In a historic ruling that reverberated throughout the nation, the Supreme Court of India recently in the case of Association for Democratic Reforms & Anr. Vs. Union of India & Ors rendered a judgment on February 15th, 2024, declaring electoral bonds unconstitutional. This momentous decision represents a significant stride towards transparency and accountability in the electoral process, setting a precedent for safeguarding democratic values in India. The verdict, delivered by a bench of justices, invalidated key provisions of the Electoral Bond Scheme, 2018, deeming them in violation of foundational principles such as equality, fairness, and the right to information. This landmark ruling bears profound implications for the landscape of electoral financing and the integrity of democratic governance in the country.

Understanding Electoral Bonds

Electoral Bonds were introduced by the Government of India in 2018 as a mechanism for making anonymous donations to political parties. These bearer instruments, resembling promissory notes, allow individuals & corporations to make contributions to political parties without disclosing their identities. Proponents argue that electoral bonds enhance donor privacy & prevent victimization, while critics contend that they undermine transparency in political funding and facilitate the flow of black money into politics.

Such bonds akin to promissory notes, available in various denominations can be purchased from authorized branches of the State Bank of India (SBI), the only bank authorized to issue them. They are interest-free and, notably, allow the buyer to remain anonymous, as their details are not recorded during the purchase process. The bonds come with a short validity period of 15 days, during which they can be donated to registered political parties. In 2017, the Modi government aka BJP, aiming to curb anonymous cash donations, introduced electoral bonds through the Finance Act.

This Electoral Bond Scheme has become a focal point of legal scrutiny in the Supreme Court, as numerous critics challenge its constitutionality and its alignment with the right to information. Opponents contend that rather than improving transparency, the scheme runs contrary to established standards & undermines the foundation of democracy. Legal disputes primarily revolve around the argument that the scheme breaches transparency standards and poses a threat to the democratic process. The government vigorously supports the Electoral Bond Scheme, arguing that it has effectively minimized cash donations and enhanced transparency.

Analysis of Electoral Bonds

Critics of Electoral Bonds raise several key arguments against their implementation. They assert that the anonymity provided by electoral bonds acts as a corporate shield, allowing corporate donors to influence political parties without accountability, thus potentially distorting political decision-making processes. Furthermore, they criticize the lack of transparency within companies, as the scheme fails to disclose the identity of the original buyer, creating a loophole in tracking the flow of funds. Another major concern is the perceived undermining of democratic processes, as the influx of significant financial influence tilts the political playing field in favour of affluent entities, diminishing the voice of ordinary citizens.

On the other hand, proponents of Electoral Bonds present counterarguments in support of their efficacy. They argue that the scheme replaces opaque cash donations with transparent and traceable bonds, thereby enhancing visibility and accountability in political funding practices. Additionally, supporters emphasize the anonymity feature as a safeguard against potential harassment or intimidation of donors, which encourages wider participation in the political process. The government’s defense highlights the successful reduction of anonymous cash donations through the scheme, aligning with broader efforts to combat illicit financial flows into the political domain.

Hence the inception of electoral bonds in 2018 was ostensibly aimed at purifying political funding and fostering transparency within the system. However, detractors swiftly pointed out inherent flaws in the scheme, primarily centered around its opacity and lack of accountability. By enabling donors – whether individuals or corporations – to contribute to political parties anonymously, the scheme created a veil of secrecy that potentially fostered corruption and undue influence in the electoral arena.

Supreme Court’s View

The Supreme Court constituted a bench, comprising Chief Justice DY Chandrachud and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, & Manoj Misra, and delivered a unanimous verdict served to validate these concerns after hearing ab batch of cases challenging the electoral bonds scheme underline the pivotal role transparency in political funding plays in upholding the sanctity of elections and preserving democratic norms.

The judgment meticulously delineated several critical deficiencies within the electoral bond scheme that rendered it unconstitutional. Foremost among these concerns was the anonymity afforded to donors, which obfuscated the public’s right to information regarding the origins of political funding. By permitting contributions without disclosure of the contributors’ identities, the scheme undermined transparency, leaving the electorate in the dark about potential conflicts of interest and sources of influence. This opacity perpetuated inequality among political parties, conferring undue advantage upon those with access to substantial corporate donors, thus distorting the democratic principles of equality and fairness. The Supreme Court’s ruling underscored the imperative of a robust and transparent framework for political financing to ensure equitable participation and prevent the perversion of democratic processes.

Moreover, the judgment underscored the intrinsic connection between transparency and the right to information in a democracy. Access to information about political funding empowers citizens to make informed decisions and hold their elected representatives accountable. By nullifying provisions that impeded transparency, the Supreme Court reaffirmed the fundamental right of citizens to access information about political parties’ finances and funding sources, thus fortifying the bedrock of democratic governance.

In addition to championing transparency, the judgment emphasized the pivotal role of the Election Commission of India (ECI) in upholding the integrity of the electoral process. The Court exhorted the ECI to undertake proactive measures to bolster transparency and accountability in political funding, including mandating the disclosure of all donations received by political parties. This underscores the indispensable role of independent oversight mechanisms in safeguarding the democratic process and preserving the rule of law.

The Supreme Court’s decision to invalidate electoral bonds as unconstitutional constitutes a resounding victory for democracy and constitutional principles. It sends an unequivocal message that transparency and accountability are indispensable tenets of the electoral process and that any attempts to subvert these principles will be subject to judicial scrutiny and rebuke. However, while this verdict represents a significant stride toward electoral reform, it merely marks the inception of a broader journey.

The ruling underscores the imperative of comprehensive electoral reforms aimed at fortifying the electoral system and enhancing transparency in political funding. Such reforms may encompass stringent disclosure requirements for political donations, caps on campaign expenditures, and heightened scrutiny of political parties’ financial transactions. Furthermore, the judgment underscores the imperative of fostering public awareness and engagement on electoral reform issues. Citizens serve as the linchpin of democratic governance, and their proactive involvement is indispensable in driving meaningful change within the electoral framework. Hence, the Supreme Court’s verdict nullifying electoral bonds as unconstitutional constitutes a watershed moment in India’s democratic journey.

By dismantling a flawed and opaque system of political financing, the Indian Judiciary has again reaffirmed the core principles of equality, fairness, and transparency in the electoral process. However, the journey towards comprehensive electoral reform is ongoing, necessitating collective efforts from all stakeholders – including the government, political parties, civil society organizations, and citizens – to fortify the foundations of democracy and ensure that the voice of the people resonates unequivocally in the halls of power.

By- Esha Gandhi (Intern)

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