Supreme Court Observation on Electoral Bonds Scheme

By Amigos IAS

  • The Electoral Bond Scheme introduced by the Indian government aimed at enhancing transparency in political donations. However, the Supreme Court of India has recently made an observation regarding this mechanism, stating that the Electoral Bond is “selectively anonymous.”
  • This observation underscores concerns about the potential implications and ambiguities in the scheme’s design, particularly in how it manages donor confidentiality while ensuring accountability in political financing.
  • The court’s remark opens the door to a broader discourse on striking a balance between donor privacy and the public’s right to transparency in political funding.

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Concerns & Challenges

  • The scheme might violate the Citizen’s Fundamental Right to Information under Article 19 (1) (a) regarding political parties.
  • It could enable backdoor lobbying and quid pro quo. Further, it may pave the way for shell companies.
  • The funds from the scheme can be used for purposes other than elections.
  • The scheme may not reduce black money but reroute it. It acts like an ‘alternative white money channel’.
  • Importantly, the scheme might not ensure a level playing field for opposition parties. According to Association of Democratic Reforms (ADR), between 2016-17 and 2021-22, the BJP received a significant portion of the total donation from electoral bonds.


Electoral Bonds

·       Interest-free bearer bonds to donate to political parties.

·       Sold in multiples: Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore.

·       Can be purchased through a KYC-compliant account.

·       No cap on number of bonds one can purchase.

·       Must be encashed by political parties within a set time frame.

·       Bonds are said to be anonymous as donor’s details aren’t recorded.


Eligibility for Funding via Electoral Bonds

·       Parties that secured at least 1% of votes in recent Lok Sabha or State Assembly elections and are registered under the RPA.

·       Amounts deposited within 15 days of bond purchase.

·       If not encashed within 15 days by a political party, funds go to the Prime Minister’s Relief Fund.


Electoral Bond Scheme Details

·       Aimed at bringing transparency in political funding.

·       Introduced via the Finance Act of 2016 and 2017, altering four Acts: Representation of the People Act, 1951; The Companies Act, 2013; The Income Tax Act, 1961, and the Foreign Contributions Regulation Act, 2010 (FCRA).

·       Introduced as a Money Bill, limiting Rajya Sabha’s power.

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