The Supreme Court of India invalidated the provisions of the electoral bond system, stating that it contravenes the Right to Information Act. The five-judge Constitution Bench, presided over by Chief Justice D Y Chandrachud, concluded that the scheme facilitates anonymous political contributions, thereby infringing upon Article 19(a) of the Right to Information. The court expressed concerns that such a setup could potentially result in quid pro quo arrangements.

What is Electoral Bond Scheme?

The Electoral Bonds (EB) Scheme, enacted in 2018, enables individuals and corporations to donate to political parties while maintaining anonymity by purchasing electoral bonds from the State Bank of India (SBI). Under this scheme, only the SBI has access to the purchasers’ details. Additionally, any electoral bonds not cashed within 15 days of issuance are directed to the Prime Minister’s Relief Fund. This provision aims to ensure that unused funds contribute to charitable causes rather than remaining idle.

Who are the Petitioners?

• CPI (M)
• Association of Democratic Reforms
• Common Cause

Objection by RBI & Election Commission before Electoral Bonds became law:

In 2017, the Reserve Bank of India (RBI) raised objections to the Ministry of Finance through a letter, arguing that the objectives of electoral bonds could be achieved through existing means such as cheques, demand drafts, and digital payments. The introduction of a new bearer bond in the form of electoral bonds was deemed unnecessary. The RBI’s letter also highlighted concerns regarding the anonymity of intervening entities, which could potentially violate the principles of the Prevention of Money Laundering Act, 2002.

However, the Ministry of Finance responded to the RBI’s concerns by stating that the apprehension of electoral bonds being misused as currency was unfounded, given the time limit imposed on redeeming the bonds. The government asserted that the core purpose of electoral bonds was to maintain donor secrecy and ensure that donations were made from taxed funds.

Subsequently, the RBI recommended activating electoral bonds with certain precautions, including a 15-day limit for redeeming the bonds, facilitating the sale of bonds twice a year for seven days each, and allowing redemption only through the designated bank accounts of eligible political parties.

Despite these recommendations, when the draft electoral bond scheme was submitted to the RBI for deliberation, serious concerns were raised. These concerns were discussed by a committee of the central board, which expressed reservations about the issuance of electoral bonds in physical form. The committee warned that scrip-form bonds could be vulnerable to forgery, cross-border counterfeiting, and potential misuse for money laundering. Additionally, the RBI argued that allowing scheduled banks to issue electoral bonds would infringe upon its monopoly on issuing bearer instruments.

Furthermore, the Election Commission also voiced apprehensions regarding the amendment of the Companies Act, which exempted companies from declaring receiver details of donations made through electoral bonds in their financial statements. In a 2019 affidavit, the Election Commission stated that the scheme contradicted the goal of transparent political financing, raising concerns about unchecked foreign funding influencing Indian policies through contributions from foreign companies.

What Central Government said to court?

The Government, in its submission to the court, argued that the right to information is not a blanket entitlement for citizens, particularly concerning the specifics of political funding. It emphasised that citizens do not possess an inherent right to access details regarding political funding. Additionally, the Government asserted that the scrutiny of contributions made by companies to political parties should not fall under the purview of the court but rather remain within the legislative domain.

Furthermore, the Government hailed the Electoral Bonds (EB) Scheme as a transparent mechanism introduced after 70 years of Independence.

The Verdict:

On February 15, 2024, the Supreme Court of India delivered a judgement striking down the 2018 Electoral Bonds (EB) Scheme. The Bench declared that the Scheme infringed upon the voters’ right to information as guaranteed by Article 19(1)(a) of the Constitution. Additionally, the Court ordered an immediate halt to the sale of electoral bonds. The State Bank of India (SBI) was instructed to furnish details of all Electoral Bonds purchased from April 12, 2019, onwards to the Election Commission of India (ECI). These details would encompass information about the purchasers as well as the political parties that received the bonds. Furthermore, the Court directed the ECI to publish the information provided by SBI on its official website within one week of receiving it, effectively by March 13, 2024.

https://main.sci.gov.in/judgments