[Editorial Analysis] An invitation to corruption?

Mains Paper 2: Polity

Prelims level: Electoral Bond Scheme

Mains level: Laws, institutions and Bodies constituted for the protection and betterment of these vulnerable sections


• The government introduced an Electoral Bond Scheme purportedly with a view to cleansing the prevailing culture of political sponsorship.

• The programme’s failings have been so blindingly obvious, and its consequences so utterly devastating to rectitude and transparency in government.

• There are many grey areas in this because when there is no ceiling on party expenditure and the EC (Election Commission) cannot monitor it, how can you be sure that what is coming in is not black money as there is a secrecy of the donor.

Too opaque

• The present scheme permits not only individuals and body corporates, but also “every artificial juridical person,” to purchase bonds, issued by the State Bank of India, in denominations of ₹1,000, ₹10,000, ₹lakh, ₹10 lakh and ₹1 crore, during specified periods of the year.

• Issued in the form of promissory notes, once a bond is purchased the buyer can donate it to any political party, which can then encash it on demand.

• Since these bonds are purchased through banking channels the scheme will eliminate the infusion of black money into electoral funding.

• But not only is this argument palpably false, as a simple reading of the scheme’s terms shows us.
• Neither the purchaser of the bond nor the political party receiving the donation is mandated to disclose the donor’s identity. Therefore, not only will, say, the shareholders of a corporation be unaware of the company’s contributions, but the voters too will have no idea of how, and through whom, a political party has been funded.

• The programme removes an existing condition that had prohibited companies from donating anything more than 7.5% of their average net-profit over the previous three years.

• This now means that even loss-making entities can make unlimited contributions.

• Also the requirement that a corporation ought to have been in existence for at least three years before it could make donations a system that was meant to stop shell concerns from being created with a view purely to syphoning money into politics has also been removed.

Two judgments

• The dangers inherent in untrammelled funding of political parties, especially by corporations, have been apparent for many years.

• Even as early as in 1957, in a pair of judgments outstanding in their lucidity and prescience, the Bombay and the Calcutta High Courts warned Parliament of the perils in allowing companies to freely add to party coffers.

• It’s a threat, wrote Chief Justice M.C. Chagla, of the Bombay High Court, which is likely to “grow apace and which may ultimately overwhelm and even throttle democracy in the country”.

• The court was conscious that, given the circumscriptions of the law, it could scarcely deny, in the case before it, permission sought by Tata Iron and Steel Co. Ltd. to amend its memorandum of association, to allow the company to make contributions to different political interests.

• But this did not stop the court from drawing Parliament’s attention to the problem.

• In entreating Parliament to act, the judgments were recognising a bedrock principle of democracy: that public action ought to be guided by transparency and fairness.

• In the years since, every effort has been made to endorse opacity in political funding.

• The electoral bonds scheme, which represents the latest such assault, unless immediately rescinded, may well irredeemably damage India’s democratic edifice.

• As petitions filed in the Supreme Court point out, the scheme suffers from at least two foundational defects.

• One, that it was incorporated on the back of a series of amendments made to legislation, including the Representation of the People Act, the Income Tax Act and the Companies Act, which were introduced in the form of a money bill.

• And two, that the scheme flouts a number of fundamental rights.

Article 110 issue

• Article 110 of the Constitution allows the Speaker to classify a proposed legislation as a money bill, only when the draft law deals with all or any of the subjects enlisted in the provision.

• These subjects comprise a set of seven features, including items such as the imposition of a tax, the regulation of the borrowing of money by the government.

• The custody of the Consolidated Fund of India, the appropriation of money out of the consolidated fund, and any matter incidental to the subjects explicitly mentioned in Article 110.

• Hard as we might try, though, it’s impossible to see how the provisions pertaining to the electoral bond scheme could possibly fall within any of these categories.

• The Finance Act, through which these amendments were introduced, therefore did not deal with only those matters contained in Article 110.

Fundamental rights

• The scheme is equally destructive in its subversion of the fundamental rights to equality and freedom of expression.

• There’s no doubt that the Constitution does not contain an explicitly enforceable right to vote.

• To implicit in its guarantees of equality and free speech is a right to knowledge and information.

• Our courts have nearly consistently seen “freedom of voting” as distinct from the right to vote, as a facet of the right to freedom of expression and as an essential condition of political equality.

Way forward

• In the absence of complete knowledge about the identities of those funding the various different parties, it’s difficult to conceive how a citizen can meaningfully participate in political and public life.

• It was critical to building India’s republican structure. When the power of that vote is diluted through opacity in political funding, democracy as a whole loses its intrinsic value.

• Ultimately, therefore, to borrow from English jurist Stephen Sedley’s formulation, the electoral bonds scheme suggests two possibilities: one, that the government doesn’t understand the Constitution; or, two, it does, and has expressly set out to transgress it.


Prelims Questions:

Q.1) With reference to the Electoral Bonds, announced recently in the Union Budget, consider the following statements:

1. They are a financial instrument for making donations to political parties.

2. They cannot be purchased by paying cash.

3. They are issued by the Election Commission of India.

Which of the statements given above is/are correct?

(a) 1 only

(b) 1 and 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

Answer: B

Mains Questions:

Q.1) The Electoral Bond Scheme inhibits the citizen’s capacity to meaningfully participate in political and public life. Critically analyse the statement.

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