ABSTRACT
In today’s democracy in India, elections are essential. The outcome of elections is greatly influenced by financing and money and as supreme court says ’one way in which money influences electoral outcomes is through vote buying. Another way in which money influences electoral outcomes is through incurring electoral expenditure for political campaigns. Campaigns have a measurable influence on voting behaviour because of the impact of television, advertisements, campaign events and personal canvassing.’ And while reforming the funding mechanism of India Electoral bonds scheme was introduced to curb the unregulated campaign funds, but later was challenged in country’s top court as unconstitutional. This research paper delves into the judgement on electoral bonds and investigates the factors contributing to the scheme’s unconstitutionality, provides an in-depth analysis of the causes that render the scheme unconstitutional.
KEYWORDS
Promissory note, Black money, corruption, Amendments.
INTRODUCTION
The central government had on January 29, 2018, notified the electoral bond scheme. It is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India. The citizen can then donate the same to any eligible political party of his/her choice. Individuals, associations, and corporations wishing to make donations to political parties could approach the State Bank of India (SBI) and purchase (tax free) time–limited bearer bonds in specified denominations during certain windows of time throughout the year that they could subsequently deposit into the registered bank accounts of political parties. Political party can cash a bond only through a bank account. They are generally issued in the denominations of Rs 1,000, 10,000, 1,00,000, 10,00,000, and 1,00,00,000. It possesses a validity of 15 days, within which it is supposed to be in cash, failing which the authorised bank is obligated to deposit the same with the Prime Minister’s relief fund. The main purpose of introducing electoral bonds was that since, everything is through a banking account the government’s official position is that this will curb black money. In 2017 the then finance minister Mr. Arun Jaitley, while introducing the scheme, said, ”we need to reform the funding mechanisms to political parties. That reform is to do away with cash donations. However, why do political parties require financing to contest elections? Political parties‟ primary motive for fighting elections is to win and form a government through democratic, legitimate means of elections. They require money to campaign for votes and to propagate their ideology. It has to pay salaries to its office bearers, members, their transportation, boarding lodging, etc. In order to ensure that the expenditure of political parties through legitimate money and not unaccounted or „black‟ money, electoral bonds have been introduced. The funds in liquid cash are generally associated with unaccounted money. Electoral bonds acted as a new instrument through which political parties can raise funds to campaign in the elections. According to Central government electoral bonds would keep a tab on the use of black money for the funding of elections as the electoral bonds would be legitimate and traceable source of funding the elections. The reason behind keeping the buyers name private was to safeguard them from opposition parties harassing them. Petitions were filed questioning the basic framework of the scheme since it goes against the international best practice in campaign funding that around the world in all democracies voters know whom funded whom since this information is important at democracy, which later on led to it being held unconstitutional by the supreme court of India.
LITERATURE REVIEW
‘A democracy is a form of government that empowers the people to exercise political control, limits the power of the head of state, provides for the separation of powers between governmental entities, and ensures the protection of natural rights and civil liberties’ Democracy’s governance is based on democratic elections and India being a democratic country has importance of elections. The power of money and financing play a very important role in election it has the power of influencing the outcomes of elections, by exerting the influence in electoral campaigns, candidate selection, and policy formulation. But, sometimes the availability of vast financial resources especially to some political parties makes the election an uneven playing field which makes it difficult for some parties to contest in elections and reach out to public. The power of money might lead to widespread corruption and money laundering by the political parties hindering the ‘free and fair elections’ where one party gets an undue advantage by using the money power in elections which also violates the basic fundamental right of ‘right of quality before Law’ which is protected under Article 14 of the constitution. In order to ensure that the expenditure of political parties through legitimate money and not unaccounted or „black‟ money, electoral bonds have been introduced by the NDA-led government. Electoral bonds scheme had to do away with cash donations, the buyers mandatorily being KYC-complaint would fund the political parties through legitimate means, which would leave an audit trail as everything would be done through a banking system. But this information will be kept private in order to protect the buyers from ‘victimization’ by other political parties by keeping such information private voters would be denied their basic fundamental right of ‘right to information’ which is protected under section19(A) of the constitution. Several objections and concerns were raised by the Reserve Bank of India (RBI) and the Election Commission of India(ECI), which were ignored by the central government and they went ahead and introduced the scheme, which was later challenged in the court by the number of writ petitions heard by the 5 judge constitution bench, and was declared as unconstitutional and it was believed the scheme had done opposite so far as the bonds are cloaked in secrecacy.
