The Supreme Court will consider whether petitions challenging the constitutionality of the electoral bonds plan should be heard by a Constitution Bench.
What are Electoral Bonds?
- Electoral bonds are banking instruments that can be bought by any citizen or company in order to make donations to political parties without disclosing the donor’s name.
- It is similar to a promissory note that can be purchased from specific State Bank of India branches by any Indian citizen or company incorporated in India.
- The citizen or corporation can then donate to any eligible political party of his or her choosing.
- Individuals or parties will be able to buy these bonds digitally or by check.
Concerning the plan
- The bond can be purchased by an Indian citizen or an entity incorporated in India.
- Such bonds can be bought for any amount in multiples of 1,000, 10,000, 10 lakh, and 1 crore from any of the State Bank of India’s specified branches.
- The purchaser will be permitted to acquire electoral bonds only if all existing KYC requirements are met and payment is made from a bank account.
- The certificates will be valid for 15 days. (15 days time has been prescribed for the bonds to ensure that they do not become a parallel currency).
- Donors who give less than 20,000 to political parties through the purchase of electoral bonds are not required to provide their personal information, such as their PAN. (PAN).
The scheme’s objective
- Transparency in political funding: Ensuring that the funds raised by political organizations are accounted for or clean money.
Who has the authority to repay such bonds?
- The Electoral Bonds may only be redeemed by a qualified Political Party through a bank account with an Authorized Bank.
- Only political parties that have been registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and have received at least 1% of the votes cast in the last General Election to the Lok Sabha or the State Legislative Assembly are eligible to receive Electoral Bonds.
Restrictions that have been lifted
- Previously, under the Companies Act, no foreign company could donate to any political group.
- According to Section 182 of the Companies Act, a company may give up to 7.5 percent of its average three-year net profit as political donations.
- Companies were required to reveal details of their political donations in their annual financial statements under the same section of the Act.
- The government proposed an amendment to the Finance Bill to guarantee that this provision does not apply to companies that issue electoral bonds.
- Thus, Indian, foreign, and even shell companies can now contribute to political parties without informing anyone.
Problems with the Scheme
- Uncertain funding: While the donor’s name is recorded, it is not made public or available to the party. As a result, voter openness is not improved.
- Income tax breaks may not be available for contributions made through electoral bonds. This forces the contributor to choose between anonymity and tax savings.
- Donors are not anonymous: The donor’s privacy is jeopardized because the bank will know their name.
- Differential advantages: These bonds will benefit any party in control because the government will know who gave what money and to whom.
- Donations are unlimited: The electoral bonds scheme and amendments in the Finance Act of 2017 allows for “unlimited donations from individuals and foreign companies to political parties without any record of the sources of funding”.
Way forward
- However, the concerns about the electoral bond plan extend beyond its obvious unconstitutionality.
- The concern about the potential of misappropriation of funds is very real.
- The EC has demanded that a law be enacted requiring political parties to have their accounts audited by an auditor chosen from a panel recommended by the CAG or EC. This should be highlighted.
- Another viable alternative would be to create a National Election Fund to which all donations could be directed.
- This would alleviate the donors’ fictitious dread of political retaliation.
Source: https://theprint.in/india/sc-to-consider-whether-to-refer-to-constitution-bench-pleas-against-electoral-bond-scheme/1460909/