M.C. Chagla of the Bombay High Court predicted that any decision to allow companies to fund political parties might “ultimately overwhelm and even throttle democracy in this country”.
• Justice P.B. Mukharji of the Calcutta High Court used language that was stronger still. “To induce the Government of the day by contributing money to the political funds of political parties, is to adopt the most sinister principle fraught with grave dangers to commercial as well as public standards of administration,” he wrote.

Conclusion

• Today due to electoral bonds, individual voters not only are in a position where they are unable to match contributions made by corporations but also find themselves in a position where they have no knowledge over the identity of the donors bankrolling the political establishment.
• The need is very genuine and the court should show some urgency to determine the constitutional validity of Electoral Bonds.
• It is crucial to plug the loopholes in the current laws to make the entire governance machinery more accountable and transparent.

Mains Question:

Q. India’s reforms on electoral funding are very sui generis in design, quid pro quo in intent and fait accompli as outcome. Critically examine this statement with special emphasis on Electoral Bond Scheme.( 15 marks

Source: The Hindu