• UGI USER
  • Feb 19, 2024
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THE CLEAR MESSAGE IN THE COURT’S ‘NO’ TO ELECTORAL BONDS

Syllabus:

GS 2:

  • Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.
  • Separation of powers between various organs dispute redressal mechanisms and institutions.
  • Salient features of the Representation of People’s Act.

Focus:

  • Afive-judge Constitution Bench of the Supreme Court (SC) of India unanimously struck down the Electoral Bond Scheme (EBS) and associated amendments as unconstitutional.
Source:- India Today

In a landmark decision, a five-judge Constitution Bench of the Supreme Court (SC) of India unanimously struck down the Electoral Bond Scheme (EBS) and associated amendments as unconstitutional. This judgment marks a pivotal moment in the landscape of political financing in India, addressing longstanding concerns about transparency and accountability in the funding of political parties. The ruling is expected to have profound implications for the way political campaigns are financed, aiming to curb the influence of anonymous and potentially unaccountable money in Indian politics.

Electoral Bonds: Overview and Mechanics

·    Introduction of Electoral Bonds: Introduced in 2018 to facilitate anonymous funding to political parties, electoral bonds serve as financial instruments for political donations.

·    Legislative Background: Announced during the 2017 Budget Session and operationalized in January 2018 through amendments to several acts, including the Finance Act of 2017 and the Representation of the People Act of 1951, to enable their issuance.

Key Features of Electoral Bonds:

·    Issued exclusively by the State Bank of India (SBI) across selected branches.

·    Available in denominations ranging from Rs 1,000 to Rs 1 crore.

·    Purchasable by individuals and companies through KYC-compliant accounts, ensuring donor anonymity.

·    Provides 100% tax exemption for donations made through these bonds.

·    No cap on the quantity of bonds any single donor can acquire.

Donor Anonymity and Financial Regulations

·    Anonymity and Tax Benefits: Donor identities are kept confidential, with the scheme offering full tax exemption for contributions made via electoral bonds.

·    Regulatory Easements: The scheme removed previous limits on corporate donations and the obligation to disclose donations, facilitating unrestricted financial contributions to political parties.

Criteria for Receiving Funds:

·    Must be a political party registered under Section 29A of the Representation of the People Act (RPA), 1951.

·    Required to have obtained at least 1% of the votes in the most recent Lok Sabha or state legislative assembly elections to be eligible for receiving funds through electoral bonds.

SC Ruling on Electoral Bond Scheme: Summary

Unconstitutionality Declared: The Supreme Court (SC) ruled that the Electoral Bond Scheme (EBS) and associated amendments to the Finance Act, 2017, Representation of the People Act (RPA), 1951, Income Tax Act, 1961, and Companies Act, 2013, were unconstitutional.

Reinstatement of Previous Legal Framework:

  • RPA, 1951: Restored disclosure requirements for donations exceeding Rs 20,000.
  • Companies Act, 2013: Reimposed caps on corporate donations and reinstated disclosure obligations.
  • Income Tax Act, 1961: Revoked exemptions from record-keeping for Electoral Bond contributions.
  • Proportionality Test Application: The SC applied the proportionality test to assess the balance between voter’s right to information and donor privacy, emphasizing transparency in the electoral process.
  • Government’s Argument on Anonymity: The government’s defense of donor anonymity and curbing black money was rejected by the SC, prioritizing voter’s right to information over donor privacy.

SC Directions:

  • Ordered SBI to cease issuing electoral bonds.
  • Mandated SBI to provide details of electoral bonds to the Election Commission of India (ECI), which must publish this information.
  • Required unused electoral bonds to be refunded.
  • The SC’s judgment emphasizes the importance of transparency and accountability in political financing, reinforcing the balance between fundamental rights and state interests.

The Need for Reform

  • Transparency and Accountability: The current opaque system of campaign financing, particularly through mechanisms like electoral bonds, has been criticized for allowing anonymous donations, thereby obscuring the influence of big money in politics.
  • Influence of Big Money: A growing correlation between large political donations and increased access to power and public procurements has been observed, highlighting the risks of policy-making being skewed in favor of wealthy donors.
  • International Perspectives: The Supreme Court of India’s recent decision to strike down the electoral bonds scheme underscores a global trend towards demanding greater transparency in campaign finance. The judgment also reiterates the principle that funding limits are essential to prevent undue influence over the political process.

Challenges and Implications

  • Crony Capitalism and Political Access: The interplay between business interests and political funding has historically led to crony capitalism, where policies are tailored to benefit donors. The Supreme Court’s judgment seeks to curb this by reinstating funding limits and demanding transparency.
  • Legal and Constitutional Considerations: The editorial highlights the Supreme Court’s role in upholding constitutional principles, such as the right to information and equality before the law, which were compromised by the electoral bonds scheme.
  • Role of the Election Commission: The commission is tasked with publishing details of electoral bonds, ensuring that the process is transparent. This is part of a broader effort to make political funding more transparent and accountable to the public.

Proposed Solutions

  • Publicly-Funded Elections: Advocating for a model where elections are funded by the government, possibly supplemented by capped and transparent private contributions. This approach is seen as a way to level the playing field, ensuring that all candidates have a fair chance regardless of their financial backing.
  • Legislative Oversight and Crowdfunding: Suggesting the implementation of laws to oversee the collection and distribution of campaign funds, alongside promoting grassroots financial support for political campaigns. Such measures aim to restore public accountability and encourage citizen participation in the electoral process.
  • Tax Incentives and Matching Funds: Offering tax-free status for smaller contributions and proposing that the government matches public contributions with unutilized funds, to foster a culture of small donations.
  • Allocation Based on Merit: Introducing a points system for distributing funds to political parties, based on criteria such as previous electoral performance, development factors, and the candidate’s record. This aims to promote meritocracy in politics.

The Supreme Court’s decision is seen as a step towards dismantling the pay-to-play culture in politics, but it’s recognized that achieving comprehensive reform will be a complex and prolonged effort. In essence, the call for a publicly-funded, transparent campaign finance system reflects a broader desire for a political landscape where elected officials are accountable to their constituents rather than to their wealthiest donors. The proposals and discussions outlined in these editorials contribute to an ongoing debate on how best to achieve this ideal, acknowledging the challenges inherent in reforming entrenched systems of political financing.

 

Source: Economics Times

https://www.thehindu.com/opinion/op-ed/the-clear-message-in-the-courts-no-to-electoral-bonds/article67854474.ece#:~:text=The%20judgment%20of%20the%20Supreme,parties%20and%20the%20amounts%20given.

Mains Practice Question:

“Discuss the implications of the Supreme Court of India’s decision to strike down the electoral bonds scheme on the transparency and accountability of campaign financing in India. Compare the Indian approach to campaign finance reform with that of other democracies, highlighting the benefits and challenges of publicly-funded elections. Evaluate the potential impact of such reforms on the relationship between business interests and political decision-making.”