Introduced in 2018, electoral bond scheme allowed anonymous political funding

The electoral bond (EB) scheme of political funding, which the Supreme Court on Thursday struck down, was introduced in 2018 and allowed the purchase of bonds at any State Bank of India (SBI) branch in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh and ₹1 crore. They could be bought through a KYC-compliant account with no limit on the number of electoral bonds that a person or company could purchase.
Every party registered under section 29A of the Representation of the People Act and having secured at least 1% of the votes polled in the most recent Lok Sabha or state election was allotted a verified account by the Election Commission of India (ECI) for the bonds.
On October 16, the Supreme Court referred a clutch of petitions against the scheme to a Constitution bench of five judges. It started hearing the petitions, filed by Association for Democratic Reforms (ADR), non-profit Common Cause, Congress leader Jaya Thakur, and the CPI (M), among others, on October 31.
The bench heard the matter on three consecutive days when it picked holes in the 2018 EB scheme. It flagged a spate of “flaws” while the government mooted two suggestions. First, the government said the court could consider substituting SBI with the Reserve Bank of India (RBI) as the statutory bank for issuing EBs and keeping accounts. Second, the court could criminalise any instance of breach of confidentiality regarding donors.
The court remained of the tentative view that the EB scheme did not appear to augur well with the need for transparency when such donations could very well be kickbacks. The government maintained that confidentiality is necessary so that no political party gets to know as to which entities have not donated to it but have given funds to some other party.
Attorney-general R Venkataramani, who argued on behalf of the government, said there cannot be a general right to know everything under the sun. He said that the petitioners failed to show what larger public purpose would be served by disclosing the identity of the donors. Venkataramani said there was enough for the government to corroborate how the scheme was helping weed out black money.
For the petitioners, senior counsel Kapil Sibal and Vijay Hansaria, along with advocates Prashant Bhushan, Shadan Farasat, and Nizam Pasha, argued that either the scheme must go on account of violating people’s right to know and affecting free and fair election, or the court ought to direct for full disclosure of the purchasers and donors.
The five-judge Constitution bench, headed by Chief Justice of India (CJI) Dhananjaya Y Chandrachud, and comprising justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra, ruled on the legal sanctity of the EB scheme ahead of the general elections expected to take place in April and May.
The bench on November 2 reserved its judgment in the matter even as it observed on the day that the scheme suffers from “serious deficiencies”. It added that the Union government ought to consider designing a new tailor-made system balancing proportionality and for a level playing field instead of “putting a premium on opacity”.
In response to a question from the bench, the government refrained from making a statement that it was prepared to make suitable amendments to the Companies Act to ensure that profit-making companies could make political donations, which will be capped at a fixed percentage of their profits.
Solicitor General Tushar Mehta on November 2 said that making laws was a legislative function. He said he could not commit nor was he of the view that donations had to be a percentage of profit of a company. Mehta produced a letter signed by the chairman of SBI to support his claim that not even the Union government has access to information about EBs. He said should the court decide that more safeguards needed to be included in the scheme, RBI could be the only designated bank to issue EBs.
On November 2, the bench directed the ECI to submit within two weeks complete information on every donor and contributions received by political parties through EBs until September 30.