Introduction:
For a democratic country like India, the elections play a major role in representing the will of the people. The elections are extremely crucial for the survival and sustenance of any democracy and are thus regulated by the Election Commission in India. The First General Elections were held in the year 1951-52 and since then this body has played a great role in conducting fair and just elections throughout India. For conducting elections it is also particularly important for the various political parties that they are adequately funded and thus to facilitate the process of funding, to make the whole process cashless and to get the whole system cleaned out the Electoral Bond Scheme was rolled out in the year 2018[1].
What is the Electoral Bond Scheme?
With intent to provide a new lease of life to the system of election funding system in India, the Finance Bill of 2017 introduced the Electoral Bond Scheme and it was formally notified in the year 2018. Having semblance with promissory notes, the electoral bonds are interest-free instruments which can be bought by any citizen of India, both natural persons and artificial persons like the companies which have been incorporated in India etc. These electoral bonds are meant to be bearer-instruments, meaning that the ownership of these bonds will be dependent upon the possession of these bonds. These bonds can be donated by the owners to the political parties of their choice. These are interest-free instrument as well.
The mechanism is such that these bonds can be bought only from the State Bank of India. The system is so devised that these bonds can be bought in the multiple values of Rs. 1000, Rs.10,000, Rs.1,00,000 and Rs. 10,00,000 and of Rs. 1,00,00,000. These bonds can then be accepted by the political parties which have been registered under the Section 29A of the Representation of People Act, 1951. Donations cannot be made to the parties which secured less than 1% votes in the last general elections under this scheme. These bonds are of such nature that they can be redeemed only by the political parties which possess authorized State Bank Account. The fulfilment of KYC formalities by the purchaser of the electoral bonds is a necessity and a bond once it has been purchased remains valid for 15 days from the date when it has been issued by the State Bank of India. The main idea behind the Electoral Bond Scheme is to promote transparency in the elections, but that does not appear to be the so as the details of the donors cannot be made available to the public.
The main purpose of the scheme was to provide transparency. The coming in force of the scheme was also accompanied by differing standpoint which was taken by the Election Commission as it had warned that the scheme would have “serious repercussions”. A trend has been observed in the last general elections where this scheme evidently seemed more favourable to the ruling BJP party. Upon the orders of the Supreme Court of India to disclose the annual audit report, it came to the forefront that the BJP received 95% of its funds through the mode of electoral bonds[2].
The Amendment to Law for Electoral Bond Scheme
The system of law-making in India is such that the after the Union Budget is presented in the Lok Sabha or the Lower House of The Parliament, then the Financial Bill is presented as a legislative proposal when the process has duly exercised the budget for the upcoming year gets implemented. The Lok Sabha has more powers with regard to the Money bills and it is under no such liability to accept any suggestion from the Rajya Sabha. The Finance Bill for the year 2017 was presented in the Lok Sabha and the suggestions which were presented by the Rajya Sabha were out rightly rejected and thus the Bill came into force. The main Act which came into force was the Finance Act, 2017 and this Act brought into effect amendments in the provisions of various Acts so that the Electoral Bond Scheme could be implemented without any legal hindrance.
A new clause was added that is, Section 31(c) to the Reserve Bank of India Act so that the process of issuance of electoral bonds could be simplified at the level of banks. The Section 29C of the Representation of People Act, 1951 was amended in such a way that it did not require the political parties to disclose the name of the donors where the donations were made by way of electoral bonds. The Income Tax Act, 1961 was also amended as far as S. 13A of the Act was concerned and through this amendment, the payments made, irrespective of the amount of money being donated by electoral bonds was made tax-deductible.
Apart from the abovementioned amendments, a change was also introduced in the Foreign Contribution (Regulation) Act, 2010 and thus it became easier for the foreign companies that had a majority stake in an Indian Company to contribute to the political parties. The Companies Act, 2013 also did not remain free from the purview of this Bill and changes were introduced in the Act under Section 18(1) that a company could not donate more than 7.5% of the average net profit of last three years.
The Implications of the Amendments– All the changes that came into force by way of this Finance Act and those which facilitated the implementation of the Electoral Bond Scheme which has instead of making the funding more transparent has made it more obscure. The role of the Election Commission has been reduced and the fund transfer from the companies or individuals to the political parties cannot be made known to the public and it is against the spirit of democracy. Simultaneously, this Act is also bound to increase the funding to the Indian elections from the foreign companies and thus their involvement has increased multitudinously.
This scheme has increased the funding of the parties for sure due to the ease of donating and receiving the funds but at the same time, the right of the voters to have the requisite information about the parties has been done away with and this leaves no room for the accountable and transparent governance. Constitutionally, the Bill which was introduced was an important prerequisite if the Electoral Bond Scheme was to be implemented but this Act also brought many amendments in the various sections of various Acts dealing with elections and funding did not limit the scope of the matters in the Bill to just money matters as per Article 110 of the Indian Constitution and thus it fails to qualify as a money bill.
Impact of the Electoral Bonds Scheme
1. A Threat to Democracy
The very basis of a healthy democracy is transparency, accountability and confidence of the general public in the elected government. Through this scheme the confidence and trust of the public are not reciprocated, the crucial information is kept from the very people that are bringing the party in power. This scheme is far, far away from the ideal of transparency and accountability, which are the two most basic things, expected out of representative democracy.
This scheme did not arrive alone but also introduced such amendments in the different Acts that have damaged the system of funding at the level of the topmost institutions in the country. This scheme has also created a system of seeking favours from the ruling party wherein the donations which would be made will help in maintaining the party in power and also would be helpful for the donors. The retention of power by the ruling party has become all the easier due to the biasness in the funding which would be created in order to get benefits from the ruling party.
2. Black Money
This scheme is extremely beneficial for companies that want to get rid of their black money. They can make donations in huge amounts and thus remain in the good books of the parties. The electoral bond scheme can help them to evade tax and avoid the taxes altogether without being held accountable for that whilst maintaining utmost anonymity. The electoral bond scheme is going to be the breeding ground for the shell companies which are going to sprout all across the country and will be a floodgate for disposing off all the black money made by the companies.
3. Money Laundering
A lot of money changes hands through the electoral bond scheme, of both the legal and illegal kind. A lot of illegal money is donated by the anonymous contributors and not just from India but also out of the jurisdiction of the laws of India through the amendment in the Foreign Contribution (Regulation) Act, 2010 and thus it becomes even more difficult to trace the source of these donations. The money launderers put their money in the market and then such money is placed in the electoral bonds and thereafter it gets integrated with the whole system and comes into the circulation.
This scheme, by the mere way that it works, has brought legality to the money laundering. This kind of scheme blurs the line between black money and white money and thus leaves no room for transparency and accountability.
Conclusion
The electoral bond scheme which officially came into place in 2018 and was introduced via the Finance Bill, 2017 and amended many sections of the various enactments was introduced with the intent to create transparency and accountability. This scheme has rather created immense opaqueness as far as the funding is concerned. The funding is an important and indispensable part of the elections. In a representative democracy like ours, it is important that the basic principles like accountability, representation, transparency are upheld. There are certain lacunas in the scheme at the basic constitutional level and it has failed to be an alternative to the cash funding system and rather has provided a better option to facilitate the flow of black money and money laundering in India.
References:
[1] https://www.thehindu.com/news/national/the-hindu-explains-what-is-an-electoral-bond-and-how-do-we-get-one/article22367124.ece
[2] https://www.thequint.com/news/politics/95-percent-electoral-bonds-purchased-in-2017-18-bjp
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