India’s voters deserve a bond — of probity

Political parties need to ask themselves why they are not determined to accept clean money

Updated - March 21, 2024 10:10 am IST

‘While political parties have been enriched through the Electoral Bond Scheme, money used in election campaigns may have still not changed colour’

‘While political parties have been enriched through the Electoral Bond Scheme, money used in election campaigns may have still not changed colour’ | Photo Credit: AP

There are a few basic tenets of good laws and public policies: lack of ambiguity, enforceability, predictability, and accountability. All laws and policies are framed with the purpose of addressing a public issue with a view to improving the situation from when the problem was identified. Therefore, the outcome should be evaluated keeping in mind the objectives behind that law or policy.

In this framework, let us look at the genesis, design, and demise of the Electoral Bond Scheme (EBS).

A ‘clean’ channel

In paragraph 143 of his Budget Speech 2017-18, the then Finance Minister stated that the objective of his government was “to eliminate black money”.

And there was a problem statement (in paragraphs 164 and 165.): “Even 70 years after Independence, the country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections. An attempt was made in the past by amending the provisions of the Representation of Peoples Act, the Companies Act and the Income Tax Act to incentivise donations by individuals, partnership firms, HUFs and companies to political parties…. The situation has only marginally improved since these provisions were brought into force. Political parties continue to receive most of their funds through anonymous donations which are shown in cash…. An effort, therefore, requires to be made to cleanse the system of political funding in India.”

The cause for the problem was stated to be donors’ “reluctance in donating by cheque or other transparent methods as it would disclose their identity and entail adverse consequences”.

As a solution, the Finance Minister proposed a reform, the EBS, which “will bring about greater transparency and accountability in political funding, while preventing future generation of black money”. The outcome, he expected, was that this approach “will change the colour of money”.

Complete coverage | Making sense of the electoral bonds data

There can be no gainsaying that political parties — the “essential ingredient of a multi-party Parliamentary democracy” — were surviving on contributions less than ₹20,000 each that did not require a disclosure of the identity of the contributors. This was how black money was allegedly finding its way to the accounts of political parties that enjoyed income-tax exemption. The fact that crores of rupees were spent during elections before and after the EBS is a separate and serious malaise that no law has been able to cure. The EBS too has not succeeded in this despite its stated objective. Thus, while political parties have been enriched through the EBS, money used in election campaigns may have still not changed colour.

There is no doubt that the EBS created a ‘clean’ channel for funds to flow from the donor’s bank account to the political party’s bank account. The questionable presumption is that since funds used to purchase the bond are drawn from an account in a designated bank, the source of those funds is also ‘clean’. The Supreme Court observed that a similar channel existed, and still does, in the form of the Electoral Trusts, which is more transparent.

Editorial | Bonded favours: On the electoral bond scheme, sordid revelations

The information that the State Bank of India has disclosed so far shows that many purchasers bought bonds that seem to be disproportionate to their business income. There are obvious questions about the legitimacy of the sources of the funds being used for the purchase. It cannot be said with certainty that the funds that reached the designated account of the political parties were of the same “colour”. There were no safeguards to protect the so-called clean channel from being contaminated.

Defenders of the EBS have argued that if there are doubts about the sources of the funds used to purchase the bonds, this would be easy to investigate. The question is who will conduct the investigation? Will it not be the same agencies that are accused of directing donations to the party in power, be it in a State or at the centre? Therein lies the rub.

Watch | Electoral bonds: Who were the biggest donors?

However, the real twist in the tale is that according to Section 7(4) of The Electoral Bond Scheme, 2018, the information furnished by the buyer “shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency”. It is being said by the ‘designers’ of the EBS that the bank could not have legally kept any record of the secret number on the bond issued to the purchaser (in keeping with the provision of anonymity enshrined in the EBS). If this is the case, it would be almost impossible to establish any link between purchaser and recipient.

This would mean that, as in the real life example of dispensing currency notes to a bank customer/the common man, the SBI does not have any record of the person who purchased a specific bond. The alphanumeric number in the bond was only embedded to verify the authenticity of the bond and thus meet the audit requirement. The bond was akin to currency — and this is why the Reserve Bank of India (RBI) raised objections in the beginning, which led to the amendment in the RBI Act.

That raises a few important questions.

Pertinent questions

Will this limited information with the SBI, when disclosed to an enforcement agency, reveal the identity of the purchaser but limit the scope of the investigations only to the sources of funds? Does this not rule out the possibility of providing the donor-political party link, thereby eliminating the clue that would be vital to probe allegations of a quid pro quo? Does it mean that the EBS created fiction — of the enforceability of the law and the accountability of the bank towards the court and the law enforcement agency? But finally, does not the ‘confidentiality clause’ apply to “information submitted by the purchaser”, which was to be kept “undisclosed till asked for’? How could it mean not maintaining a record in order to fulfil its obligation to enforce the law of the land? If the SBI did not maintain any record, on what basis did it ask for time to collate information on the bonds that would link both the parties? Indeed, on what basis did the Supreme Court observe in April 2019 that the information is not behind “iron curtains incapable of being pierced”?

Also read | Election Commission always in favour of transparency, but must also protect donor privacy: CEC on electoral bonds scheme

The SBI’s affidavit on March 21 will make it clear whether the law was deficient or illusory in its design or that full disclosure was being dodged.

The Court mandated disclosures mean that there could now be wild allegations of corruption with the possibility of endless investigations under Prevention of Corruption Act, and for the tax authorities also to investigate the sources of funds used in buying the bonds. Thus, those who contributed to the ruling party face allegations of quid pro quo. And those who have not could face the “adverse consequences” the scheme was designed to avoid. If political parties cannot disclose the names of all those who contributed, they create an uneven playing field for donors after their donations helped in creating a permanent non-level playing field among recipients.

This appears to be the opposite of a win-win situation, with the political parties having the last laugh. No wonder, the road to hell is often paved with good intentions.

It is for Parliament to work it out

Many proponents of the EBS have criticised the Court for not suggesting a ‘less worse’ method of political funding and dragging political parties to the “dark alleys” of black money. I do not think it was/is for the courts to decide the future course because Parliament has the mandate to find a solution and has ‘superior’ wisdom in making laws (as was seen in the case of the appointments of the Election Commissioners). A reasonable way forward can only be found through a well-meaning consultative process and not through court fiats, or laws and policies crafted in secret to deal with complex and vexed problems.

Where are we headed with a public debate where the gravity of an offence is sought to be determined by per capita crime? Why are political parties not determined to accept clean money, and not funds that are “furtively slipped under the door”? Will political parties keep holding up the mirror to each other and leave people blinded? People crave for political parties with a difference but not those so different that they look alike. How long can we accept the specious explanation that people get the government that they deserve? I think voters deserve better. They deserve a bond of probity.

Ashok Lavasa is a former Election Commissioner and a former Finance Secretary of India

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