RESEARCH METHODOLOGY
In this research paper, we will delve into the legal perspective surrounding electoral bonds, examining their impact on political finance laws and the broader implications for democracy and governance. We will analyse the various dimensions of electoral bonds, considering their legality, transparency, and potential consequences for the Indian political landscape.The research paper is structured around a descriptive examination of the reasons for the introduction of electoral bonds and what led to their curtailment. To properly analyse the topic, multiple secondary sources, such as newspaper articles, journals, and law reports, have been consulted. The main focus is on studying the scheme in detail and identifying the limitations that resulted in its curtailment. The paper also uses a comparative approach to provide insights into various countries election funding schemes for further strengthening the basis of the study.
CONCERNS ABOUT THE LEGITIMACY OF THE SCHEME
The electoral bonds scheme was framed by the Ministry of Finance in January 2018 in exercise of powers conferred under Section 31(3) of the RBI Act. The legal framework governing electoral bonds in India is primarily guided by the Electoral Bond Scheme 2018, which was introduced by the Government of India through an amendment to the Finance Act, 2017. Introduction of the electoral bonds scheme was not an easy task as many amendments were to be made to introduce the scheme, which raised serious issues and concerns for democracy in India as EBS kept private all the names of the funders from the voters, which is a important information in a democracy and also denied them from their fundamental right to information which is protected under Article 19(A) of the constitution which also gives the right to voters to seek the constitutional in case of violation to their fundamental right under article 32 of the constitution. Prior to the introduction of the EBS, 2018 through the Finance Act, 2017, provisions of various parliamentary legislations were amended by the Parliament which are the RBI Act 1934, the RP Act 1951, the IT Act 1961 and the companies Act 2013.Election commission while giving the response to the scheme said that’ … a retrograde step as far as transparency of donation is concerned and this provision needs to be withdrawn’ as they believed that it would do the opposite by keeping the name of the buyers private and would also go against the provisions under Section 29B of the RP Act 1951.
The net effect of amendments introduced by the Finance Act, 2017 to the above-named legislation was as follows: (a) A new scheme for financial contribution to political parties is introduced in the form of electoral bonds. (b) The political parties need not disclose the contributions received through electoral bonds. (c) Companies are not required to disclose the details of contributions made in any form. (d) Unlimited corporate funding is permissible.Which raised the question that why were so many laws amended for the Electoral Bonds scheme, which were also later challenged in the court by way of the number of writ petitions heard by the Constitution Bench.
All these concerns raised in court dealt with Whether unlimited corporate funding to political parties, infringes the principle of free and fair elections and violates Article 14 of the Constitution and Whether the non-disclosure of information on voluntary contributions to political parties under the Electoral Bond are violative of the right to information of citizens under Article 19(1)(a) of the Constitution and several questions were also raised that why was amendments made through the money bill under article110 which need not be passed through the Rajya Sabha under and The issue of the scope of Article 110 has been referred to a seven-Judge Bench and is pending adjudication.
Several questions were also raised by the RBI before introducing the bill which dealt with the facts that the Electoral bonds has the potential of becoming currency as through EBS multiple non-sovereign entities can issue bearer instruments which goes against the main principle of RBI being the sole authority to issue bearer instruments and also raised concerns that the identities of intervening parties would not be known through KYC(know your customer) and which goes against the principle of the prevention of Money Laundering Act,2002.
