On Monday, October 16, the Supreme Court decided to refer the petitions challenging the anonymous electoral bonds scheme to a Constitution Bench comprising five judges. Chief Justice of India DY Chandrachud, while addressing the matter, stated,
“In view of the importance of the issue raised, and with regard to Article 145(4) of the Constitution of India, the matter be placed before a bench of at least five judges.”
He further mentioned that the matter will remain on the board for October 30.
The case revolves around a series of petitions that challenge the amendments introduced by the Finance Act 2017, which paved the way for the anonymous electoral bonds scheme. This Act introduced changes to several legislations, including the Reserve Bank of India Act, Companies Act, Income Tax Act, Representation of Peoples Act, and the Foreign Contributions Regulations Act, to facilitate the issuance of electoral bonds.
Electoral bonds, as described, are instruments akin to promissory notes or bearer bonds. They can be purchased by any individual, company, firm, or association, provided they are either Indian citizens or entities established in India. These bonds, available in various denominations, are specifically designed for contributing funds to political parties. The 2017 Finance Act established a system allowing scheduled banks to issue these bonds for electoral funding. Notably, this Act was passed as a money bill, which means it bypassed the need for Rajya Sabha’s assent.
The core of the bond system is that a donor can buy an electoral bond at specified banks using electronic payment methods after completing the necessary KYC (know your customer) requirements. However, political parties receiving these bonds aren’t mandated to disclose the source to the Election Commission of India (ECI). These bonds can be purchased in denominations ranging from Rs 1,000 to Rs 1 crore. Crucially, the donor’s name is absent from the bond, which remains valid for 15 days from its issuance date.
Petitions challenging this scheme have been filed by entities such as the Communist Party of India (Marxist), NGOs Common Cause, and the Association for Democratic Reforms (ADR). They criticize the scheme as
“an obscure funding system which is unchecked by any authority.”
Concerns have been raised that the amendments to the Companies Act 2013 might result in
“private corporate interests taking precedence over the needs and rights of the people of the State in policy considerations.”
In March 2019, the Election Commission of India expressed its reservations about the scheme, labeling it a “retrograde step” due to its potential impact on transparency in political funding. The Supreme Court, in 2021, declined to halt the release of electoral bonds ahead of certain state assembly elections.
The Central government, in its counter-affidavit, has defended the scheme, asserting its transparency. The top court, earlier this month, scheduled the final hearing on the challenge to the Electoral Bonds scheme for October 31.
