On Monday, October 16, the Supreme Court made a significant decision to refer the petitions challenging the controversial anonymous electoral bonds scheme to a Constitution Bench consisting of five judges. Chief Justice of India DY Chandrachud emphasized the importance of the matter and invoked Article 145(4) of the Indian Constitution to justify the formation of this special bench. The case will remain on the docket until October 30.


This legal case revolves around a series of petitions contesting the amendments introduced by the Finance Act of 2017, which paved the way for the introduction of anonymous electoral bonds. Just last week, a three-judge bench led by CJI Chandrachud agreed to hear these petitions following a plea from the petitioners who sought an expedited hearing before the upcoming general elections.


The key change brought about by the 2017 amendment to Section 29C of the Representation of the People Act, 1951, allows donors to purchase electoral bonds at specified banks and branches using electronic payment methods after completing the necessary KYC (know your customer) requirements. However, the concerning aspect is that political parties are not obliged to disclose the source of these bonds to the Election Commission of India (ECI). These bonds are available in various denominations, including Rs 1,000, Rs10,000, Rs 1 lakh, Rs 10 lakh, or Rs 1 crore. Importantly, the identity of the donor is not included on the bond, and it remains valid for 15 days from the date of issue, during which it must be redeemed by the recipient political party. The face value of these bonds is treated as income by eligible political parties, serving the purpose of exemption from income tax under Section 13A of the Income Tax Act, 1961.


As a result, these petitions were initially filed in 2017 to challenge the provisions of the Finance Act of 2017 that facilitated the introduction of anonymous electoral bonds. This particular act brought amendments to various laws, including the Reserve Bank of India Act, Companies Act, Income Tax Act, Representation of the People Act, and the Foreign Contributions Regulations Act, all in support of the electoral bonds.


The petitions have been submitted by the political party Communist Party of India (Marxist), as well as non-governmental organizations Common Cause and the Association for Democratic Reforms (ADR). These entities contest the scheme, describing it as an “opaque funding system that lacks oversight from any authority.” The petitioners also express concerns that the changes to the Companies Act of 2013 could lead to “private corporate interests taking precedence over the needs and rights of the people of the State in policy considerations.”


It Is essential to note that in 2021, the Supreme Court declined to halt the issuance of electoral bonds ahead of certain state assembly elections.


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