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Election Commission Has No Comments on Landmark Electoral Bonds Verdict: How it Changed its Stance

From calling it “retrograde step” to backing the opaque funding instrument, the ECI has come a long way from warning the Modi government that electoral bonds might even "lead to increased use of black money for political funding through shell companies".
Election Commission of India, Government of India, GODL-India <https://data.gov.in/sites/default/files/Gazette_Notification_OGDL.pdf>, via Wikimedia Commons

In a landmark judgment, the Supreme Court on Thursday declared the electoral bond scheme “unconstitutional” and violative of the Right to Information and Article 19(1)(a). The court has ordered the State Bank of India to release details of all the electoral bonds purchased and directed the Election Commission of India (ECI) to publish the information on its website by March 13, 2024.

Interestingly, the ECI had expressed concerns related to the absence of “transparency of donations” in electoral bonds but didn’t want a stay on the scheme suggesting that it would mean going back to the era of unaccounted cash transfers, which would cause further damage.

Initial discussions

Before the Narendra Modi government  brought the scheme in 2018, the ECI warned the government that electoral bonds would help political parties hide illegal donations from foreign sources and might even “lead to increased use of black money for political funding through shell companies,” according to a report  by the Reporter’s Collective published in Huffington Post. The report underlined that the ECI wrote to the Ministry of Law in this regard on May 26, 2017. 

In its letter, the ECI described the amendment in Section 29C of the Representation of Peoples Act 1951(RPA) as a “retrograde step as far as transparency of donations is concerned” since political parties did not have to report to the commission regarding the donations received through electoral bonds. 

Further, it was also pointed out that if contributions were not reported then it will not be possible to ascertain if political parties have taken donations from government companies and foreign sources, which is prohibited under Section 29B of RPA. 

The ECI had also underlined that amendment to Section 182 of the Companies Act took away the restriction that contribution can be made only to the extent of 7.5% of net average profit of three preceding financial years, enabling even newly incorporated companies to donate via electoral bonds.

While the Ministry of Law forwarded the ECI’s letter to the Finance Ministry, the report underlined that the commission’s concerns were ignored and the then finance minister Arun Jaitley set up a meeting on July 19, 2017 with the RBI and ECI to “finalise the structure of the bond”.

Further, the report also underlined that a separate meeting was held between government officials and the then chief election commissioner (CEC) Achal Kumar and two election commissioners (ECs) Om Prakash Rawat and Sunil Arora. In this meeting held on July 28, 2017 with the CEC and ECs, the government officials made a “false claim” that companies would make accounting entries in their books when buying electoral bonds which will lead to “complete transparency,” as per the report.

When ECI flagged concerns

The CPI (M), Congress leader Jaya Thakur and non-profit Association for Democratic Reforms (ADR) filed petitions in 2017 in the Supreme Court underlining that the anonymity associated with electoral bonds undermined transparency in political funding and encroached upon voters’ right to information. The petitions challenged the provisions of Finance Act 2017, which paved the way for anonymous electoral bonds.

In lines with the letter written by the ECI, the constitutional body filed a counter-affidavit in this case flagging its concerns that the amendments to the IT Act, Representation of Peoples Act (RPA), and Companies Act introduced by the Finance Act 2017 will have a “serious impact on transparency of political finance/funding of political parties.” 

Also read: Rs 570 Crore of Electoral Bonds Sold in January Alone, 94% Amount in Rs 1 Crore Denomination

Sharp U-turn

The Supreme Court on March 26, 2021 refused to stay the release of the fresh set of electoral bonds from April 1, 2021 for the Assembly elections which were scheduled that year in West Bengal, Kerala, Tamil Nadu, Assam and Puducherry. The apex court dismissed the application filed by the NGO ADR seeking stay of the bonds.

Notably, the ECI opposed the plea for a stay in this instance. Underlining that the ECI was not opposed to electoral bonds but wanted more transparency, the commission’s counsel Senior Advocate Rakesh Dwivedi told the court that the issue of transparency can be considered at the final argument stage and there should be no interim stay.

Its spokesperson said yesterday when asked by reporters, “We have no comments to offer on SC verdict of today.”


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