“In a world, where privacy is a growing concern, the electoral bond system ensures the right to privacy for the donors.”
Chief Justice Mohammed Ali Currim Chagla once opined “Any attempt on the part of anyone to finance a political party is likely to contaminate the wellsprings of democracy. Democracy would be vitiated if results were to be arrived at not on their merits, but because money played a part in making those decisions. The form and trappings of democracy may continue, but the spirit underlying democratic institutions will disappear. History of democracy has proved that in other countries, democracy has been smothered by big business and money bags playing an important part in the working of democratic institutions.”
Our political science textbooks indoctrinate the idea of democracy in the minds of young students. Democracy, it says, is ‘of the people, by the people and for the people.’ In an ideal world, democracy is run by the people through their elected representatives who participate in the decision-making process and uphold their needs and aspirations. But the reality is that the working of many democratic countries in the world is influenced by an important factor: political funding. One such instrument of political funding is the electoral bond, which is gaining traction across the country.
Notified on January 2, 2018, the electoral bond scheme introduced instruments through which anyone in the country could donate money to political parties anonymously. Usually sold in denominations ranging from Rs 1,000 to Rs 1 crore, these bonds can be bought from authorized SBI branches through accounts complying with KYC norms. Following this, the political parties can choose to encash the bonds within 15 days of receiving them and fund their electoral expenses. However, these bonds aren’t available for purchase throughout the year and can only be purchased between 10-day windows falling in January, April, July, and October.
Consequently, the Finance Act(s) of 2016 and 2017 amended four separate legislations to make way for the electoral bonds scheme, including the Foreign Contribution Regulation Act, 2010; the RPA, 1951; the Income Tax Act, 1961; and the Companies Act, 2013. As per the Companies Act 2013, a company can make a political contribution only if its net average profit for the three preceding financial years is at 7.5%. The removal of this clause has raised concerns about black money in political funding through shell companies.
In 2017, the first batch of petitions was filed by two NGOs, Common Cause and the Association for Democratic Reforms (ADR), to strike down amendments made through the Finance Acts of 2016 and 2017, passed as money bills, which “opened doors to unlimited political donations, even from foreign companies,” thereby legitimizing electoral corruption on a huge scale.
In a world, where privacy is a growing concern, the electoral bond system ensures the right to privacy for the donors. It empowers and allows the donors to freely and fearlessly support those political parties that align with their ideologies, goals, and aspirations. It allows voters to donate to their parties without fear of being victimized in the future. In the absence of electoral bonds, there was always a fear that the donors who donated, for example, to the ruling party would be penalized if the party in power changed. The anonymity and shield provided by the electoral bond scheme ensure that political victimization is a thing of the past.
A major argument that is given in favor of electoral bonds is that it has institutionalized political funding, thereby reducing the use of black money in the system. Now, the purchase of bonds from the SBI ensures that only accounted income is being used for these donations and the cash component in political expenditure is reduced. Earlier, white money was converted to black money to donate anonymously and with confidentiality to parties which proved to be disastrous for the economy. Moreover, the use of white money ensures an income tax exemption for the donor which prompts and incentivizes people to participate more actively in a democracy.
One of the major fallbacks of electoral bonds is the lack of transparency in funding as the bonds do not bear the name of the donor, which means that political parties can get away with unaccounted income. Moreover, political parties are not mandated to employ independent auditors who can keep their funding in check.
Companies that are donating money via electoral bonds need not mention the name of the party to which they are donating. Foreign companies can donate their money via electoral bonds as well, allowing them to make unlimited anonymous donations to a particular party without revealing details. When read with the tax benefits provided to companies to encourage such political donations, electoral bonds appear to be the most efficient way to route off black money to political parties. By grossly distorting democratic values, electoral bonds encourage the absolute confluence of corporate money with seemingly sacred political processes. Such uncapped corporate resources funding political parties can only lead to private corporate interests taking precedence over the needs and rights of the people of the state in policy considerations. As an obvious consequence, back-seat driving by big industrialists and corporate houses becomes the norm. Once they do donate money, the political parties are under an obligation to incorporate private interests in their policies and programs at the whims and fancies of these industrial masters.
These industrialists may have vested interests of their own and make such policies that put the socio-economic concerns of the public at large at risk. India is a pluralistic country whose main aim under DPSPs has been the socio-economic development of its people and the electoral bonds violate the very fundamentals of our constitution. They have been crafted with due prudence to suit the best interests of the political parties. It has been observed that anonymity in electoral bonds was compromised to suit the ruling party. SBI is government-owned, so the identity of the donors might not be completely confidential and the government may be biased against those who support opposition parties. Hence, the benefits of democracy are overruled.
As it is well known, that corporations will give the money only to parties that are capable of winning the elections, the secrecy helps the political parties more than it helps the donors. It also ensures a disparity in the playing field of different political parties and more often than not new entrant parties are discouraged due to lack of funding.
The electoral bond scheme, moreover, could lead to the creation of a banana republic. Unchecked foreign funding of political parties can lead to Indian politics being influenced by foreign companies. Funds flowing from alien countries could steer Indian politics to a dangerous tangent, for example, in the US, President Donald Trump faced serious charges of having received Russian campaign funding.
Electoral bonds compromise the public’s right to know which has been declared to be a part of the right to freedom of expression under Article 19 of the Constitution. However, such anonymity is not absolute and can be compromised by the ruling government that has access to donor data implying that the incumbent government can very well deploy such information to compromise free and fair elections.
Electoral democracy jeopardizes the very foundation of the Indian constitution. It has a tremendous bearing on the sanctity of the electoral process in the country. It provides for selective anonymity and doesn’t provide a level playing field to political parties. The scheme could lead to money laundering as was also iterated by the RBI governor Urjit Patel who expressed concerns that this scheme could lead to money laundering as these instruments might be traded like currency.
Any individual, firm, or special interest group could now give an unlimited sum of money to any political party without disclosing a single rupee and nobody—no voter, no citizen, no journalist, and no civil society representative—would be able to connect the dots. In this way, it violates the right to information of citizens.
A look around the globe shows that European countries such as France and Belgium have curtailed private spending on elections through a series of legislations since the 1990s, thereby successfully negating the influence of the super-rich in elections. In France, for example, political parties may not receive more than 7,500 euros a year from individuals, and any contribution greater than 152 euros must be made by cheque. Businesses have been forbidden from making party donations since 1995. Brazil and Chile also recently banned corporate donations after a series of corruption scandals related to corporate funding – particularly Petrobras – and introduced the public financing of elections. The Federal Election Commission in the US maintains a database of individuals who have made contributions to federally registered political committees. In Germany, corporate donations to political parties are banned but not on donations from trade unions.
As India strides confidently toward a more robust democracy, the electoral bond scheme must be viewed and amended in light of its fallacies and shortcomings. Foremostly, citizens’ right to know must be restored. Further, it must be recognized that the electoral bonds scheme is nothing but a temporary salve to a foundational and structural problem of the Indian electoral system which is – the evergreen lack of infrastructural resources available to the ECI to conduct and regulate free and fair elections in India. Unless the more foundational issues are addressed, most amendments to the present legal structure would be redundant in curbing black money.
By:-SUHANI JAIN
