Electoral Bonds Scheme Struck Down by the Supreme Court

The electoral bonds scheme was introduced by the Indian government in 2018 as an alternative system for financial donations to political parties aiming to bring transparency in political funding. However recently, 2024 the scheme was struck down by the Supreme Court as unconstitutional.

Overview

Electoral bonds allow political donations through banking instruments purchased from specified branches of the State Bank of India. The identity of donors remains anonymous. Initially touted to increase transparency and curb black money, critics raised concerns over anonymity enabling opaque financing.

Supreme Court Judgment

In the recent ruling, the Constitution bench of the Supreme Court held that electoral bonds violate citizens’ right to information under Article 19(1)(a). By enabling anonymous donations, it fails transparency over possible ‘quid pro quo’ deals for quid pro quo. The key reasons cited by the Supreme Court while striking down India’s electoral bonds scheme:

  1. The amendment to Section 182 of the Companies Act enabling blanket corporate funding of parties is unconstitutional. It fails to address risks of quid pro quo deals from allowing even loss-making firms to donate anonymously.
  2. The judgment upholds citizens’ right to information on political financing as essential for making informed electoral choices and holding parties accountable.
  3. It distinguishes between small donations by individuals warranting privacy versus large influential corporate donations needing transparency given significant public interest.
  4. The Court notes that while some donations are made just to support parties, opacity in financing channels can obscure those intended to buy policy influence. Hence, transparency is required.
  5. The right to privacy for political affiliation does not extend to major contributions made to shape public policy, as per the Supreme Court verdict striking down electoral bonds.

Key Observations

The judgment states that information on political funding is essential for voter choices. Allowing unlimited corporate donations can disproportionately influence policy. It struck down amendments treating companies and individuals alike in political contributions as manifestly arbitrary.

Directions Issued

The Supreme Court directed that the electoral bonds scheme must be discontinued immediately, and no further bonds issued. The State Bank of India was ordered to furnish details of past bond donations and recipient parties.

Rationale Explained

The ruling explains that curbing black money cannot justify infringing transparency. Privacy in political donations is also not an absolute principle. While some small individual donations warrant privacy, large corporate donations carrying higher public interest call for disclosure.

 Impact

The striking down of electoral bonds is seen as a significant boost for bringing accountability in Indian election financing. It closes avenues for anonymized donations diluting transparency. Ensuring disclosure norms and checks against quid pro quo deals remains vital for free and fair democratic processes.


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