June 22, 2024

Lukmaan IAS

A Blog for IAS Examination



THE CONTEXT:  A Constitution Bench headed by Chief Justice on November 2, reserved its judgment on petitions challenging the validity of the electoral bonds scheme.


  • An electoral bond is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India.
  • The electoral bonds were introduced with the Finance Bill (2017). On January 29, 2018, the government notified the Electoral Bond Scheme 2018.
  • The electoral bonds are available for purchase for 10 days in the beginning of every quarter.
  • Any party that is registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has secured at least one per cent of the votes polled in the most recent General elections or Assembly elections is eligible to receive electoral bonds.
  • The electoral bonds will not bear the name of the donor.
  • electoral bonds permitted donations of ₹20 crore or even ₹200 crore to be made anonymously.
  • Any transaction exceeding ₹20,000 related to elections was required to be reported to the Election Commission without which no IT rebate could be extended.
  • The Finance Act of 2017 introduced amendments to several laws, including the Reserve Bank of India Act, Companies Act, Income Tax Act 1961, Representation of the People Act, and Foreign Contribution Regulations Act, all to pave the way for electoral bonds.


  • According to the government, electoral bonds were being introduced to ensure that all the donations made to a party would be accounted for in the balance sheets without exposing the donor details to the public.
  • Electoral bonds would keep a tab on the use of black money for funding elections.
  • In the absence of electoral bonds, donors would have no option but to donate by cash after siphoning off money from their businesses.


  • Violates Right to Information: Electoral Bond scheme violates the citizen’s fundamental right to information under Article 19 (1) a, about political parties. In the 2003 ruling in People’s Union for Civil Liberties v Union of India and the 2002 judgment in Union of India v Association for Democratic Reforms, the Supreme Court mandated the ECI to obtain and disclose to the public background information relating to candidates running for office, including information on their assets, criminal records, and educational background.
  • Opens doors to shell companies: It has been argued that since the government removed the limit of 7.5 per cent of the annual profit for companies to make donations to political parties and allowed Indian subsidiaries of foreign companies to make donations, shell companies can now also be used to make donations.
    • Section 29B of the Representation of the People Act, 1951, prohibits political parties from accepting contributions from foreign sources, and Section 3 of the 2010 Foreign Contributions (Regulation) Act restricts foreign contributions to candidates, legislative members, political parties and party office holders.
    • In 2014, the Delhi High Court found that Congress and the BJP had accepted foreign funds in violation of the FCRA 1976, then the BJP government passed a retroactive amendment via a 2016 finance bill, replacing the 1976 Act with the modified 2010 statute.
  • Opaque instrument that is not entirely anonymous: It has been argued that Electoral Bonds are opaque instruments that are not entirely anonymous. As nobody can come to know other than the government who contributed to whom.
  • Black Money: The ECI, in a letter to the Ministry of Law and Justice, warned that electoral bonds, coupled with preceding legislative changes, could lead to the proliferation of shell companies to channel black money into the political system via these bearer bonds.
  • Promotes corruption: It has also been argued that reducing the disclosure threshold from Rs 20,000 to Rs 2,000 might not reduce the use of cash in politics and promote intended transparency.


  • Eliminate private funding and introduce public funding for political parties.
  • Need for secrecy would be to establish a National Election Fund to which all donors could contribute.
  • Implement measures to enhance transparency.
  • Identify and plug loopholes in the Electoral Bond Scheme to prevent potential misuse, violations of donation limits, and risks such as crony capitalism and black money laundering.
  • Ensure continuous monitoring of the Electoral Bond Scheme through judicial oversight.


Free and fair elections are not possible, without transparency of political funding. Free and fair elections and the integrity of our electoral process have been repeatedly declared by the apex court as a part of the basic structure of the constitution.


Q) “There is a need for simplification of procedure for disqualification of persons found guilty of corrupt practices under the Representation of peoples Act” Comment (2020)

Q) “Recent amendments to the Right to information Act will have profound impact on the autonomy and independence of the Information Commission”. Discuss (2020)


Q) Discuss the various issues related to electoral bonds and suggest some reforms to make electoral funding fair and transparent.

SOURCE: S Y Quraishi writes: On electoral bonds, Supreme Court must uphold Right to Information | The Indian Express

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