The Supreme Court of India is scheduled to begin hearings on a set of petitions challenging the Electoral Bonds scheme on October 31, 2023. The constitution bench tasked with this critical evaluation of electoral bonds includes Chief Justice of India DY Chandrachud, along with Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra. The case had initially come before a three-judge bench, consisting of CJI Chandrachud, Justices JB Pardiwala, and Manoj Mishra, who subsequently referred it to a five-judge bench due to the matter’s significant implications.

These petitions challenge the amendments introduced by the Finance Act 2017, which laid the groundwork for the anonymous electoral bonds scheme. This issue holds great significance as it raises concerns about the transparency of political funding, a fundamental aspect of a democratic electoral process. Here is an exploration of the legal complexities involved in this case:

 Electoral Bonds Scheme and Legal Framework  

The Finance Act of 2017 introduced crucial amendments to various legislations, including the Reserve Bank of India Act, Companies Act, Income Tax Act, Representation of Peoples Act, and Foreign Contributions Regulations Act. These changes were intended to facilitate the electoral bonds scheme.

The central provision at the heart of this scheme is Section 29C of the Representation of Peoples Act 1951 (RPA). This amendment permits donors to purchase electoral bonds from specified banks and branches using electronic payment methods, provided they fulfill the KYC (know your customer) requirements. However, what sets these bonds apart is that they allow for anonymous donations to political parties. Political parties are not obliged to disclose the source of these electoral bonds to the Election Commission of India (ECI).

The electoral bonds are available in various denominations, including Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakhs, and Rs. 1 crore. Notably, the donor’s name is not inscribed on the bond, which makes these contributions untraceable. The bonds have a validity period of 15 days from the date of issue, within which the political party recipient must encash them. Moreover, these bonds are counted as voluntary contributions received by eligible political parties and enjoy income tax exemptions under Section 13A of the Income Tax Act, 1961.

 Challenges to the Electoral Bonds Scheme  

The petitions challenging the electoral bonds scheme have been filed by various parties, including the political party Communist Party of India (Marxist) and NGOs Common Cause and Association for Democratic Reforms (ADR). They have raised several concerns about the scheme, describing it as “an obscure funding system unchecked by any authority.”

One of the main apprehensions expressed in these petitions is that the amendments introduced by the Companies Act 2013 could elevate “private corporate interests” over the welfare and rights of the public when shaping government policies. This apprehension primarily revolves around the potential influence that large corporate donations could wield in shaping political decisions.

 The Election Commission’s Perspective  

In March 2019, the Election Commission of India filed an affidavit expressing its reservations about the anonymous electoral bond scheme. The Commission considered this scheme a “retrograde step” with adverse implications for transparency in political funding. The Election Commission’s view underscores the critical importance of transparency in political donations as a safeguard for the integrity of elections and the democratic process.

 Supreme Court’s Previous Ruling  

In 2021, the Supreme Court had an opportunity to address the issue of electoral bonds when it was approached to stay the release of electoral bonds before specific state assembly elections. However, the Court declined to do so, highlighting the importance of these bonds in the electoral process. It should be noted that this ruling pertained to a specific situation and did not resolve the broader challenges raised by the petitions before the constitution bench.

 Anticipated Legal Debate  

As the constitution bench commences hearings, the legal debate will likely revolve around the core issues raised by the petitioners. These issues include the lack of transparency associated with anonymous political funding, the potential influence of corporate interests on government policies, and the constitutional principles of a fair and transparent electoral process.

The court’s deliberations and eventual verdict will significantly impact the electoral bonds scheme, and more importantly, they will have far-reaching consequences for the democratic processes of India. The decision will set a crucial precedent regarding political funding and transparency, shaping the landscape of future elections and political contributions in the country.

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