Encouraging secret donations

Despite massive campaign spending in India, there is barely any public scrutiny of such spending because of the opaque nature of the transactions. The electoral bonds scheme amplifies such opacity by not disclosing the identity of the donor. Recently, in an affidavit countering the CPI(M)’s petition challenging the scheme, the Central government argued that the scheme has a two-fold purpose: one, it enhances transparency in political funding; two, it protects the right to privacy of donors. In reality, the scheme undermines the complementary nature of the rights to privacy and information, namely, to make the state more transparent.

Electoral bonds were introduced in 2017 when the Finance Act amended four different statues: the Reserve Bank of India Act, 1934; the Representation of Peoples Act, 1951; the Income Tax Act, 1961; and the Companies Act, 2013. The government argued that the use of bank routes would likely reduce under-the-table cash transactions and promote transparency in election funding. It said that transactions through banks would incentivise the use of white money, and KYC requirements of banks would ensure paper trails.

Dismantling previous restrictions

However, the terms of the scheme appear to have disastrous consequences for political transparency. Under the scheme, both the purchaser of the bond and the political party receiving the money have a right to not disclose the identity of the donor. Also, the policy dismantles several restrictions that checked illegal corporate sponsoring previously — for example, by removing a cap on corporate sponsorship. Donations can now be made by any “artificial juridical person”. This means that even foreign donations are now allowed. The requirement that a company has to be in existence for three years for it to make political donations has also been removed. This ignores all the concerns regarding the use of shell companies to siphon black money into the system.


These changes show that access to the paper trails will be outside the scope of public scrutiny as it will lie exclusively with the banks. As bonds can be issued only by public sector banks, the only entity with full knowledge of the transactions will be the Central government. History has shown that money laundering often takes place through banks, so the government’s argument that the use of banks will reduce under-the-table transactions does not hold.

Two rights, many wrongs

The Centre informed the Supreme Court that protecting the privacy of electoral bond buyers is vital. While the right to privacy in India safeguards the individual’s autonomy and dignity, it is subject to restriction on the basis of “compelling public interest”. If the information pertains to matters which affect the lives of others, or is closely linked to a public person, it must be disclosed. The policy choices and decisions of public officials have to be brought under public scrutiny to ensure that they have not acted in a manner that unfairly benefits them or their benefactors. The same logic can then be extended to the funding of political parties, where the funder’s actions are bound to have an influence on the policy decisions of the party, if the party wins. A clear conflict of interest would likely arise if important policy decisions are taken that could affect the donors to the party. Let’s imagine that an Indian company decides to make a huge political donation through the electoral bonds scheme and the political party it donates to emerges victorious. What if the government decides to provide favourable deals to the sector in question? The public will have no way of knowing what guided such a biased action.

The Central government in its affidavit further argued that the right to keep the identity of the donor private was an extension of their right to vote in a secret ballot. The Supreme Court has almost unequivocally read a right to information and knowledge implicit in the right to freedom of speech and expression. The freedom to vote (as different from the right to vote) is seen as an essential facet of Article 19 of the Constitution. It is difficult to understand how a liberal democratic structure can sustain its legitimacy when information is not fully available to voters exercising their choice. The policy on electoral bonds thus needs to recognise the complementary nature of the rights to privacy and information, namely, to make the state more accountable.

Sayan Bhattacharya and Vishal Rakehcha are students at the NALSAR University of Law, Hyderabad

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Printable version | Oct 23, 2021 5:10:04 AM |

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