Electoral Bond Scheme: Upholding the values ​​of transparent governance and voter access to information

- Election bonds violate the right to information contained in Article 19(1)(a) of the Constitution

A five-judge constitution bench of the Supreme Court has banned the six-year-old electoral bond scheme as unconstitutional in a decision to bring much-needed transparency to electoral donations in the country. He said in his judgment that this bond violates the right to information contained in Article 19(1)(a) of the Constitution. Through this decision, the Supreme Court has upheld the values ​​of open and transparent governance and access to voter information.

The Supreme Court has directed that the State Bank of India, which is the government-owned bank authorized to issue these bonds, should provide complete details of the bonds issued and purchased since April 12, 2019 (when an interim order was passed in this regard). The Election Commission has to publish this information on its website between March 6 and March 13. Valid election bond must be returned within 15 days.

The comment made by the Supreme Court regarding Section 182 (3) of the Companies Act 2013 through the Finance Act 2017 is also not less important. This section is about political contributions by companies. Under Section 182(3), such contribution should be authorized by the Board, should not be in cash and should be reported in the profit and loss account.

The 2017 amendment removed the limit under which 7.5 percent of last three years' profits can be donated. The amendment also removed the requirement to declare it. The court questioned whether unlimited corporate funding to political parties violated the principle of free and fair elections and also doubted the effectiveness of electoral bonds to curb black money.

The amendment was introduced in line with Section 29(a) of the Representation of the People Act, which exempts political parties from disclosing contributions received from electoral bonds. In March 2023, the Association for Democratic Reforms found that in 2020–21, 66 percent of the income of seven national parties, including the ruling party, came from unknown sources. The share of election bonds was 83 percent in this income.

The truth is that electoral bonds have increased the ambiguity of political donations. Under the current law, political parties are required to declare donations of more than Rs 20,000. Because of this limit, large donations are broken down into smaller ones. In the absence of a system of independent audit of political parties, it is easy to violate these disclosure rules.

In 2013, the government introduced the Electoral Trust Scheme, which allowed non-profit companies to set up entities that could collect funds from other companies and individuals and distribute them to political parties. These disclosure standards also do not require a declaration by the parent company setting up the trust.

As companies have more ability to influence the electoral process than individuals, the court signaled an urgent need to reform laws governing political donations. This is necessary in any democracy where money is the vehicle of political success. Laws governing election campaign donations can never be without flaws, but the Election Commission should not miss this opportunity to bring election funding rules in line with the best standards of Western democracy.