The government introduced an Electoral Bond Scheme purportedly with a view to cleansing the prevailing culture of political sponsorship. But the programme’s failings have been so blindingly obvious, and its consequences so utterly devastating to rectitude and transparency in government. Even O.P. Rawat, who just retired Chief Election Commissioner, thought it fit to deliver a damning indictment of the scheme. “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”.

ELECTORAL BOND:

• Electoral Bond is a financial instrument for making donations to political parties. These are issued by Scheduled Commercial Banks upon authorization from the Central Government (“the CG”) to the intending donors, but only against cheque and other digital payments (in other words, it cannot be purchased using cash).
• These bonds shall be redeemable in the designated account of a registered political party prior to the expiry of the life of the bonds.
• The bonds are open for purchase by all citizens of India.
• Only registered political parties that have secured not less than 1 per cent of the votes polled in the latest general election to the Lok Sabha or a State Assembly are eligible to receive them.
• The bonds have to be deposited within 15 days of issue in the authorised bank branch of the party; it can be encashed only through the same account.
• The process of how electoral bonds are proposed to be rolled out:
• Electoral bond was announced in the Union Budget 2017-18.
• Selection of notified banks– The CG after precise review selects a panel of scheduled banks which shall be eligible to issue such electoral bonds in consultation with the respective bank’s management.
• Issue of bonds– The banks once notified shall be permitted to issue electoral bonds in specified denominations to the intended parties / customers (“the donor”).
• Subscription– The donor buys electoral bonds using cheque or through digital banking channel.
• Tenure – The donor gives such bonds to the party of his / her choice within the specified time during which the bond shall be valid. However, it is proposed to choose 30 days as the tenure of the bond by the CG.
• Encashment– On receipt of electoral bond from the donor, the party deposits the bond into an account, the details of which are with the Electoral Commission.

Role of Reserve Bank of India:

• Required amendments to the Reserve Bank of India Act, 1934 (“the RBI Act”), specifically to Section 31(3) and the Representation of People Act, 1951 were made through Section 133 to 136 of Finance Bill, 2017.
• CG is in the process of framing a Scheme in this regard. Section 31 of the RBI Act gives power to issue bearer bonds to RBI and government. The bearer bond has the characteristic of a currency.
• The RBI Act states that other than the Central Bank and the CG, nobody can issue notes which have the characteristic of a banknote or a currency note.
• Hence, the government’s move to amend the Act to allow commercial banks to issue such bonds is leading to some discomfort among RBI officials who feel it will erode some of the Central Bank’s authority.

Drawbacks of Present Electoral Bond Scheme:

1. Even foreign money can come and even a dying company can give money. So, prima facie it appears the scheme cannot really deliver whatever it was intended to.
2. The fact that the scheme allows for complete anonymity of the donor and neither the purchaser of the bond nor the political party receiving the donation is mandated to disclose the donor’s identity.
3. Through the Finance Act, 2016, FCRA rules were amended to allow political parties to accept donations from foreign companies.
4. Cash donation from one source is limited to Rs. 2,000 per year. As usual, there will be no requirement to disclose contributions by cheque or through digital means up to Rs. 20,000.
5. There is no cap on the expenditure of the political parties during elections.
6. 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.
7. For instance, 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.
8. This now means that even loss-making entities can make unlimited contributions.
9. Additionally, 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 companies from being created with a view purely to syphoning money into politics has also been removed.
10. The scheme also suffers from at least two foundational defects.
11. 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.
12. Two, that the scheme flouts a number of fundamental rights. The Finance Act, through which these amendments were introduced, therefore did not deal with only those matters contained in Article 110.

Two Judgements with respect to Electoral Funding:

• 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.
• Bombay High Court said it is something which is likely to “grow apace and which may ultimately overwhelm and even throttle democracy in the country”.
• The Calcutta High Court had made an almost identical appeal.
• “To the cynic it appears to be a plea of the company to have a legal sanction to bribe the Government of the day, to induce policies that will help the company in its business”.
• If amendments of this kind were allowed, and if joint stock companies serve as adjuncts to political parties, the Court added, the “man who pays the piper will then call the tune”.

Conclusion:

• The above two judgments clearly recognised the bedrock principle of democracy.
• Over the years, efforts have been made to endorse opacity in political funding. Electoral Bonds Scheme, which represents the latest such assault, may well irredeemably damage India’s democratic edifice.
• There’s no doubt that the Constitution does not contain an explicitly enforceable right to vote. But 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.
• 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.