SC to hear plea against sale of Electoral Bonds

In News: CJI agreed to urgently hear a plea by NGO Association for Democratic Reforms to stay the sale of a new set of electoral bonds before Assembly elections in West Bengal and Tamil Nadu.

About Electoral Bonds

• They were introduced by a Finance Bill, 2017 and the Electoral Bond Scheme 2018.
• Like a promissory note, Electoral Bond 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.
• The bonds will be issued in multiples of Rs. 1000, Rs 10,000, Rs 100,000 and Rs 1 crore (the range of a bond is between Rs 1,000 to Rs 1 crore).
• These will be available at some branches of SBI.
• The bonds are similar to bank notes that are payable to the bearer on demand and are free of interest.
• An individual or party will be allowed to purchase these bonds digitally or through cheque.

Usage of electoral bonds

• A donor with a KYC-compliant account can purchase the bonds from designated branches of SBI and can then donate them to the party or individual of their choice.
  • The electoral bonds are available for purchase for 10 days in the beginning of every quarter.
  • The first 10 days of January, April, July and October have been specified by the government for purchase of electoral bonds.
  • An additional period of 30 days shall be specified by the government in the year of Lok Sabha elections.
• Now, the receiver can encash the bonds through the party’s verified account. The electoral bond will be valid only for fifteen days.
• To receive Electoral Bonds, a party must be
  • registered under section 29A of the RPA, 1951 and
  • has secured at least 1 percent of the votes polled in the most recent General elections or Assembly elections.
• The party will be allotted a verified account by the Election Commission of India (ECI) and the electoral bond transactions can be made only through this account.
• The electoral bonds will not bear the name of the donor to ensure anonymity.
• Donations would be tax deductible.
  • Hence, a donor will get a deduction and the recipient, or the political party, will get tax exemption, provided returns are filed by the political party.

Benefits as per Government:

• Transparent Funding: Electoral bonds will make party balance sheets transparent without exposing the donor details to the public.
• Curb Black money: Electoral bonds would keep a tab on the use of black money for funding elections.
  • In the absence of electoral bonds, donors would have no option but to donate by cash after siphoning off money from their businesses.

Controversy over electoral bond

• Need to disclose Donor’s Identity: Experts feel that the government must not restrain from allowing details of such donations to be made public for better transparency.
  • The corporations may donate without the knowledge of shareholders and there will be no medium to seek such info.
  • Neither the voters will have an idea about the donors of political parties.
• Influx of Black Money in Political system: It was alleged that anonymous donors could mean influx of black money.
  • Similar concerns were raised by RBI in an article published by HuffPost India in 2019 which was suspicious of Money Laundering leading to “undermined faith in Indian banknotes”.
• Help Big Corporates and Big Parties: The Money laundering will help big corporates and big parties as donors identity will not be revealed.
• Several Key Restrictions were 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 provision 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.

Supreme Court’s Stance

• In 2019 the Supreme Court asked all the political parties to submit details of donations received through electoral bonds to the ECI.
• It also asked the Finance Ministry to reduce the window of purchasing electoral bonds from 10 days to five days.
• The apex court is yet inconclusive regarding other pleas against the electoral bonds.

Way Forward

• The Election Commission in 2019 told the Supreme Court that while it was not against the Electoral Bonds Scheme, it did not approve of anonymous donations made to political parties.
• Hence, the anonymity clause must be revoked and electoral bonds continued.
• One problem of removing ‘Anonymity clause’ may be a threat to the donors if the party they supported could not come to power.
  • In such cases, the test of maturity of democracy will come into play when the political parties without any grudge may work for the welfare of the common masses.

Source: BusinessStandard