‘Unconstitutional, arbitrary and violative of Article 14’: SC strikes down electoral bonds scheme

Supreme Court of India. [File Photo]

New Delhi: The Supreme Court of India has struck down the seven-year-old “electoral bonds” system, a method allowing individuals and companies to donate money to political parties anonymously and without limits.

This decision, delivered nearly two months before the general election, is considered a setback for Modi’s Bharatiya Janata Party (BJP), which has been the primary beneficiary of the system since its introduction in 2017, Al Jazeera reported.

The controversial election funding system faced legal challenges from opposition parties and a civil society group, arguing that it impeded the public’s right to know the identity of political donors.

The five-judge top court bench, headed by Chief Justice D Y Chandrachud, declared the system “unconstitutional” and instructed the State Bank of India (SBI), a state-run bank, to cease issuing any more of these bonds.

Chief Justice Chandrachud emphasised the importance of transparency in political contributions, stating that such contributions provide contributors with access and influence over policy-making.

Under the electoral bonds system, individuals or companies could purchase bonds from the SBI, ranging from 1,000 rupees ($12) to 10 million rupees ($120,000), and donate them to a political party of their choice. These bonds, introduced in early 2018, could then be exchanged for cash by the receiving party.

Notably, the bonds were exempt from tax and did not disclose the identity of the donor, the report said.

The bench, also comprising Justices Sanjiv Khanna, B R Gavai, J B Pardiwala and Manoj Misra, said, “The deletion of the proviso to Section 182(1) of the Companies Act, permitting unlimited corporate funding to political parties is arbitrary and violative of Article 14”.

While cash donations remain permissible, they no longer carry tax exemption. The court expressed concerns about the potential for quid pro quo arrangements resulting from financial contributions and reinstated limits on corporate donations.

The court ordered the SBI to halt the issuance of such bonds, provide identity details of purchasers, and furnish information about bonds redeemed by each political party.

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