Abstract
“Politics is not a game. It is an earnest business.”
-Winston Churchill
This research paper examines the sum and substance of the 2018 electoral bond scheme which recently got rolled back by the apex court of the nation. The scheme was introduced to carry out political funding in a clean and responsible manner but did not seem to serve the purpose. Money remains a quintessential part of electoral politics,but if not effectively regulated, it can derogate the sanctity of democratic processes and undermine the integrity of democratic institutions. The scheme did not only furnish an easy way to carry out money laundering but also stood in violation to the fundamental rights guaranteed by the Indian Constitution. One of the hotly debated issues in this case was the dichotomy between donors’ right to privacy and voters’ right to information and which should enjoy precedence over the other. The central government supported the cause of the donor, whereas the Supreme court upheld the supremacy of voters’ rights.
This paper contributes to the ongoing dialogue on corruption in Indian politics, Judicial Evasion and proposes alternative ways by which we can avoid having the same defects in our upcoming political financing scheme. It also analyzes the position of the Supreme court in the electoral bond case and its role as the guardian of the constitution.
Keywords
Electoral Bond Scheme, Right to Privacy, Right to Information, Corporate funding, Judicial Evasion.
Introduction
India is the largest democracy in the world and it has maintained its democratic nature by carrying out regular free and fair elections, providing representation to opposition parties to raise dissenting voices and having an independent judiciary. Recently India hosted the world’s biggest ever democratic elections with 744 political parties contesting the election[1]. Contesting an election requires a lot of money and it is no secret that money and politics go hand in hand. But have we ever wondered from where do political parties derive their funds?
In 2017, Aruun Jaitley, then Finance minister, while introducing the Finance Bill, proposed the scheme of Electoral bonds. Simply speaking, electoral bonds are promissory notes through which common people as well as corporate entities can donate money to political parties. Under this scheme donors were prevented from donating more than ₹2000 in cash to political parties. It was laid that any donation which is more than ₹2000 was to be made through electronic media in authorized branches of the State Bank of India. These bonds were available in denominations of rupees one thousand, ten thousand, one Lakh, ten Lakh and one crore and remained valid till a period of 15 calendar days within which the political parties needed to encash these.
One of the most important features of this scheme was that the identity of the donor was to remain completely anonymous. This confidentiality would safeguard the donor’s privacy and insulate him/ her from any unnecessary harassments.
This research paper aims to briefly introduce the scheme relating to the electoral bonds and to analyze the benefits and apprehensions raised against the scheme. It compares the political financing scheme present in India with those of other democracies . The paper further illustrates how this scheme violates the Fundamental rights enshrined in our constitution and why the Supreme court declared it unconstitutional.
Research Methodology
This paper has been prepared by following the qualitative approach which uses non numerical data. The research is conducted by deeply analyzing secondary sources of information like journals, newspapers, articles and case laws. One of the most important methods used in the research is the detailed analysis of specific sections of various statutes, for example- The Companies Act, The Income Tax Act etc. Also, an in-depth study of various Articles of the Indian constitution has been carried out in reference to the electoral bond scheme.
In this study, qualitative research design has been used because, the study seeks to understand the very nature of electoral bonds, their validity as well as proposes alternatives to replace this scheme, all of which requires personal assessment of data and detailed study of existing sources.
Review of literature
The topic of “ Electoral Bonds” is highly controversial and different scholars have put forward different views regarding it.
D. Ananda has questioned the anonymous nature of these electoral bonds and is also apprehensive that the ruling party is already aware about the identity of donors[2] which runs against the principle of privacy. If this is the case, then it poses a serious threat to the democratic processes of the country.
Dr. A. Shaji George has raised concerns about electoral bonds inviting foreign influence into domestic politics[3]. This is because electoral bonds have made foreign funding of parties possible, but this can pave the way to foreign companies getting undue precedence in national politics undermining the demands of the citizens of the country which is detrimental to the whole system.
