The judgment of the Supreme Court of India, on February 15, 2024, striking down the electoral bonds scheme, is a landmark moment. Democracy requires transparency and the fact is that the electoral bonds scheme was opaque.
Voters in India have no idea who has been funding political parties and the amounts given. In all leading democracies, transparency is the basis of campaign funding. The Court has restored that transparency.
Funding limits removed
There are other legal issues. The first is the limit on funding by a corporate house or organisation. Again, the world over, this amount is limited to prevent undue influence on the government. We had such a provision in India before electoral bonds were introduced. The judgment says: “The chief reason for corporate funding of political parties is to influence the political process which may in turn improve the company’s business performance....”
Electoral bonds also removed the earlier limits on how much of its profits a company could donate to political parties. The scheme even allowed loss-making companies to make donations. This could have opened the door for shell companies to be formed with the purpose of channelling funds to political parties. The Election Commission of India has said, “This opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties.” This too has been reversed by the Court.
Democracies went through a phase of crony capitalism, where big money funded political parties. In return, laws, policies, schemes and incentives were made for the benefit of the donors. In a limited way, the Supreme Court’s judgment prevents this from happening in India.
There was an Amendment to the Finance Bill. In any country, the central bank alone has the authority to issue currency such as notes and bonds. Section 31 of the Reserve Bank of India (RBI) Act says “only the RBI or the Central Government authorized by the RBI Act shall draw, accept, make or issue any bill of exchange or promissory note for payment of money to the bearers of the note or bond”.
The Government amended the RBI Act using a Finance Act, and allowed under a new clause 31(3), the central government to authorise any scheduled bank to issue electoral bonds. This amendment to the Finance Act too has been struck down.
A well thought-out plan
We need to pause for a minute to understand a few issues. The Amendment to the RBI Act was passed in a Finance Bill as this does not have to be passed by the Rajya Sabha. At the time of the introduction of the electoral bonds scheme, the ruling party did not have a majority in the Rajya Sabha and wanted to avoid a vote in the Upper House. But can any issue be inserted into a Finance Bill? Electoral bonds have nothing to do with the provisions for a Finance Bill. Again, a number of laws were amended to introduce the electoral bonds such as the RBI Act 1934, the Representation of the People Act (RPA), 1951, the Income Tax Act 1961, and the Companies Act 2013. It was carefully thought-out. It was in response to a Central Information Commission (CIC) ruling that political parties have to be completely transparent about their funding. The electoral bonds were introduced to bypass the CIC ruling. But why are political parties afraid of transparency?
The legal system remains opaque to the so-called ordinary citizen and voter. When four laws are amended to introduce a scheme that strikes at the root of democracy, namely transparency, layers of obfuscation are drawn over the scheme so that the citizen gives up trying to understand it. But these are not technical issues. These are issues that affect the very basis of democracy.
This also raises fundamental issues in a democracy. Any government with a majority can pass any Bill, which becomes law. There is no concept of an independent vote in India and ruling party members have to vote in favour of the government unlike in the United States. This means that a few people at the top of a ruling party can get almost any law they want passed. In the case of electoral bonds, processes for public consultation, and discussions in Parliament were not followed.
The essence of the judgment
The Supreme Court judgment can be summarised as follows. The electoral bonds scheme has been struck down. All Amendments to the RPA Act, the Finance Act 2017, and the Companies Act 2013 are violative of Articles 19 and 14 of the Constitution. Article 19 refers to the right to information, and Article 14 to the right to equality, where arbitrariness in law is not permissible. These Articles are part of the Fundamental Rights in the Indian Constitution, and cannot be violated. The Supreme Court has directed the State Bank of India (SBI), the sole bank receiving funds in exchange for electoral bonds, to stop issuing them. The SBI has to submit the full details of all electoral bonds that have been issued so far, to the Election Commission of India (ECI) by March 6, 2024. In turn, the ECI has to publish this information on its website within two weeks.
We need to note that two constitutional bodies, the ECI and the Supreme Court, have acted in favour of democracy. The power of judicial review of laws passed by Parliament on the basis of the Constitution is precious. We need to applaud the Constitution and those who framed it.
Editorial | Unbonded: On the striking down of the Electoral Bond Scheme by the Supreme Court
The issue of money in elections, which includes the use of black money and bribing of voters using campaign funds and freebies, remains. It is said that the price of democracy is eternal vigilance. The Supreme Court’s judgment is the outcome of vigilance by citizens. We need political parties, but it is up to us to ensure that they work for the good of society and the nation.
Trilochan Sastry is Chairman and Founder, Association for Democratic Reforms (ADR) and Professor, Indian Institute of Management Bangalore
