INTRODUCTION
In modern democracies the elections lie at the very heart of liberal democracy. There is no denial to this fact that it is only through elections that people in a democracy participate in public affairs and express their will. Likewise as we have always witnessed that it is only through the procedure of elections that power changes from one party to another peacefully and the authority of government gets clothed with legitimacy by constitutional methods. The elections are the most important and integral part of politics in a democratic system of governance. There is a famous saying that ‘politics is the art and practice of dealing with political power’ and elections is a process of legitimization of such political power in democracy. Similarly Democracy can function only upon the principle that the elections are free and fair and not rigged and manipulated. Such elections are effective instruments of ‘ascertaining popular will both in reality and in form.’ India is both the largest and one of the most populous democracies in the world. Nevertheless this apart, when we compare India to most of the developed democracies like USA and British of the world, problems of illiteracy, poverty, etc. still continue in India as is the case with most of the developing countries. There is no denial to this fact that the electorate is not only vast in India but also quite diverse that reflects in plurality of caste, religion, region, language, etc. of its social variety. Thus conducting periodic elections in India that having so much huge population; the country by encouraging large-scale popular participation is a stupendous task for any institution.
ELECTION COMMISSION OF INDIA
The Constitution of India assigns the responsibility to supervise, direct and control the entire procedure and machinery for conducting the elections and also for some other subsidiary matters on the Election Commission of India under Article 324 of Indian constitution. At present, the commission of India constitutes the CEC and two Election Commissioners. The Election Commission has the power of superintendence, direction and control of all elections to Parliament and the State Legislature and to the offices of the President and Vice-President respectively. The Election Commission that is a Constitutional body was vested with the actual power of superintendence, direction and control of elections in India, has, from time to time, come up with concrete proposals/recommendations based on objective difficulties met in the conduct of smooth free and fair elections.
ELECTORAL REFORMS IN INDIA
This critical juncture, approaching nearly 75 years of independence, necessitates an urgent overhaul of electoral and political systems. The goal is to reserve politics exclusively for individuals deeply committed to dedicating their time and energy to serving the nation tirelessly. Embracing these reforms is not merely a choice; it is a fundamental step toward cultivating a healthier, more robust democracy. The imperative for these changes arises from the need to eradicate corruption, rectify inequalities, and eliminate misgovernance. Introducing new political and electoral frameworks aspires to forge a democracy characterized by transparency, accountability, and a swift response to the people's needs.
Central to this vision is the establishment of a government with zero tolerance for corruption - a cornerstone for the advancement of any democracy. Achieving this imperative requires restructuring and rejuvenating existing electoral and political formats into more responsive entities. The aim is to facilitate the formation of honest, efficient, and stable governments at both the central and state levels. In essence, the call for electoral and political reforms is not just a call for change; it is a call for a profound transformation that aligns with the evolving needs and expectations of the populace. These reforms serve as catalysts for a democracy that not only stands the test of time but also thrives as a beacon of governance excellence and public service.
The preamble of Indian constitution aims to provide ‘political justice’ to the people of India without any differences. However, when the criminal elements are becoming a part of the legislature, then securing any form of justice, is a hollow promise of the governments. Nevertheless the sovereign of India is crippled some criminal elements who uses threat, intimidation, violence, even sexual assault and any other means to win the election at any cost. All recent committees on politics and electoral reform have observed the criminalization in Indian political system almost unanimously. Criminalization of politics has many forms, but perhaps the most alarming among them is the significant number of elected representatives with criminal charges pending against them.
ELECTORAL BONDS
Electoral bonds are legal tender that may be bought by individuals or businesses in India and function similarly to promissory notes or bearer bonds. The bonds are specifically intended to be used as a means of funding political parties. Announced by the then Finance Minister Arun Jaitley during the 2017 Union Budget, the scheme represented a significant shift in how political contributions could be made and reported in the country. The electoral bond scheme was introduced in 2018.
Electoral bonds are issued by the State Bank of India (SBI) at specified branches, available for purchase by any citizen of India or entities incorporated or established in India. They can be bought at certain times of the year, announced by the Ministry of Finance.
