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The electoral bonds scheme is a threat to democracy

From a constitutional point of view, the scheme fails the tests of rationality and non-arbitrariness

analysis Updated: Mar 18, 2019 23:55 IST
Gautam Bhatia
Gautam Bhatia
The stated justification of the electoral bond scheme is the removal of black money from elections, especially in the form of under-the-table cash payments(REUTERS)

Earlier this month, the Supreme Court indicated that it would hear the long-pending constitutional challenge to the electoral bonds scheme. The electoral bonds scheme, which was introduced by the government in early 2018, provides new channels for private funding of political parties, and has been subjected to severe criticism, including by a former Chief Election Commissioner. The Supreme Court’s announcement that it would finally hear the constitutional challenge comes too late to have any impact on the impending general election. Nonetheless, how the Court decides this case will have a vital impact upon the future of our electoral democracy.

How do electoral bonds work? In short, they are issued by the State Bank of India (SBI), for specific amounts, ranging from Rs 1000 to Rs 1 crore, for a certain number of days in the year. The donor purchases the bonds, and then transfers them to the account of the political party in question, where they are converted into donations.

There are a number of features of the electoral bond scheme that merit constitutional scrutiny. The first — and most important — is that of anonymity. Neither the donor (who could be an individual or a corporate) nor the political party is obligated to reveal whom the donation comes from. This undercuts a fundamental constitutional principle: the freedom of political information, which is an integral element of Article 19(1)(a) of the Constitution (the free expression clause). In other words, the freedom to vote in a free and fair election, with access to all relevant information, is a fundamental right; in pursuance of this right, to take two examples, the Supreme Court has mandated the disclosure of candidates’ past criminal records, and the addition of the none of the above (NOTA) button.

If the voter cannot know who funds a political party — and is therefore in a position to exercise influence over it — then the process of voting is degraded into a farce. In this context, it is also important to note that not only is the electoral bond scheme opaque, but it is asymmetrically opaque: because the bonds are purchased through the SBI, the government is always in a position to know who the donor is. This asymmetry of information threatens to skew the process in favour of whichever political party is ruling at the time, something that was in evidence when figures revealed that the Bharatiya Janata Party has been the largest recipient, by some distance, of electoral bond funding.

The electoral bonds scheme must be understood in conjunction with other, recent changes to election law. These include the elimination of a former cap of 7.5% (that is, of average profits over three years) when it comes to corporate donations, the elimination of the requirement that corporations must reveal political contributions in profit and loss statements, and the elimination of the requirement that a corporation must be three years in existence. In other words, therefore, the result is that troubled companies, dying companies, shell companies can now donate to an unlimited amount, and do so anonymously. A more blatant perversion of the democratic process is difficult to imagine.

The stated justification of the electoral bond scheme is the removal of black money from elections, especially in the form of under-the-table cash payments. However, the provision of donor anonymity, and the elimination of regulations designed to ensure some kind of level playing field (however inadequate), far from reforming election funding, takes us several steps backwards. From a constitutional point of view, not only does it impact the freedom to vote in a free and fair election, as well as the constitutional right to vote per se, but — by accomplishing the exact opposite of what the government claims it wants to achieve — it fails the tests of rationality and non-arbitrariness.

For these reasons, it is imperative that the case have an urgent hearing before the court, and the scheme be struck down as unconstitutional.

Gautam Bhatia is an advocate in the Supreme Court

The views expressed are personal

First Published: Mar 18, 2019 23:55 IST