An unconstitutional bond unravels in a big win for the right to information

Unaccounted political funding hasn’t really gone away despite electoral bonds.

The SC judgement striking down electoral bonds as violative of Article 19(1)(a) of the Constitution will be a shocker to political parties, though not entirely unexpected. Replacing cash donations with a bank-issued bond that did not have details of payer and payee was hardly a transparency enhancement and always ran the risk of being shot down. This is exactly what the SC did when it adjudged the bonds to be violative of the right to information and thereby the principles of free and fair elections, notwithstanding the objective of curbing black money.

Also struck down as ultra vires, were the amendments to the Representation of Peoples Act(which exempted such bonds from being reported), the Companies Act (which overrode the ceiling imposed by Sec 182 on political donations) and the amendment to Sec 13A of IT act (which gave tax exemption to purchasers for such donations). The immediate onus is on SBI which has to not only stop further sales but also reveal details of all the bonds issued and encashed since April 2019 (the extent of detail remains to be seen). For the beneficiaries they would need to return unencashed bonds to the purchasers.

It was always a test between the Government’s stand of the bonds’ twin objectives (curbing the use of black money in elections and protecting the identities of parties in the interests of safety) and the  superiority of the right to information and transparency. That the latter prevailed is a triumph of the constitutional rights but the taint of unconstitutionality hangs over the monies collected since 2019.

The donations made in excess of permitted limits, the income tax breaks availed by purchasers, the non-disclosure in annual reports and financial statements are issues that could crop up in the light of its being declared unconstitutional. With SBI being the sole bank tasked with collecting electoral bonds, the job of transparency is perhaps easier but clearly the need is for a clean and transparent way to finance electoral campaigns, perhaps on the lines that the USA has.

After all, the Court has not disputed the need for financing nor the making of donations by corporates and individuals but has only made out a case for transparency. The issue of safety of interests of the purchasers and parties can surely be addressed without sacrificing transparency if political will and consensus is available.

With one door being shut, fears are being raised that cash could make a comeback. But unaccounted political funding hasn’t really gone away despite electoral bonds. Moreover, in the totally digital environment, cash is not an easy option any longer. Salvaging the electoral bonds by making them more transparent is also an option, but there may not be enough time for the election ahead and will have to await a new Government.

SA Raghu is a columnist who writes on economics, banking and finance. Views are personal, and do not represent the stand of the publication.