The bonds are available in multiple denominations, ranging from INR 1,000, INR 10,000, INR 1, 00,000, INR 10, 00,000, and INR 1, 00, 00,000. This allows for donations of various amounts.
The purchased bonds can then be donated to any political party registered under the Representation of the People Act, 1951, that has secured at least 1% of the votes in the most recent Lok Sabha or State Legislative Assembly election. The political party can encash the bonds through a designated bank account with the authorized bank.
One of the key features of electoral bonds is the anonymity they provide; the identity of the donor is not disclosed to the recipient political party. This is intended to protect donors from any potential backlash due to their political contributions.
Electoral bonds have a short validity period; they must be encashed by the political party within 15 days from the date of issuance. If not encashed within this period, the amount is directed to the Prime Minister's Relief Fund.
PURPOSE OF ELECTORAL BONDS
The primary objectives behind the introduction of electoral bonds were:
Transparency in Political Funding: By channeling donations through an official banking instrument, the scheme aimed to reduce the influx of unaccounted cash through opaque means that had traditionally dominated political donations.
Protecting Donor Anonymity: One of the key features of electoral bonds is the anonymity they provide to donors. This was intended to shield donors from potential political backlash and to encourage more individuals and corporations to contribute to political parties without fear of reprisal.
Encouraging Legal Donations: The scheme was designed to encourage donations through formal and traceable channels, thus reducing reliance on black money in political financing.
Digital Trail and Accountability: Although the identities of donors are not disclosed to the public, the use of a banking instrument ensures a digital trail. This was seen as a step towards ensuring that all political donations are accounted for within the banking system, allowing for some level of regulatory oversight.
Regulating Political Funding: By setting clear guidelines and eligibility criteria for both donors and political parties, the scheme seeks to regulate the flow of funds to ensure that only legitimate, eligible political entities can benefit from these funds.
SUPREME COURT RULING DECLARING BONDS UNCONSTITUTIONAL
The scheme was justified as enabling legitimate donations from corporations, individuals and groups who wished to maintain their privacy. The previous system of cash equivalents was portrayed as breeding black money and being open to misuse. Electoral bonds, acting like bearer instruments, would supposedly tackle this by funneling "white money" transparently into the system. However, right from the start, opposition parties, transparency activists and constitutional experts raised serious concerns. They argued the scheme effectively legitimized and facilitated unlimited, undisclosed corporate donations to ruling parties. Being routed via the state-owned SBI, the secrecy around donors was being enabled by the government itself, unlike the previous system of electoral trusts run by the private sector. Critics pointed out how donor anonymity works against the citizen's fundamental right to know the financial bedrock of parties seeking votes. The Representation of People's Act mandated declaration of donations above Rs 20,000. By removing caps on donations and diluting transparency, electoral bonds were termed a retrograde step for democratic accountability.
With general elections approaching in 2024, scrutiny of electoral bonds has sharpened. Opposition parties claim the scheme has singularly benefited the ruling party's war chest while crippling their own fundraising. The Supreme Court began examining its constitutional validity based on petitions filed soon after its announcement. Court struck down the scheme as illegal and arbitrary, marking a landmark victory for transparency. Its full impact, however, depends on comprehensive disclosure of bond transactions to ascertain who donated how much to which party. Ensuring free and fair elections requires public knowledge of donors that seek to shape policies and governance.
The Supreme Court of India delivered a landmark judgment striking down the Electoral Bond Scheme as unconstitutional and illegal. By a 4:1 majority, the five-judge bench ruled that the scheme seriously compromised transparency in political funding, going against the fundamental right to information of citizens. The electoral bonds scheme had allowed anonymous donations to political parties. Introduced in 2017 via amendments to the Finance Act and Representation of People's Act, it opened a window for unchecked corporate donations to ruling parties. The government claimed it would improve transparency and reduce black money in election financing. However, over Rs 16,000 crores was donated via electoral bonds from 2018-early 2022. Multiple public interest litigations (PILs) were filed in 2017 challenging the scheme's constitutional validity. Petitioners included NGOs working on electoral reforms like the Association for Democratic Reforms (ADR), along with opposition political parties. The cases argued that removing disclosure requirements for political donations contravened the citizens' right to know under Article 19(1) (a) of the Constitution. Article 19(1)(a) guarantees the fundamental right to freedom of speech and expression. The Supreme Court has interpreted this to include the right to information about public issues and candidates for ensuring informed voting choices. By cloaking the identities and amounts of political funding through bonds, this right was being violated as per petitioners.
