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Why Electoral Bonds are Detrimental to the Idea of Free India?

As early as 1932, James Kerr Pollock wrote, “the relation between money and politics has come to be one of the great problems of democratic government. Healthy political life is not possible as long as the use of money is unrestrained.” Time and again experts have pointed to the deleterious effect of unregulated money in elections. One reason for it is that money is a great driving force in elections. From advertising to canvassing to the organization of meetings, money affects almost every aspect of electoral politics. No wonder, democracies have strived for electoral finance reforms.

The prime aspect of electoral funding in India has revolved around corporate funding of political parties. With a view to limit the influence of money on elections, the Representation of People Act (RPA), 1951 was enacted. Several government-appointed committees like the Santhanam committee and the Wanchoo committee pointed to the proliferation of black money in Indian elections. Against this background, the Indrajit Gupta Committee endorsed the idea of state funding of elections. Consequently, at present, some part of election are met by state funding in the form of free airtime, renting of public offices, income tax exemption, etc. However, given the huge expenditures required, state funding is peanuts and the problem of unaccounted private funding continues. Against this backdrop, the Government of India introduced Electoral Bonds (EB) in the Union Budget 2017. EBs were touted as the harbinger of transparency in electoral funding process. However, soon after its introduction, critics pointed to the opaque nature and duality in the operation of the scheme.


What’s wrong with Electoral Bonds?

An Electoral Bond is a bearer instrument like a promissory note that is payable on demand. It can be purchased by individuals or corporations either through cheque or digitally from specific branches of the State bank of India. On the face of it, the scheme appears to be progressive, ensuring transparency in the electoral funding process. However, the devil lies in the details. Although, the transaction occurs through formal banking channels leaving audit trails and the donor has to meet all the KYC norms, the fact is neither the political parties and nor the donor is required to disclose the source/destination of funding and the amount involved. While the earlier regime mandated political parties to reveal the names and particulars of all donors making donations in excess of Rs. 20,000, there is no such requirement in the present scheme. Likewise, in contrast to the earlier framework, companies or individuals purchasing the bonds need not reveal the name of the party they are financing. The transparency begins and ends at the bank as if there is no need for the people to know who funds whom and to what extent.

Before the introduction of EBs, no Indian company can donate to a political party in excess of 7.5% of its average net profits preceding three years. The Finance Act 2017 removed this cap by making suitable amendments opening doors for donations by shell companies. By amendment to the Foreign Contributions Regulation Act (FCRA), 2010, the Act broadened the definition of foreign firms, to attract a greater amount of funds from abroad, raising further questions on the fairness of the electoral process. EBs were introduced with the promise of creating a level playing field in Indian politics but according to an RTI reply filed by Association for Democratic Reforms (ADR), 95% of the EBs subscription in 2017-18 has been in the name of the ruling dispensation. Even in the following years, the ruling party has been able to garner a majority of subscriptions.


Judiciary’s Take on Electoral Bonds

Pursuant to its notification, the scheme was challenged before the Supreme Court in Association for Democratic Reforms (ADR) vs Union of India contending violation of voter’s right to know enshrined in Article 19(1)(a) of the constitution. The petitioners challenged the amendments brought in by the Finance Act, 2017 and 2016 that have opened the floodgates to unlimited corporate donations and anonymous funding  The petitioners, in particular, sought the striking down of amendments brought in the Companies Act, 2013 that removed the cap on corporate funding of elections, Representation of Peoples Act, 1951 providing for anonymous corporate donations, and the Foreign Contribution Regulation Act (FCRA), 2010 that allowed subsidiaries of foreign firms to donate funds, among others.

In its March 24, 2021 order, the court strikingly rejected to stay the operation of the scheme on the dubious ground that it has been in operation for more than two years now and it appears that it has sufficient safeguards. On the contrary, the court questioned the allegation of complete anonymity raised by the petitioners and went on to say that one only needs to match the following with the amount of donations revealed by companies on one side and by political parties on the other. In coming to this conclusion, the court forgot that political parties often hire auditors that toe the parties’ line, and the statements by political parties are often not a true reflection of their income.



In the wake of increased funding from big corporations and multinationals, there is heightened fear of Indian democracy being hijacked by vested interests. In the absence of adequate mechanisms to check the illicit flow of money, democracy becomes a farce, and crony capitalism becomes the order of the day. By disabling citizen’s right to know, the twin pillars of democracy – transparency and accountability are shattered and democracy is exposed to exploitation and ruthlessness of selected powerful few. Indeed without information, the idea of free and fair elections becomes hollow for it is through informed choices alone that voters freely and fairly elect their representatives. In the absence of such crucial information, elections simply become a function of a political party’s budget. The party getting the largest purse from the corporates will rule and devise policies that suit corporate interests at the cost of general public. If that is allowed to happen the idea of free India will lose its spirit and India will become slave to neo-colonists. The judiciary must realize that it is time that we set high standards of transparency and accountability in the electoral funding process in this country.





Mohd Sikandar is a legal scholar and activist, with an LL.M. from NALSAR University of Law, Hyderabad.

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