Electoral bonds have been the talk of the town due to the recent landmark judgment passed by the Supreme court which states “SBI shall submit details of the Electoral Bonds purchased from 12 April 2019 till date, to the Election Commission of India (ECI) within three weeks. The details shall include the date of purchase of each bond, the name of the purchaser and the denomination of the bond purchased. The ECI shall publish this information on its official website within one week from the receipt of the information[4]” and has further declared the scheme ultra vires the constitution.
Political Funding around the world
Election is an expensive spectacle where money is needed for advertising, campaigns, grassroot mobilization and so on. In India political parties collect funds through electoral bonds but other democracies have their own mechanisms of collecting political funds. Let’s have a brief overview of political financing mechanisms in these following countries –
i) United Kingdom – There is no limit on the amount of donations made. Although there is a prohibition on donations from foreign interests, there is no ban on corporate donations.
ii) United States of America – In the US, campaigns run up to billions. Political Action Committees or PACs are used to fund elections. These committees are constituted of labor unions, trade associations, individuals etc.[5]
iii) Germany – According to European Public Accountability Mechanisms, there is no ban on donations made by foreign entities to candidates[6]. But there is a ban on corporate donations.
iv) Canada – In Canada, contributions to political parties are not limited to any certain amount. Canada prohibits corporations and trade unions from making political contributions. There is also a ban on foreign donations.
Thus, we can find out that all the political financing schemes present in countries across the world serve the same function i.e. providing monetary support to political parties yet are quite distinct from one another in their structure and working.
The Ups and Downs of Electoral Bonds
The electoral bond scheme was introduced nearly 6 years ago by the NDA government and replaced the existing political financing laws of the country. The scheme was introduced to limit and have a track on black money channeled in politics. The scheme was meant to provide transparency regarding the monetary affairs of political parties which in turn would lead to greater levels of accountability. Privacy of the donor ensured under this scheme further helped to keep the donor’s identity anonymous and protect him/her from unnecessary harassments.
But as we all know, no roses come without sharp thrones. Same was the case with electoral bonds . One of the major drawbacks of the scheme was the allowance to uncapped corporate fundings. There was no limit to the amount of donation a company could make to a political party. Moreover, with the added veil of anonymity provided under the scheme, a lot of shell companies started channeling black money to political parties.
The scenario was different before the introduction of this scheme. Earlier the Companies Act had certain prohibitions and restrictions regarding political contributions. According to the prior provisions of section 182 of the Companies Act, a company could not contribute more than 7.5% of the average profit of the past 3 years[7]. But this provision was struck down by the Finance Act 2017.
Many activists have also raised their voice against the provision of donor’s privacy. According to them, in the name of greater transparency, this scheme has only made the political system in India more opaque.
Money received by political parties
The Election Commission of India has revealed the amount of money received by various political parties through electoral bonds and it is even more than rupees ten thousand crores.
The top beneficiaries of these electoral bonds are –
i) The Bharatiya Janata party (BJP), the ruling party at the centre
ii) The All India Trinamool Congress (TMC), the ruling party in West Bengal
iii) The Indian National Congress ( INC)
iv) The Bharat Rashtra Samithi ( BRS )
v) Dravida Munnetra Kazhagam ( DMK ), the ruling party in the state of Tamil Nadu
Some of the political parties which received no money through Electoral Bonds are-
i) Bahujan Samaj Party (BSP)
ii) National People’s party ( NPP), ruling party in Meghalaya
iii) Communist Party of India ( CPI)
iv) Communist Party of India- Marxist ( CPI-M)
It is quite unfortunate to see the amount of political donations made in a developing country like India where even today a large share of the population live below the poverty line. If even half of this money was used for the betterment and welfare of the citizens then India would have reached new heights.
Violation of Fundamental Rights
The system of electoral bonds stands in opposition to the following fundamental rights:
- Violation of right to information
Let’s take a look at how the introduction of the electoral bonds affected the following acts and how it is a straight violation of Article 19(1)(a)[8] of the Indian constitution-
i) Section 183(3) of the Companies Act, 2013 earlier made it necessary for companies to disclose the amount contributed to political parties along with specific particulars of the total amount but after the enactment of the Finance Act 2017, it was no longer required to disclose the particulars of the amount.
ii) Section 13A[9] of the Income Tax Act, 1961 required political parties to maintain an account of any voluntary contributions made by individuals whose worth is more than ₹20,000 with the Donor’s name and address. But after the electoral bond scheme (EBS) came into force, it was no longer necessary to record the identity of the donor if contribution was made through electoral bonds.