The government contested these assertions. It claimed electoral bonds would improve transparency by funneling donations through banking channels instead of illegal cash. Seeking to balance transparency with privacy, it argued donor anonymity incentivized legitimate funding. Making all donor details public could discourage individuals and organizations from contributing to parties they support. A 3-judge bench of the Supreme Court began hearing arguments in the case in 2021. In April 2022 it referred the matter to a larger 5-judge constitutional bench given the weighty issues involved regarding citizens' rights. Hearings took place over 10 days starting October 2022, with the 5-judge bench unanimously declaring the scheme illegal.
The majority ruling held that the right to information could only be restricted on well-established grounds such as national security or public order. The anonymity of political donors did not qualify as a reasonable restriction. The State also could not assign such importance to privacy concerns as to compromise a foundational democratic right. Moreover, it found the electoral bond scheme failed to meet its own stated goals. There was no evidence that anonymous donations reduced the prevalence of black money. Rather, removing caps on corporate donations had further shifted power to big business interests. This landmark verdict is a resounding victory for transparency, accountability, and the rights of voters. It reaffirms the centrality of disclosure in cleansing election finance from opaque interests. While details of past bond transactions are still emerging, the banning of anonymous donations prevents further erosion of transparency standards in a democracy.
IMPACTS AND AFTERMATH OF THE RULING
Disclosure of Donor Details Ordered
The most significant impact of the Supreme Court verdict on electoral bonds was the directive to the government to reveal details of all donors and donations made through the controversial bonds. The Court stated that maintaining transparency in political funding was essential for free and fair elections. Hence, it ordered that all information about electoral bond transactions must be made public on an urgent basis. As per the ruling, the State Bank of India, which issued the bearer bonds, will have to furnish detailed data to the Election Commission within 4 weeks. This covers information on who purchased how many bonds, when and in which denominations. Additionally, SBI must also provide data on which political parties subsequently encashed the bonds and received the donation amounts in their accounts. Even though parties are not legally obligated now, the Court said all parties must voluntarily reveal amounts received through bond donations. This break from anonymity is a major win for transparency. The scheme had enabled over Rs 16,000 crores of political donations without donor or amount details. Now this opacity will be uncovered through systematic disclosure of who funded which party secretively until now. The Court asserted the citizen's right to know crucial details regarding financing of parties which aim to gain political power. It noted anonymous funding ran counter to democratic principles and could enable quid pro quo deals between parties and their big donors.
By mandating disclosure, dubious funding channeled via electoral bonds will be exposed. Earlier, any entity including illegal sources or foreign companies could anonymously donate unlimited sums to parties through bonds purchased at SBI branches. Legal experts have lauded the ruling for prioritizing transparency and affirming the fundamental right to information of voters regarding election funding. This upholds accountability in democracy by enabling scrutiny of financial influences on parties seeking public office.
Pre-bond Donation Rules Back in Effect
The Supreme Court verdict striking down electoral bonds has restored the legal framework governing political party funding that existed prior to the controversial bonds being introduced in 2017. Experts state this marks a significant reversal to norms of transparency and accountability that were weakened by electoral bonds. Rules mandating declarations of donations above Rs 20,000 are back in effect. Before electoral bonds were introduced, the Representation of People's Act required that parties submit details of donors and amounts for all contributions above Rs 20,000 to the Election Commission every year. This included name, address and PAN details of donors. The companies law also restricted corporate donations to 7.5% of average net profits over the past 3 years. This prevented unlimited funding by registered companies to political parties or candidates. Electoral bonds scrapped both these rules. By removing caps on donations and opacity around donors, they opened the doors for unrestricted anonymous funding including from foreign and illegal sources. The Supreme Court ruled that electoral bond anonymity violated the citizen's right to information, and failed to clean up political funding as claimed. Hence it struck down amendments made to the RPA and Companies Act to facilitate the bonds. With this, the pre-2017 status quo on transparency in party funding has been restored. Activists have termed it a major boost to India's election transparency framework that was undermined in the name of electoral bond reforms. Parties are once again legally required to submit details of all donors and amounts to the Election Commission for contributions above Rs 20,000. This will enable public scrutiny of financial interests behind parties. The 7.5% limit on corporate donations also kicks back in. This levels the playing field somewhat instead of skewed anonymous funding to the party in power seen in the electoral bonds era from 2018-2022.
