Association of Democratic Reforms v Union of India
Electoral Bonds and the 2018 scheme
Electoral bonds are a financial instrument introduced by the Government of India in 2018 to facilitate anonymous political donations while aiming to ensure transparency in political funding. The scheme was announced in the Union Budget 2017-18 and later implemented through the Electoral Bond Scheme, 2018. These bonds allow individuals and corporations to donate money to political parties without disclosing their identity to the public.
Under this scheme, electoral bonds could be purchased from designated branches of the State Bank of India (SBI) in denominations ranging from ₹1,000 to ₹1 crore. Only political parties registered under Section 29A of the Representation of the People Act, 1951, and securing at least 1% of the votes in the last general election, were eligible to receive these donations. The government claimed that this mechanism would reduce cash-based political funding and curb black money in elections.
The Debate
The issue regarding electoral bonds revolves around transparency, accountability, and potential corporate and government influence in political fundraising. Critics contend that anonymous donations keep the public from understanding which sponsors which political party, reducing voter awareness. The ruling party could acquire access to donor information via the State Bank of India (SBI), creating an unfair playing field in which firms can pay more to secure government favors. The elimination of the corporate donation cap raises worries about crony capitalism and political influence. Though intended to reduce black money, anonymous ways may nevertheless allow for criminal contributions through shell corporations. Furthermore, the plan undermines the Right to Information (RTI) Act, obscuring political funding facts.
The Case
The Petitioners to the case contented that electoral bonds violate the right to information of the voters as voters have the right to know about political party funding. They further contended that the scheme encouraged corporate donations in exchange for political favors. Since donations were anonymous, companies could secretly influence policy decisions, leading to preferential treatment in contracts, licenses, or regulatory approvals. An argument was also put forth by the petitioners that the scheme bypassed parliamentary scrutiny and had disproportionate benefits for the ruling party.
The Respondents counter argued and contented that the scheme was transparent and the anonymity of donors was maintained to prevent retaliation. They also contented that right to information was not absolute, and donations were a private matter between political parties and donors, thus right to information was not violated.
A five-judge bench held that the 2018 Electoral Bond Scheme is unconstitutional, ahead of the 2024 Lok Sabha elections. The EB Scheme enabled corporations, individuals, and organizations to make anonymous contributions to political parties. On February 15, 2024, the Court ruled unanimously that voters have the right to be informed about the sources of party funding. The Court determined that the 2018 Scheme was not flawless and did not meet the Union’s purpose for wishing to safeguard funders from negative conduct by competing political parties. In a move to promote free and fair elections, the Court put an immediate halt to bond sales and directed the Election Commission and the State Bank of India to publicly release the data they had previously acquired on EB transactions.
Recent Update
After this landmark judgment, the State Bank of India which was the authorized bank for the collection of donations was ordered by the Court to release data as to the complete amount collected. Further petitions were filed to confiscate rupees 16,518 crores through the scheme of 2018. But the petition was dismissed by the Supreme Court. Recently A review petition was filed to review the dismissed petition regarding the confiscation of the amount collected through the scheme.
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