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Supreme Court Strikes Down Electoral Bond Scheme, Cites Concerns Over Transparency and Democratic Integrity

Electoral Bond

Electoral Bonds (EBs) are a form of financial instrument introduced in India to ensure transparency and accountability in political funding while also attempting to keep donors anonymous. Here’s a detailed explanation of how they work:

 Concept and Purpose

Electoral Bonds are designed as a tool for donating money to political parties in India. The primary objectives behind their introduction were to:
Enhance Transparency: By routing political donations through formal banking channels, the government aimed to clean the political funding system from the influence of black money.
Protect Donor Anonymity: Donors, whether individuals or entities, can contribute to political parties without disclosing their identity to the public, thus protecting them from potential backlash or undue influence.
Regulate Political Funding:** Encouraging donations through EBs is seen as a step towards documenting and auditing the flow of funds to political parties.

How They Work

1. Denominations: EBs are issued in multiple denominations, starting from 1,000 rupees to 10 million rupees, making them accessible to a wide range of donors, from individuals to large corporations.

2. Purchase and Validity: They can be purchased by Indian citizens, companies incorporated in India, or entities legally allowed to donate to political parties. The bonds are available for purchase at specified times of the year from designated branches of the State Bank of India (SBI). Once purchased, the bonds are valid for 15 days.

3. Donation Process: A donor buys EBs from the bank and can donate them to a political party. The political party can redeem these bonds through their verified accounts within the validity period.

4. Anonymity: The donor’s identity is kept anonymous to the public and the recipient’s political party. However, the bank knows the buyer’s identity, as KYC (Know Your Customer) norms are applicable at the time of purchase, ensuring a traceable trail of transactions for regulatory and tax purposes.

5. Redemption: Political parties registered under the Representation of the People Act, 1951, and secured at least 1% of the votes in the last general or assembly elections can receive donations through EBs. These parties can redeem the bonds through their designated bank accounts.

 Criticism and Concerns

While the system of Electoral Bonds was introduced to clean up political financing, it has faced criticism and concerns from various quarters:
Transparency vs. Anonymity: Critics argue that while the bonds may have brought the transactions under the banking system, the anonymity provided to donors hides the source of political funding from the public, potentially leading to unchecked corporate influence and quid pro quo arrangements.
Regulatory Oversight: The scheme has raised questions about the authorities’ level of scrutiny and oversight over the funds being donated to political parties.
Potential for Misuse: The anonymity feature has led to concerns that it could be misused for money laundering, making it difficult to trace the source of funds.

In summary, Electoral Bonds represent a novel approach to political funding, aiming to balance transparency, accountability, and donor anonymity. However, the effectiveness and integrity of this system continue to be a subject of debate and scrutiny.

The Supreme Court of India’s decision to strike down the electoral bond scheme introduced by the National Democratic Alliance (NDA) government in 2018 marks a significant moment in the ongoing debate over political funding and transparency in India. This ruling highlights the judiciary’s role in scrutinizing and, when deemed necessary, overturning government policies that may affect the democratic fabric of the nation. Here’s a detailed breakdown of the context, the court’s verdict, and its implications:

Background of the Electoral Bond Scheme

As discussed earlier, the electoral bond scheme was introduced with the intention of cleaning up the sources of political funding, by allowing donations to be made through a formal and traceable banking mechanism while keeping the identity of the donors anonymous. The government argued that this would reduce the influx of black money into political funding and ensure that contributions were traceable by the banking system, albeit not by the public or other political entities.

The Supreme Court’s Verdict

The five-judge constitution bench of the Supreme Court, delivering a unanimous verdict, declared the electoral bond scheme unconstitutional for several reasons:

1. Violation of Democratic Transparency:The court found that the scheme’s provision for anonymity contradicts the principles of transparency and accountability in a democracy. The inability of the public and watchdog entities to know the source of political donations undermines the democratic ethos, which relies on informed citizens.

2. Potential for Policy Influence: The verdict pointed out that the scheme could potentially allow wealthy individuals and corporate entities to wield undue influence over policy-making by making substantial anonymous donations. This concern aligns with criticisms that the scheme could lead to a quid pro quo, where large donors could covertly sway government policies in their favor.

3. Arbitrary Nature: The court labeled the scheme as “manifestly arbitrary,” suggesting that it was introduced without sufficient consideration of its impact on the democratic process and the potential it created for misuse.

4. Ripping the Shroud of Secrecy: By striking down the scheme, the Supreme Court has effectively lifted the veil of secrecy surrounding the donations made to political parties through electoral bonds.

This aspect of the verdict emphasizes the court’s stance on the need for transparency in political donations, potentially paving the way for a more open disclosure of the sources of political funding.

Implications of the Verdict Electoral Bond 

The Supreme Court’s decision has far-reaching implications for political funding in India, especially with a general election on the horizon:

Increased Transparency: Political parties may now have to seek alternative means of funding that ensure greater transparency and public disclosure, which could lead to a more informed electorate.
Impact on Political Funding: The ruling could impact the financial strategies of political parties, especially those that relied heavily on donations through electoral bonds.

Parties may need to adapt to more transparent funding mechanisms that could be subject to public scrutiny.
Legal and Regulatory Reforms: The verdict may prompt legal and regulatory reforms concerning political donations and funding, potentially leading to stricter guidelines that mandate disclosure of donors and enforce limits on donations.
Public and Political Reaction: The decision is likely to elicit mixed reactions from various political entities and the public. While some may view it as a step towards cleansing the political system, others might see it as a constraint on political financing.

In summary, the Supreme Court’s ruling against the electoral bond scheme is a landmark decision that emphasizes the importance of transparency in political donations, aiming to curb the influence of unchecked and anonymous funding in the democratic process. The verdict is a call for more open and accountable political financing practices in India, reflecting the judiciary’s active role in safeguarding democratic principles.

The statement highlights critical concerns regarding the potential for quid pro quo arrangements and the lack of transparency in political funding, particularly in the context of the electoral bond scheme in India.

The judiciary’s rejection of the government’s argument underscores the significance of transparency in political donations. While the government argued that anonymity in the scheme would deter money laundering and protect donors from retaliation by non-recipient parties, the court emphasized the need for accountability and scrutiny in political financing.

The mechanisms described by Justice Chandrachud illustrate various ways in which electoral bonds could facilitate undisclosed contributions to political parties.

Despite the anonymity of donors, the bonds could be physically handed over to party officials, sent to party offices with the donor’s name, or disclosed to party members for verification.

These processes raise concerns about the potential for undisclosed influence over political decisions and policymaking.

Moreover, the data indicating that a significant portion of contributions (ninety-four percent) were made in denominations of one crore rupees underscores the magnitude of financial influence wielded through electoral bonds. Such substantial contributions raise questions about the motives behind these donations and their potential impact on political decision-making processes.

In essence, the rejection of the electoral bond scheme by the Supreme Court reflects a broader commitment to democratic principles, transparency, and accountability in political funding. By addressing concerns about quid pro quo arrangements and the lack of transparency, the verdict seeks to uphold the integrity of the democratic process and ensure that political decisions are not unduly influenced by undisclosed financial interests.

News Shot 24
Author: News Shot 24

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