Electoral Reforms In India

SC to hear plea against Electoral Bonds Scheme


From UPSC perspective, the following things are important :

Prelims level: Electoral Bond Scheme

Mains level: Transparency in election funding


The Supreme Court is scheduled to examine whether petitions challenging the validity of electoral bonds scheme need to be referred to a Constitution Bench.

What is a Constitution Bench?

  • The constitution bench is the name given to the benches of the Supreme Court of India.
  • The Chief Justice of India has the power to constitute a Constitution Bench and refer cases to it.
  • Constitution benches are set up when the following circumstances exist:
  1. Interpretation of the Constitution: Article 145(3) provides for the constitution of at least five judges of the court which sit to decide any case “involving a substantial question of law as to the interpretation” of the Constitution of India.
  2. President of India seeking SC’s opinion: When the President has sought the Supreme Court’s opinion on a question of fact or law under Article 143 of the Constitution. Article 143 of the Constitution provides for Advisory jurisdiction to the SC. As per the provision, the President has the power to address questions to the apex Court, that he deems important for public welfare.
  3. Conflicting Judgments: When two or more three-judge benches of the Supreme Court have delivered conflicting judgments on the same point of law, necessitating a definite understanding and interpretation of the law by a larger bench.
  • The Constitution benches are set up on ad hoc basis as and when the above-mentioned conditions exist.
  • Constitution benches have decided many of India’s best-known and most important Supreme Court cases, such as:
  1. K. Gopalan v. State of Madras (Preventive detention)
  2. Kesavananda Bharati v. State of Kerala (Basic structure doctrine) and
  3. Ashoka Kumar Thakur v. Union of India (OBC reservations) etc.


What are Electoral Bonds?

  • Electoral bonds are banking instruments that can be purchased by any citizen or company to make donations to political parties, without the donor’s identity being disclosed.
  • It is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India.
  • The citizen or corporate can then donate the same to any eligible political party of his/her choice.
  • An individual or party will be allowed to purchase these bonds digitally or through cheque.

About the scheme

  • A citizen of India or a body incorporated in India will be eligible to purchase the bond
  • Such bonds can be purchased for any value in multiples of ₹1,000, ₹10,000, ₹10 lakh, and ₹1 crore from any of the specified branches of the State Bank of India
  • The purchaser will be allowed to buy electoral bonds only on due fulfillment of all the extant KYC norms and by making payment from a bank account
  • The bonds will have a life of 15 days (15 days time has been prescribed for the bonds to ensure that they do not become a parallel currency).
  • Donors who contribute less than ₹20,000 to political parties through purchase of electoral bonds need not provide their identity details, such as Permanent Account Number (PAN).

Objective of the scheme

  • Transparency in political funding: To ensure that the funds being collected by the political parties is accounted money or clean money.

Who can redeem such bonds?

  • The Electoral Bonds shall be encashed by an eligible Political Party only through a Bank account with the Authorized Bank.
  • Only the Political Parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last General Election to the Lok Sabha or the State Legislative Assembly, shall be eligible to receive the Electoral Bonds.

Restrictions that are done away

  • Earlier, no foreign company could donate to any political party under the Companies Act
  • A firm could donate a maximum of 7.5 percent of its average three-year net profit as political donations according to Section 182 of the Companies Act.
  • As per the same section of the Act, companies had to disclose details of their political donations in their annual statement of accounts.
  • The government moved an amendment in the Finance Bill to ensure that this proviso would not be applicable to companies in case of electoral bonds.
  • Thus, Indian, foreign and even shell companies can now donate to political parties without having to inform anyone of the contribution.

Issues with the Scheme

  • Opaque funding: While the identity of the donor is captured, it is not revealed to the party or public. So transparency is not enhanced for the voter.
  • No IT break: Also income tax breaks may not be available for donations through electoral bonds. This pushes the donor to choose between remaining anonymous and saving on taxes.
  • No anonymity for donors: The privacy of the donor is compromised as the bank will know their identity.
  • Differential benefits: These bonds will help any party that is in power because the government can know who donated what money and to whom.
  • Unlimited donations: 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 ahead

  • The worries over the electoral bond scheme, however, go beyond its patent unconstitutionality.
  • The concern about the possibility of misuse of funds is very pertinent.
  • The EC has been demanding that a law be passed to make political parties liable to get their accounts audited by an auditor from a panel suggested by the CAG or EC. This should get prominence.
  • Another feasible option is to establish a National Election Fund to which all donations could be directed.
  • This would take care of the imaginary fear of political reprisal of the donors.

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