CAUSES OF THE SCHEME BEING HELD UNCONSTITUNAL
In September 2017, the NGO Association for Democratic Reforms (ADR) filed petitions in the Supreme Court challenging the amendments to the Finance Act. They thought that the scheme was arbitrary, unconstitutional and problematic, they believed that the scheme would do the opposite by keeping the name of the buyers private and would also go against the provisions under Section 29B of the RP Act 1951 and as mentioned earlier by keeping the buyers name private it would violate the citizen’s fundamental ‘Right to Know’ and By preventing disclosure of information to shareholders of companies who donate money to political parties, they violate their rights.
Under section 293A of Companies Act 1956, a Government Company or a company that has been in existence for less than three years were prohibited from making a political contribution to any political party or a person associated to the political party. A company could donate only an aggregate sum of average of previous three year’s average profits. The amendment to Section 182(3) permits: (i) loss making companies to contribute to political parties; (ii) unlimited contributions to political parties enabling significant policy influence; and (iii) non-disclosure of information on political funding to shareholders. under Section 9 of the Companies Act 2013, a company is a separate legal entity. Making political contributions is not in the best interest of a separate legal entity, but rather its agents, like In the case of Jayantilal Ranchchoddas Koticha v. Tata Iron & Steel Co. Ltd[5], an early judicial warning came when the court observed that political contributions “throttle the democracy”.AS this also goes against the basic principle of ‘one man, one vote’ as it will give corporate entities to play a major role and influence the voting process in general elections and can also posses a threat to country being ruled by the players of large corporate entities as ruling parties will come under pressure by the wealth makers. The electoral bonds scheme may violate the constitutional principle of equal opportunity and a level playing field for political parties.
Another reason for the potential unconstitutionality of the electoral bonds scheme is the inequality it creates among political parties, Between FY 2017-18 & 2018-19, political parties received a total of Rs 2,760.2036 cr from electoral bonds. A whopping 60.173% or Rs 1,660.89 cr of this was received by a single party which is the ruling political party and As per the annual audit report of BJP(ruling party) submitted with the Election Commission, the party had received Rs 210 crore worth contribution in the form of electoral bonds for FY 2017-18. This was a whopping 95% of all the electoral bonds purchased in 2017-18. As we can discern from this data, electoral bonds resulted in a significant division between the ruling party and the other parties. This demonstrates the ruling party’s intent to enrich itself by introducing a scheme, which also gives the reason to push the scheme as a money bill, so that it can surpass Rajya Sabha as money bill doesn’t need to be passed in the Rajya Sabha. The scheme encourages information asymmetry by not disclosing information about political donations to voters, but Such information is accessible to the Central Government through the State Bank of India, which has been authorized by the Scheme.
The question of whether electoral bonds are compatible with democratic principles, such as transparency, accountability, and the right to information arises and it brings up concerns about the potential for conflicts of interest, undue influence, and the erosion of the level playing field in elections led to scheme being held unconstitutional as they violated the provisions of the Indian constitution and basic principles of democracy.
THE SUPREME COURT JUDGEMENT ON THE SCHEME
The supreme court’s five judge bench led by Chief Justice D.Y. Chandrachud struck down the electoral bonds scheme on 15 February, 2024 and said’ that anonymous electoral bonds were violative of the Right to Information and Article 19(1)(a’)). The Representation of the People Act 1951, Section 182(3) of the Companies Act 2013 (as amended by the Finance Act 2017), Section 13A(b) of the Income Tax Act 1961 (as amended by the Finance Act 2017), were held to be unconstitutional, Similarly, Section 31(3) of the RBI Act 1934, along with the Explanation enacted by the Finance Act 2017, has to be struck down as unconstitutional, as it permits issuance of Bonds payable to a bearer on demand by such person. 75. The petitioners have not argued that and several direction were given by the court to State Bank of India(SBI) and Election Commission of India(ECI) which are as follows:
- the state bank of India to stop issuing the electoral bonds
- and asked to disclose names of purchase for each electoral bond by march 6,2024 and submit all the details to the Election Commission of India.
- Election commission of India to publish the same on their website within two weeks.
- Electoral bonds which are within the validity period of 15 days but have not yet been encashed by political parties shall be returned by the party and refunded to the purchaser’s account.
