Do Electoral Bonds Promote Transparency Or Opacity? We Need To Know

Do Electoral Bonds Promote Transparency Or Opacity? We Need To Know

The Supreme Court will have to decide whether the electoral bonds scheme was wrongly certified as a Finance Act and if tax exemption can be granted indefinitely if the funds encashed by political parties are not used within a time frame

Olav AlbuquerqueUpdated: Friday, November 17, 2023, 12:11 AM IST
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Whether the electoral bonds scheme announced by the Narendra Modi government in 2018 facilitates opacity in funding political parties or promotes transparency in the electoral process will have to be decided by a five-judge Constitution Bench. This issue was referred to the Bench by CJI Dhananjay Chandrachud and his two colleagues because vital questions having an impact on the ensuing general elections of 2024 will have to be answered.

And from the judgment which will be delivered, we can infer whether the Supreme Court is a court of the people or an executive court, which is what some jurists have alleged. For changing times in changing climes may make the judges keep stiff spines. The Supreme Court will have to decide whether the electoral bonds scheme was wrongly certified as a Finance Act and if tax exemption can be granted indefinitely if the funds encashed by political parties are not used within a time frame.

The five-judge bench has asked the Election Commission of India to furnish vital data like the quantum of electoral bonds bought until September 30, 2023, while reserving its judgment. The judges asked crucial questions such as the need to keep secret the identities of the donor and recipient from the voters, which implies that this scheme does not promote transparency in the election process as the government claims it does.

Some of the questions which will have to be answered are: Can the state reward secret monetary transactions with tax relief when both the identity of the donor and recipient are kept secret? This implies the state is complicit in tax evasion which is a criminal offence when committed by individuals or corporate bodies.

Also, do our tax laws permit tax exemption by keeping the identities of both the donor and recipient a secret? Further, the general principle of granting tax exemption is that the funds received are used for the specific purpose which has been declared. In the case of electoral bonds, the donor can convert black money into white by the simple expedient of donating the cash to a ruling political party.

If a political party receives tax-exempt electoral bonds, should it be allowed to retain these funds indefinitely? These political parties must be forced to use these funds for the benefit of the people within a specific time period or lose the tax-exempt status. Then income-tax should be paid on the money received which should be treated as income and not as a state subsidy which is being done at present. This will curb the tendency of these political parties to receive tax-exempt funds without using them for the people’s benefit.

Political parties which have secured more than 1% votes in the last general election to the Lok Sabha or any state legislative assembly can legally accept donations through electoral bonds where the identity of the donor is kept secret. This infuses opacity in the election process, because big businesses convert crores of rupees of their black money into white by funding those who come to power and getting benefits from the government in return.

The Modi government notified the electoral bonds scheme in January 2018, to allegedly cleanse the system of political funding by providing a legal method for individuals and corporations to contribute to political parties which need funds to campaign during elections. Shockingly, these electoral bonds are granted tax exemption so that crores of rupees exchange hands without the citizen knowing who has contributed to which political party.

The government has told the Supreme Court that the Constitution does not envisage divulging to the citizen the identity of the giver and also the receiver — which is the antithesis of the Right to Information Act, 2005. This submission by the government negates the very concept of a democracy because the preamble of the Constitution declares that the people of India resolve to constitute themselves into a sovereign, socialist, democratic republic.

The electoral bonds are interest-free banking instruments; a citizen of India or a company in the country is eligible to purchase them, and the political party to whom they are given can encash them within 15 days of being handed over. These bonds are available in multiple denominations, ranging from ₹1,000 to ₹1 crore in specified branches of the State Bank of India.

Electoral bonds can only be bought by making payment from a bank account. These bonds do not carry the name of the payee but can be encashed through designated bank accounts by the parties and are available for a period of 10 days in January, April, July and October. An additional 30-day period shall be specified by the Centre in a general election year.

But many question if these electoral bonds have achieved their aim because nobody can pinpoint the source of these funds. That the government may be misleading the people about its aim for transparency becomes obvious because if that were so, the identities of the donor and recipient would be divulged. The right to information as derived from Article 19 (1) (a) and Article 21 forms a basic feature of the Constitution which cannot be abrogated even by a brute majority.

Viewed against the backdrop of criminal cases against a segment of our MPs and MLAs, this issue of electoral bonds needs to be looked at from all angles. It is an open secret that certain political parties and independents contesting the general elections bribe the voters by distributing cash, liquor bottles and sarees. Do these funds come from electoral bonds or from other sources?

Not all of these questions may be answered satisfactorily. But there is no doubt that the Supreme Court will ensure that the fundamental right of the people to know who pays what to whom may not be totally ignored.

Olav Albuquerque holds a PhD in law and is a senior journalist and advocate at the Bombay High Court

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