The Electoral Bonds scheme, floated by the BJP-led NDA government in 2018, has been pitched as an alternative to cash donations made to political parties as part of efforts to bring transparency in political funding.

The Supreme Court on Monday referred petitions challenging the electoral bonds scheme to a five-judge Constitution bench. A bench presided by Chief Justice of India DY Chandrachud scheduled October 31 as the date of hearing. Petitions have been filed by two NGOs – Common Cause and Association for Democratic Reforms (ADR), Congress leader Jaya Thakur and the CPI(M) challenging the electoral bonds scheme.

Congress leader and former Finance Minister in the UPA government, P Chidambaram, has been a staunch critic of the electoral bonds scheme. After the Centre approved the issuance of the 28th tranche of electoral bonds, which opened for sale on October 4, Chidambaram termed it as “legalised bribery”.

“It will be a golden harvest for the BJP. Going by the past records, 90 per cent of the so-called anonymous donations will go to the BJP. The crony capitalists will open their cheque books to write out their ‘tribute’ to the lord and master in Delhi. Electoral bonds are legalised bribery,” he had said in a post on X.

In March, Chidambaram had also alleged that corporate donation is a way of thanking the government for numerous “favours”.

What are electoral bonds?

The electoral bonds scheme, floated by the BJP-led NDA government in 2018, has been pitched as an alternative to cash donations made to political parties as part of efforts to bring transparency in political funding. Through the scheme, money can be donated “anonymously” to political parties by individuals, groups of individuals, corporations, NGOs, religious and other trusts.

Such bonds, sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, can be bought from authorised branches of the State Bank of India (SBI). The political parties can choose to encash such bonds within 15 days of receiving them and fund their electoral expenses.

The electoral bonds scheme was introduced in the Finance Bill, 2017 by then Finance Minister late Arun Jaitley. The Centre notified the electoral bond scheme on January 2, 2018 with the aim to enhance transparency in political funding.

The Challenge

Pleas against the electoral bonds scheme have been filed describing it as “an obscure funding system which is unchecked by any authority”.

Earlier, there was a cap on the amount to be given to political parties, which was 7.5 per cent of the average net profits of a company in the preceding three years. However, the BJP-led government amended the Companies Act 2013 to remove the limit, the result of which is hefty funding by corporates to political parties.

The petitioners contend that the amendments have led to “private corporate interests taking precedence over the needs and rights of the people of the State in policy considerations”.

Advocate Prashant Bhushan, appearing from ADR before the Supreme Court on Tuesday (October 10) said that the amendments made via the Finance Acts of 2016 and 2017, both passed as Money Bills, have “opened the floodgates to unlimited political donations” through the scheme.

“The amendments have removed the caps on campaign donations by companies and have legalised anonymous donations. The Finance Act of 2017 has introduced the use of electoral bonds which are exempt from disclosure under the Representation of the People Act, 1951, opening doors to unchecked, unknown funding to political parties,” The Hindu quoted him as saying.

The Criticism against Electoral Bonds

Although the Centre has defended the claims of “transparency” in political funding, critics have questioned the claim saying that the anonymity of donors under the scheme makes the process opaque.

Attorney General R Venkataramani defended the transparency of electoral bonds, saying while the donors are not known to the public, the source of funds had to be revealed to the SBI, reported The Times of India.

In October last year, Solicitor General Tushar Mehta, appearing for the Centre, had told the court that the methodology of receiving money through electoral bonds is “transparent”, adding it is impossible to get any money in black anymore.

Advocate Shadan Farasat, representing another petitioner, told the Supreme Court that electoral bonds can be purchased only through bank transfer and not by paying cash.

“But the point is the purchaser of the bonds enjoys anonymity. The purchaser can then transfer the bonds to a recognised party anonymously… So, who has transferred how much to a political party is anonymised from the public domain. Who is donating to which political party is not known. There is a complete sanitisation of information to the public,” he said, as per The Hindu.

The ADR had also questioned the “transparency” and “donors anonymity” claim.

In a statement, the ADR had said, “While electoral bonds provide no details to the citizens, the said anonymity does not apply to the government of the day, which can always access the donor details by demanding the data from the State Bank of India (SBI). This implies that the only people in dark about the source of these donations are the taxpayers. It may also be noted that the printing of these bonds & SBI commission for facilitating the sale and purchase of the bonds is paid from the taxpayers’ money by the central government.”

Another critic of electoral bonds, Anjali Bhardwaj, co-convenor of the National Campaign for People’s Right to Information, has noted that more than 75 per cent of all such donations have gone to the ruling BJP.

Another argument by the critics points out that although the scheme was brought to allow common man to fund the political parties of their choice, the highest denomination that has been received as of 2022 stood at Rs 1 crore.