- All four amendments to the RBI Act 1934, the RP Act 1951, the IT Act 1961 and the companies Act 2013 were struck down along with the relevant sections of the Finance Act.
MAJOR GROUNDS FOR THE JUDGEMENT
The scheme failed to meet the balancing prong of the proportionality test as the voters’ right to know supersedes anonymity in political party funding, as constitutional fundamental rights cannot be overturned by Law. Article 19(A) in the constitution protects ‘the right to freedom and expression’ and without the complete information voters cannot not be able to express as with the help of complete information, voters will be assisted and aided in evaluating those who are contesting elections. This was one of the major grounds for terminating the scheme.
It was also observed that lobbying and capture give undue importance to big donors and certain interest groups, at the expense of the ordinary citizen, will violate “the right of equal participation of each citizen in the polity.” which will violate the Article 14 of the constitution which says’ the state shall not deny any person equality before the law or the equal protection of the laws within the territory of India.” As provisions of section 182 of companies Act,2013 was amended removing the upper limit on corporate funding, because contesting in elections will no longer be a level playing field which will go against the basic principles of Democracy and also violates the fundamental right of equality before Law. This effects the integrity of the electoral process not only in the form of corruption or quid pro quo arrangements, but also extending to the greater danger of the beneficiary being too obedient to the wishes of major contributors, the supreme court holding that the amendment to Section 182 of the Companies Act, deleting the first proviso thereunder struck down the amendment, While also noting the candidate-party dichotomy in the regulations under Section 77 of the Representation of the People Act, 1951, the Law Commission of India recommends to require candidates to maintain an account of contributions received from their political party (not in cash) or any other permissible donor.
The scheme also created inequality between the ruling party and other parties as stated earlier” The scheme encourages information asymmetry by not disclosing information about political donations to voters, but Such information is accessible to the Central Government through the State Bank of India, which has been authorized by the Scheme.” Which is also a violation to article 14 of the Indian constitution.
Several amendments were also made to the RBI Act which authorised the Central Government to permit any scheduled bank to issue EBs, with the insertion of a specific Section 31 Clause 3, which goes against the main principle of RBI being the sole authority to issue such bearer instruments.
The scheme was found to be unconstitutional based on all of these grounds.
The question of introducing these amendments through the Finance Act, 2017, which are the RBI Act 1934, the RP Act 1951, the IT Act 1961 and the companies Act 2013 through a money bill under Article 110 of the Constitution and the scope of Article 110 of the Constitution has been referred to a seven-judge Bench and is sub-judice.
METHOD AND CONCLUSION
Democracy is the means by which citizens demonstrate their legitimacy and will towards the government, Democracy’s fundamental component is elections, which are a crucial mechanism for citizens to exercise their right to choose their representative, Electoral bonds scheme was introduced to curb the unregulated campaign funds and to make the process of funding of election campaigns more transparent, but it was believed to do the opposite by denying the voters their fundamental right of ‘right to information’ and amending the provision of many Acts were proved to be unconstitutional as keeping the name of buyers of electoral bonds private for the mere reason of retribution, victimisation or retaliation cannot be treated as a legitimate aim. The scheme suffers on the grounds of inconsistency and coherence as larger public interests can be sacrificed in the name of victimisation which in itself is wrong and the wrong itself cannot be a justification or a purpose, instead should be corrected instead of violating the fundamental rights of voters. The scheme hinders the basic concept of ‘free and fair elections’ The EBS scheme was seemed to fulfil the personal interests of the ruling party, which was also evident from the various data that the ruling party received a Donations, Rs.1450.8cr were raised through electoral bonds under the cloak of anonymity. Congress on the other hand raised only Rs.383.2 cr through electoral bonds out of the total sum of Rs.918 crores it received. The scheme was opposed right from its early stage as it served as a mystery on how the scheme would serve as an effective mechanism for funding the elections while compromising not only transparency, but also the fundamental right of information of the voters, the mystery which was later resolved as the scheme acted as a barrier to transparency, which would have led to widespread corruption and money laundering.
WORKS CITED