Electoral bonds are financial instruments that function as promissory notes or bearer bonds. Issued by the State Bank of India (SBI), these are available in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore, and can be purchased by any Indian citizen or an entity incorporated in the country. In the scheme, only political parties registered under Section 29A of the Representation of the People Act, 1951, and which secured not less than 1 per cent of the votes polled in the last elections to the Lok Sabha or a state legislative assembly are eligible to encash electoral bonds. The proceeds from any bonds not encashed within 15 days of being issued, are to be deposited in the Prime Minister’s relief fund.
The case of the bond
The whole idea behind the introduction of electoral bonds was to ensure that political parties receive donations through proper channels. They were also categorised as bearer bonds to ensure the anonymity of the donor. To provide some context, before the introduction of the scheme, political parties had to make public all donations above Rs 20,000, and no corporate company was allowed to make donations amounting to more than 7.5 per cent of their total profit or 10 per cent of revenue. However, the amendments brought in by the Finance Act of 2016 and 2017 paved the way for the electoral bond scheme, sparking debates and legal challenges.
Shortly after the amendments were unveiled, a coalition of non-governmental organisations, Association for Democratic Reforms and Common Cause, alongside the Communist Party of India initiated legal proceedings in the supreme court. It is pertinent to mention that the CPI is one of the four political parties that never accepted electoral bonds. They contended that the finance acts were deceptively enacted as money bills to evade thorough examination by the rajya sabha, and that the scheme perpetuated a culture of secrecy in political funding. Several critical arguments were presented in court against the electoral bond scheme. One such highlighted the scheme’s infringement upon citizens’ fundamental right to information, questioning the transparency of political party funding. Another concern was the potential for the scheme to provide pathways to shell companies and allow for backdoor lobbying and quid pro quo practices, undermining the fight against corruption. Moreover, the scheme’s anonymity feature raised questions about the equitable allocation of donations and the accountability of political parties in utilising these funds. There were also concerns raised about the possibility of trading electoral bonds, further complicating the transparency and accountability of the scheme.
In a landmark unanimous judgment on February 15, the supreme court struck down the electoral bonds scheme as unconstitutional and manifestly arbitrary. The court also quashed the amendments made to the Income tax act and the representation of People act, which made the donations anonymous. State Bank of India was ordered to furnish details of the electoral bonds received by political parties, to the Election Commission of India. As the list was released, it was evident that the bonds were by their very nature not bearer bonds. The bank and the government, which conveniently is the authority to appoint the Chairman of the bank, were always in the know. The purchaser of the bonds and the beneficiary details were always available with the government. This was a privilege in itself, as it opened ways for quid pro quos and carrot-and-stick tactics. Further, SBI was reluctant to submit the details, stating that it would take longer to trace and subsequently submitted the list without serial numbers required to trace the beneficiaries. But the supreme court had had enough by then, and SBI had to yield. Then there was light.
CBI raids first, bond purchase next
The top 3 donors were lottery company Future Gaming, infrastructure firm Megha Engineering (MEIL), and mining giant Vedanta. Megha Engineering was recently brought under the CBI scanner for allegedly bribing government officials, but the same is being investigated. It indicates that the company indeed uses this strategy of getting things done from time to time. Further, the Quint showed that 14 out of the top 30 donors have faced raids by CBI or the ED. As per a report by CAG, the cost of the Kaleshwaram project, which is being undertaken by MEIL, has almost doubled from an estimated cost of Rs 81,911 crore to Rs 147,427 crore. Yet the Hyderabad-based company has subsequently been awarded various government projects across the country. It may be noted that the company was raided by the Income tax department in 2019, but after that all has been well. MEIL had purchased bonds worth Rs 1000 crore.
Donating 5-6 times the profit
This is just the tip of the iceberg. The list revealed, among other things, that companies which were earlier restricted to donating only 7.5 per cent of profits or 10 per cent of revenue ended up donating 5-6 times of their profits. Future Gaming donated Rs 1368 crore via electoral bonds while making a profit of only Rs 215 crore during 2019 to 2023. This is the same company that was raided by IT officials and the finance minister had tweeted pictures from her discussions. Whether this was an investigation or a negotiation is unclear.
Conspiracy theorists believe this is the biggest scam that the country has seen and it has raised significant concerns regarding transparency, accountability and the influence of money in politics. The concept of quid pro quos and carrot and stick model has been existing and thriving in the country forever. But when it is done so blatantly, it becomes a national issue. The supreme court’s judgment marks a significant step towards ensuring greater transparency and accountability in political funding, setting a precedent for future electoral reforms in India.