Looking at the above two amendments, one can easily notice how the EBS has led to lowering of accountability levels. In quest of transparency, the scheme has made electoral politics dangerously opaque. The amendments made in the Companies Act clearly deprives the shareholders of the company from having knowledge about the amount of money being used for political contributions. Moreover, voters are denied the right to have information about how the political parties collect their funds which again impairs their right to vote with adequate and relevant information.
- Violation of right to equality
Article 14[10] The Indian constitution guarantees the right to equality to all citizens in India irrespective of their caste, creed, gender, religion and sex. The scope of this section is much wider and goes beyond discrimination. As we all know , companies under this scheme could now make political contributions alongside individuals and there is no limit to such donations. But we cannot equate companies with individuals because-
i) the capital power available at the disposal of companies is in no way at par to that of normal people, and
ii) the fundamental rights provided by our constitution are available only to individuals and not to companies.
Sources provide that a lion’s share of total electoral bonds were purchased in the denomination of ₹1 crore which clearly indicates that most of these contributions were made by corporates rather than individuals. If we look closely, we can easily find the simple motive behind these large scale corporate fundings. The companies found a hassle-free way to channel their black money to political parties as well as obtain income tax benefits .
At the end of the day, corporate funding leads to Quid pro Quo i.e. in return for monetary contributions, corporates can have an access to policy making. This shakes the very basis of equality and jeopardizes the democratic nature of India.
Supreme Court’s verdict
Shortly after the amendments were made, these changes were challenged in the court. The Association for Democratic Reforms (ADR) filed a writ petition challenging the scheme. Later on, the Communist Party of India(Marxist) CPI-M, also came forward and challenged the 2018 scheme in the Supreme Court.
In 2019, the Election Commission of India submitted the overwhelming concerns it had regarding the utility of the scheme and how the amendments can have “serious repercussions”.
On 15th February 2024, the five-judge constitutional Bench gave its verdict and declared the EBS as being ‘unconstitutional’. The court addressed the following issues:
i) Unlimited and unrestrained influx of corporate funding in politics violates the principles of free and fair elections as laid down by Kihoto Hollohan v. Zachillhu (1992)[11] which added free and fair elections to the basic structure of the constitution. These donations have an inevitable influence on electoral verdict.
ii) Supreme court solved the dilemma existing between donor’s right and voter’s right. The central government supported the scheme and stated that keeping the identity of the donor confidential was important to protect their privacy, whereas the Supreme court put forward that voter’s right to know who funds the political parties cannot be equated with donor’s right to privacy as the former is the prerequisite to political equality whereas the later only invites opacity and unaccountability to the system.
iii) The Supreme court also quashed down the central government’s claim that EBS was meant to reduce the influx of black money in politics. The court sternly held that “curbing of black money” must in no way pose any threat to the citizen’s fundamental right to vote.
iv) One of the main reasons why the electoral bonds were struck down was the upright violation of the right to information. In a democratic state, citizens should have the right to question the government authorities and obtain answers from them. But the anonymous nature of the scheme led to the temporary suspension of voter’s right to know.
However, 6 years after coming into force, the EBS has been finally brought down by the apex court of the country which has led to the triumph of democracy.
Alternatives to Electoral Bonds
The Supreme court has definitely struck down the EBS but no other scheme has been put forward to fill the vacuum that has arisen. A successful democracy requires free and fair elections and elections require political parties which provide representations to common masses. And most importantly, political parties need money without which they cannot sustain their campaigning process.
