Challenging the Electoral Bond Scheme Premium

The challenge to the constitutionality of electoral bonds is now approaching denouement

Political parties in India have traditionally been averse to any sort of public scrutiny of the sources and applications of their funds. The astronomical sums needed to finance their processes and operations cannot be raised from party cadres and altruistic donors. These can only come from Big Business, and as a quid pro quo.

Civil society has been campaigning for long to empower the voter by improving her access to background information on the candidates in the electoral fray, and to bring about greater transparency in the obscure domain of political funding. In this, the instrument of public interest litigation (PIL) has been deployed to good effect. The campaign is premised on the citizen’s democratic right to information, which is integral to the fundamental right to speech and expression under the Constitution.

The political establishment, on its part, has sought to undermine these hard-fought victories by legislative legerdemain and ingenious schemes fashioned to obfuscate the identity of corporate donors. The United Progressive Alliance government had devised the Electoral Trusts Scheme (2013) to create a smokescreen between political parties and their corporate donors. The National Democratic Alliance, the succeeding government, came up with a far more ambitious and ingenious Electoral Bond Scheme (EBS).

The guardrails designed to limit the influence of foreign money and big business in India’s democratic polity were systematically demolished to prepare the ground for the introduction of the EBS in January 2018, which was touted as a sincere effort to clean up electoral democracy by incentivising political donations through banking channels.

To begin with, the Foreign Contribution (Regulation) Act (FCRA) was retrospectively amended through the Finance Act of 2016 to permit Indian subsidiaries of foreign companies to donate to political parties and save the Bharatiya Janata Party (BJP) and the Indian National Congress (INC) from imminent disqualification for having violated the ban on acceptance of foreign contributions. This was followed by an overhaul of the regulatory framework comprising the Representation of the People Act (RPA), the Companies Act, the Income Tax Act and the Reserve Bank of India (RBI) Act through the Finance Act of 2017, despite strident protests from the RBI, the Election Commission of India (ECI) and Opposition parties. The device of incorporating the amending Bills in the Finance Bill effectively short-circuited the consideration of the legislative proposals by the Rajya Sabha and ensured their smooth passage.

Months before the EBS was promulgated, the Association for Democratic Reforms (ADR) and Common Cause filed a PIL to challenge the constitutionality of the amendments made in the legal framework of corporate donations by the Finance Act of 2017. The petition contended that these amendments infringed the citizen’s fundamental ‘Right to know’ under Article 19(1)(a), and were not saved by any of the permissible restrictions under Article 19(2). The vires of the amendment to FCRA effected through the Finance Act of 2016 were also impugned.

The gravamen of the petition was that the impugned amendments jeopardised the country’s autonomy, militated against transparency, incentivised corrupt practices by lifting the caps on corporate donations and allowing contributions by loss-making and shell companies.