The Supreme Court will begin hearing arguments in petitions challenging electoral bonds today—which are used to make donations to political parties. Everything about them is astonishing—especially the claim that voters have no right to know who gave how much money to which party.
Researched by: Rachel John & Nirmal Bhansali
First, some basic deets
The origin story: In March 2017, Finance Minister Arun Jaitley presented the government’s 2018/19 budget to the Parliament as usual. But the budget contained a section that was most unusual—a brand new way to fund elections called electoral bonds. At the time, Jaitley claimed these will end the practice of giving black money as political donations—and make such payments more transparent.
The ratification: A month later, the electoral bond scheme was passed by the Lok Sabha—as part of the Finance Bill. This bill is passed each year to approve the government’s budget. The BJP-led NDA had a clear majority in the lower house—and easily pushed the bill through despite noisy objections from the Opposition. The Reserve Bank and the Election Commission weren’t happy either.
The handy bit: Finance Bills do not have to be passed by the Rajya Sabha—where the NDA did not have a majority.
The numbers: As of May 2023, electoral bonds worth Rs 129.7 billion (12,979 crore) have been sold. According to 2022 numbers, a vast majority of these bonds were donated to the BJP—which got a lion’s share of Rs 52.7 billion (5,271.9751 crores) while the other national parties collectively received only Rs 17.8 billion (1,783 crores).
Ok, so what is an electoral bond?
First: You purchase a bond from any branch of the State Bank of India. It is sold in a variety of denominations: Rs 1,000; Rs 10,000; Rs 100,000 (1 lakh); Rs 1 million (10 lakh) and Rs 10 million (1 crore). You can only do this during specific times in the year—during the first ten days of every financial quarter. In a Lok Sabha election year, the government can allocate an additional 30-day window.
Point to note: There is no limit on the number of bonds you can buy.
Next: Give the bonds to the party of your choice—which has 15 calendar days to cash them from the date they were issued. The bonds can only be given to registered parties—which are required to have secured at least 1% of the vote in the latest Lok Sabha or state election to qualify.
That’s it. You’re done.
Alright, but what’s wrong with these bonds?
Mainly the fact that they make it impossible for voters to know which party received how much money from whom—which is why they are being challenged in the Supreme Court.
The anonymous donor: The electoral bond is a bearer instrument. This means it does not record any details of the owner. And therefore, they are not recorded when the party deposits the bond either. The person or entity has to go through a KYC process to verify their identity when they buy a bond. But the information is kept confidential by the bank—unless demanded by a court or law enforcement agency.
Also this: The new scheme eliminated the old requirement that parties record all details of contributions above Rs 20,000. Also gone: the cap on companies—who could only donate 7.5% of their average profits for the past three years. They also had to disclose their political donations—which isn’t required any more.
The right to know: The petitioners challenging the scheme say this anonymity violates a citizen’s constitutional ‘right to know’—which has been protected by the Supreme Court in the past as part of the right to freedom of speech and expression. In 1975, the Court declared citizens have the right to know “every public act and everything that was done in a public way by their functionaries.” In 2003, the Court again held that “the foundation of a healthy democracy is to have well-informed citizens-voters.”
Or as legal expert Gautam Bhatia puts it:
If democracy means anything, it must mean this: when citizens cast their votes for the people who will represent them in Parliament, they have the right to do so on the basis of full and complete information. And there is no piece of information more important than the knowledge of who funds political parties.
Unequal access to information: But not everyone is denied this information about the donor. The government—via its law enforcement agencies—can determine the identity of any buyer of an electoral bond. As one of the petitioners puts it: “This implies that the only people in dark about the source of these donations are the taxpayers.” This violates a citizen’s right to equality under the law. Also in the dark: Opposition parties—which puts them at a disadvantage vis-a-vis the ruling party.
Most importantly: It gives the government exclusive access to knowledge that could potentially be used to bully those who fund an opposition party. This has a chilling effect on potential donors to the Opposition:
This, in turn, means that every donor is aware that the central government can trace their donations back to them. Given India’s long-standing misuse of investigative agencies by whichever government occupies power at the Centre, this becomes a very effective way to squeeze donations to rival political parties, while filling the coffers of the incumbent ruling party.
That’s not good news for democracy either.
Point to note: Some petitioners have argued that shoving through a radical new scheme in the guise of a Finance Bill—which does not need Rajya Sabha approval—is also illegal. But the Supreme Court has said it will not look into that aspect of the case.
Hmm, and how does the government justify the scheme?
It puts forward two main arguments—one for the scheme and the other against the ‘right to know’.
Eliminating black money: The electoral system has always been notoriously corrupt—relying on vast infusions of black money given in cash. The bonds offer a ‘clean’ and legal way to donate to parties. The bonds can only be purchased by those who undergo the KYC process. This leaves a paper trail that can be investigated if required. Cash contributions above Rs 2,000 are now illegal—making it harder to launder money via donations.
Right to anonymity: The donor has a constitutional right to remain anonymous—just as voters have the right to vote in secret. It is protected by the Right to Life under Article 21 of the Constitution. In fact, the lack of anonymity creates incentives to make under-the-table contributions in cash:
[M]ost donors, when faced with the risk of harassment (which mandatory disclosure of identity would bring) from political adversaries, would prefer the anonymity of cash, thereby defeating one of the principal reasons of the reform measure. Notably, the formal channels of political funding already extant before the scheme was notified received scant response considering they engendered disclosure of identity of the donor.
Point to note: Nitin Sethi says that the constitutional claim is dubious, at best:
The Right to Life under Article 21 of the Constitution is meant only to protect the life and liberty of citizens against acts of the government. But the Union finance ministry sought to extend the cover of the fundamental right to corporates against Indian citizens who may ask for information on such secret political donations made via electoral bonds.
Limits to ‘right to know’: Yesterday, the Attorney General submitted a four-page note to the Court—which made it absolutely clear that a citizen’s right to know is limited:
Mr. Venkataramani said the right to know should be to serve “specific ends” and not for the benefit of “too over-broad” an idea like the “general health of democracy.” He said, unlike the right to know the criminal antecedents of political candidates, petitioners could not claim a “general right to know anything and everything for undefined ends” in the electoral bonds scheme.
Mind your own business: Last not least, the government says the Court has no jurisdiction in this matter—under the separation of powers. As the Attorney General’s note put it:
This is also not the case for court-driven guidelines… These are highly debatable matters and cannot be subjected to simplistic statements without parliamentary debates… Judicial review is not about scanning state policies for the purposes of suggesting better or different prescriptions.
The broader argument is that the bonds are merely a way to ensure everyone meets their tax obligations—and “does not fall foul of any existing right.” Hence, they are none of the Court’s business.
The bottomline: There can be no true equality when the ‘haves’ have more power to influence policy than the ‘have nots’. In this case, the government seems to think that declaring ‘up’ is ‘down’ is sufficient to ignore that bedrock of democracy.
There are a number of far more detailed explainers on electoral bonds—we recommend those by The Quint and The Hindu. Indian Express has all the data on the bonds. For the best critiques, we recommend Milan Vaishnav in the Huffington Post and Gautam Bhatia in The Hindu. For a stirring defence of the bonds, read Mandar Kagade and Raghav Katyal in The Print. Reporters Collective did a series of investigative pieces that reveal how the government ignored its own experts’ advice—including the RBI and EC.