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Supreme Court Rules Electoral Bonds Scheme “Unconstitutional” in Landmark Decision

Supreme Court Rules Electoral Bonds

In a historic decision, the Supreme Court ruled on Thursday that the electoral bonds scheme must be declared “unconstitutional.” The verdict, reached unanimously, came in response to several petitions questioning the legality of the government’s electoral bond system, which permitted undisclosed contributions to political parties.

About Ruling

In a significant ruling, Chief Justice DY Chandrachud, along with four other judges, declared the anonymous electoral bonds scheme a violation of the right to information under Article 19(1)(a). They stressed the importance of transparency in elections, saying it’s vital for voters to know where political parties get their funding. As a result, they ordered the State Bank of India (SBI) to stop issuing more electoral bonds and instructed the SBI to disclose details of bonds bought since April 12, 2019, to the Election Commission.

This decision is seen as a blow to the Bharatiya Janata Party (BJP), which was the main beneficiary of the scheme introduced in 2017. Advocate Prashant Bhushan pointed out that the Court struck down all parts of the scheme as violating citizens’ right to information. Initially presented as a move towards transparency by the government on January 2, 2018, the scheme allowed individuals and entities in India to buy electoral bonds, which could only be given to registered political parties. Only authorized banks could cash these bonds.

Although the Supreme Court had previously declined to put the scheme on hold, it reiterated its commitment to thoroughly examining the issue due to its significant impact on elections. The Constitution bench, comprising Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra, started hearing petitions on this matter in October of the previous year. Various parties, including Congress leader Jaya Thakur, the Communist Party of India (Marxist), and the NGO Association for Democratic Reforms (ADR), presented arguments. Throughout the hearings, the apex court stressed the importance of reducing cash involvement in electoral activities.

What are Electoral Bonds?

Electoral bonds allow anonymous donations to political parties in denominations from Rs 1,000 to Rs 1 crore. They were introduced in 2017 to enhance transparency in political funding and formally rolled out in 2018. These bonds can be purchased from designated State Bank of India branches. Political parties must cash the bonds within 15 days of purchase for electoral expenses. Bonds are available for purchase during specific periods in January, April, July, and October, extended to 30 days in a general election year. Only parties registered under the Representation of the People Act, 1951, and those securing at least 1 percent of votes in the last General Election can use electoral bonds. Authorized banks can encash these bonds only through designated accounts.

What was Argued?

Critics of the electoral bond system argue that it undermines democracy by lacking transparency, creating an uneven playing field between the ruling party and opposition. They contend that this erodes democratic institutions. The government emphasizes that before the introduction of electoral bonds, political parties weren’t required to disclose donation sources below Rs 20,000.

This resulted in 69 percent of donations coming from “unknown sources,” as reported by ADR. The government introduced anonymity in electoral bonds to protect donors’ political affiliations while ensuring parties could raise funds through recognized channels. The Supreme Court delivered its judgment seven years after the initial challenge by ADR in 2017.

Read Also: Electoral Bonds

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