Supreme Court Halts Electoral Bonds Scheme: SBI Ordered to Stop Issuing EBs

Why in News?

• In the much-awaited ruling in the electoral bonds case, the Supreme Court ruled on Thursday, February 15, that anonymous electoral bonds violate the right to knowledge guaranteed by Article 19(1)(a) of the Constitution. The plan has been declared unconstitutional as a result.

What is the Electoral Bond Scheme?

• Introduction in 2017 Union Budget:
  • Electoral bonds were introduced in the 2017 Union Budget with the aim of enhancing transparency in political funding.
• Concerns Over Donor Anonymity:
  • Concerns arose due to the anonymity of donors and the lack of disclosure regarding their identities.
  • Reduction in Cash Donation Limit: The cash donation limit was reduced from ₹20,000 to ₹2,000, while the mandatory disclosure threshold remained at ₹20,000.
• Role of Private Entities:
  • Private entities were allowed to purchase electoral bonds and transfer them to political parties.
• Notification by Government:
  • The scheme was notified by the government on January 2, 2018, and pitched as an alternative to cash donations to political parties.
    Mechanism of Electoral Bonds: Electoral bonds are monetary instruments that citizens or corporate groups can purchase from a designated bank and donate to a political party.
• Redemption Process:
  • Political parties are free to redeem these bonds for money, allowing for a transparent and accountable method of political funding.

How Donations are Made via Electoral Bonds?

1. Purchase Process:
   • Electoral bonds can be acquired through a Know Your Customer (KYC)-compliant account.
   • Individuals or entities purchase these bonds to make donations to political parties.
2. Transfer of Funds:
   • Once purchased, the funds are transferred to the chosen political party.
   • The donation process involves transferring the monetary value of the electoral bonds to the political party’s designated account.
3. Encashment by Political Parties:
   • Political parties are required to encash the donations within a specified timeframe.
   • This ensures that the funds are effectively utilized by the receiving party.
4. Unlimited Purchase Limit:
   • Notably, there is no limit on the number of electoral bonds that a person or company can purchase.
   • This allows for flexibility in the donation process, enabling larger contributions if desired.

Eligibility Criteria for Political Parties to Receive Electoral Bond Funds:

1. Legal Registration:
   • Only political parties registered under Section 29A of the Representation of the People Act, 1951, are eligible to receive electoral bonds.
   • This ensures that the receiving parties are legally recognized entities within the electoral system.
2. Electoral Performance Requirement:
   • Parties must have secured not less than 1 per cent of the votes polled in the last elections to the Lok Sabha or a state legislative assembly.
   • This criterion ensures that only parties with a certain level of electoral support are eligible to receive funds via electoral bonds.

Understanding the Electoral Bonds Scheme: A Controversial Path to Political Funding

• Introduction:
  • The Electoral Bonds Scheme, introduced by former finance minister Arun Jaitley during the 2017 Budget Session, aimed to revolutionize political funding in India. However, its implementation has been marred by controversy and legal challenges.
• Scheme Implementation:
  • In January 2018, the scheme was notified as a source of political funding through amendments to the Finance Act and the Representation of the People Act.
  • The Centre also made amendments to various other acts, including the Companies Act, Income Tax Act, FCRA, and the RBI Act, to facilitate its implementation.
• Legal Challenges:
  • Despite government assertions of transparency, the scheme faced legal challenges in the Supreme Court. Petitions filed by various parties, including the CPI(M), Congress, and NGOs, questioned the constitutional validity of the scheme.
• Concerns Raised:
  • Opponents of the scheme raised several concerns, including violations of the right to information, potential misuse by shell companies, and allegations of promoting corruption.
  • Senior advocate Kapil Sibal highlighted the risk of political parties diverting donations for non-election purposes.
• Government Defense:
  • The Centre defended the scheme, arguing that it enhances transparency and acts as a deterrent against illicit money in elections.
• Conclusion:
  • The Electoral Bonds Scheme remains a contentious issue, with proponents emphasizing its potential to reform political funding and opponents highlighting its loopholes and risks.
  • The ongoing legal battle underscores the need for a comprehensive and transparent framework for political finance in India.

FAQs

Q1: What is electoral bond verdict?Ans: On Thursday, February 15, a five-judge Supreme Court bench rendered a decision regarding the constitutionality of the electoral bonds program, declaring it “unconstitutional” in two rulings that suggested a unanimous decision.Q2: What are the issues with electoral bonds?Ans: The court has decided to primarily address two crucial concerns pertaining to the electoral bonds scheme: the legality of undisclosed contributions to political parties and the violation of citizens’ rights to access information regarding political party funding, which could potentially facilitate corrupt practices.