CONCLUSION
Importance of Political Transparency and Fair Electoral Processes
The Supreme Court's landmark ruling to strike down electoral bonds has underscored the critical need for transparency and accountability in political funding for free and fair elections. By banning anonymity for donors, the Court has upheld the citizen's fundamental right to information to strengthen India's electoral democracy. This conclusion is significant because elections are the lifeblood of democratic systems. The fairness of electoral processes and the faith people have in them shapes the quality of democracy and governance. Opaque political financing, if unchecked, has the power to erode this public trust over time. When contours of power can get defined by big money flows behind closed doors, it spawns corruption, conflicts of interest and policy distortions that hurt public welfare. The public has every right to know the financial bedrock upon which parties and candidates contest elections to gain power over lawmaking and administration. Transparency in electoral funding ensures that citizens can scrutinize if parties promote policies favored by big donors after getting elected. Such scrutiny fosters accountability and safeguards against quid pro quo deals between political elites and their financial patrons. Thereby, transparency becomes integral to free, fair and ethical democratic processes. By mandating disclosure of donor details for electoral bonds and all large contributions, the Supreme Court has assertively restored essential transparency standards in India's election financing system. This upholds the citizen's right to information and ability to assess the forces seeking to shape political power. The electoral bonds case also shows that opacity in the name of reforms can be more damaging than status quo. Conceptually, bonds aimed to improve funding cleanliness but ended up enabling black money at scale while crippling transparency. This affirms why election reforms must strengthen democratic principles, not dilute them. In conclusion, the Supreme Court's commendable ruling striking down electoral bonds will bolster the integrity and fairness of India's electoral democracy. It reaffirms that transparency in political funding is non-negotiable for free, ethical and accountable democratic processes.
Need for Balanced Policies on Political Donations
The electoral bonds case has highlighted the importance of evolving a balanced regulatory framework for political funding in India. While The Supreme Court has rightly prioritized transparency as fundamental, balanced norms are also needed to maintain fair play and prevent harassment of genuine donors. This nuanced balancing act is essential because elections require funding. At the same time, electoral finance must have oversight to prevent conflicts of interest and undue influence. Reasonable restrictions and transparency without overreach are thus required. For instance, while the Court ordered anonymity of electoral bonds to be lifted as it violated voters' right to information, unhindered disclosure norms can discourage lawful, small donors from funding parties they support. Hence, the Rs 20,000 threshold under election law, below which donor details need not be disclosed, serves a fair purpose. Although opacity for large donations is rightly banned, small individual donors may need protection from potential harassment by political opponents. Similarly, while the Supreme Court restored the 7.5% limit on corporate donations, a case can be made for raising this cap reasonably to around 10-15% of profits. A higher limit allows legitimate funding aligned with companies' interests, without opening floodgates for disproportionate influence. Such nuanced rules distinguish between transparency needed in big donor funding which can skew policies versus building a wider base through smaller donations from individuals, professionals, and enterprises. Overall, the crux is balancing transparency, freedom, and fairness in political funding. The landmark ruling on electoral bonds tilted the needle back towards transparency crucially needed to strengthen electoral integrity. Going forward, policy frameworks must sustain this with balanced complementary measures. In conclusion, the electoral bonds verdict highlighted that election funding policies require judicious balancing of transparency, reasonable restrictions and democratic accountability. While the Court has firmly reiterated the importance of transparency to voters, balanced regulations are also needed to maintain free and fair democratic processes.
REFERENCES
Written By,
Purva Dhamale
Intern, Chanchlani Law World
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