The lingering question now is “ What is the alternative?”. Keeping the essential features and defects of the EBS in mind we definitely now have an idea of what we should omit in our upcoming financial scheme. Let’s list out those points:
i) Ban on corporate donations
Corporate donations should undoubtedly be prohibited. Corporates do not have the power to cast votes and thus their monetary contribution acts more like a bribe to keep the party in power by their side. This is also against the principle of ‘One person One vote’. If it is not banned, then democracy in India will perish as the government will become a mere puppet in the hands of companies. To prevent the rise of such a situation, corporate funding must at least be limited, if not absolutely restrained.
ii) No direct contributions to political parties
With the data disclosed regarding the amount of money received by political parties through electoral bonds, we can easily point out the clear disparity in the amounts received by various parties. some of the parties received excessively large sums where some received little or no money. To prevent this discrepancy, and camouflaged corruption, the next scheme should prohibit direct donations to political parties. Instead a central fund must be created where the contributions will be collected and then it will be proportionately distributed among the parties on the basis of percentage of votes received and the number of seats acquired by the parties.
iii)Clear statement of expenses by political parties
Transparency and accountability are the two requisites needed to reduce the corruption and opacity in India’s electoral processes. That is why, political parties must be made bound by law to produce statements containing their expenses in campaigns and other processes. The common people should have a clear Idea and knowledge of how the donations are being utilized by the political parties. This will provide two fold advantages :
i) Political parties will not be able to illicitly use the money for unlawful accomplishments.
ii) Information about expenses will be available to common people which will provide them with relevant data and would shape their political outlook.
Suggestions and Conclusion
“ The only way to get money out of politics is to get politics out of Money- making”
– Richard Salsman
It took six long years for the judicial system of India to strike down the scheme of Electoral Bonds although its unconstitutionality was very evident from the initial days. In these six years, many companies obtained an upper hand in governmental affairs by making illicit transactions. Eminent Law scholar, Gautam Bhatia, has called out the judicial system for “ keeping a case pending, and delaying adjudication” and has termed “Judicial Evasion[12]” as the Supreme Court’s best strategy in dealing with sensitive cases.
The electoral bond scheme has undoubtedly led to a lot of corruption and money laundering. It has eroded people’s faith in the working of the democratic and political processes of the country. A sound judiciary which can take prompt decisions is the ultimate custodian of citizen’s liberties in a democracy. But, if the judiciary doesn’t act when it is needed then it will only pave the way to despotism. The famous saying “ Justice delayed is justice denied” goes well with the electoral bond case where the judiciary took necessary actions only after a permanent damage was already caused.
Sneha Maji
Department of Law, University of Calcutta
[1] Vijidan Mohammad Kawoosa, Record 744 Political Parties Contesting Indian Elections ( May.27, 2024, 03:30 pm) https://www..reuters.com/graphics/INDIA-ELECTION/POLITICAL-PARTIES/dwpkzrymrvm/
[2] D. Ananda, “ELECTORAL BONDS: A PERIL TO DEMOCRACY AND TRANSPARENT ELECTIONS IN INDIA”, 9(1) Journal of Liberty and International Affairs 89, 92-93 ( 2023)
[3]Dr. A. Shaji George, The Unconstitutional Nature of Electoral Bonds in India: Impacts on Political Transparency and the Democratic Process, 2(1) Partners Universal Innovative Research Publication 150, 152- 153 ( 2024)
[4] Association for Democratic Reforms & Anr. v. Union of India & Ors., (2024) 3 S.C.R. 417( India)
[5] V Nivedita,Electoral bond controversy: How are democracies around the world funding their parties?, The Hindu BusinessLine(Dec. 06, 2021, 03:25 PM) https://www.thehindubusinessline.com/news/electoral-bond-controversy-how-are-democracies-around-the-world-funding-their-parties/article30613938.ece
[6] Germany Public Accountability Index, https://europam.eu/?module=country-profile&country=Germany.
[7] Companies Act , 2013, No. 18, Acts of Parliament, 2013 ( India).
[8] INDIA CONST. art. 19, cl. 1.
[9] The Income-tax Act, 1961, No. 43,Acts of Parliament, 1961 (India).
[10] INDIA CONST. art. 14
[11] Kihoto Hollohan vs Zachillhu And Others, (1992)1 SCR 686 ( India)
[12] Gautam Bhatia, Judicial Evasion and the Electoral Bonds Case,Constitutional Law and Philosophy (Apr.13, 2019), https://indconlawphil.wordpress.com/2019/04/13/judicial-evasion-and-the-electoral-bonds-case/