In the backdrop of the Election Commission’s assertion on electoral bonds, the Supreme Court said on Friday (March 26) that such bonds can be issued from April 1.
The Election Commission said it agreed with the issuance of the bonds because without it political parties would deal in cash. The panel, though, favoured bringing in more transparency to the bond transactions.
“Since the bonds were allowed to be released in 2018 and 2019 without interruption, and sufficient safeguards are there, there is no justification to stay the electoral bonds at present,” the court said on Friday.
An electoral bond is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India. The citizen or corporate can then donate the same to any eligible political party of one’s choice. The bonds are similar to bank notes that are payable to the bearer on demand and are free of interest. An individual or party is allowed to purchase these bonds digitally or through cheques.
The bonds were introduced with the Finance Bill (2017). On January 29, 2018 the Modi government notified the scheme.
The Supreme Court order came on a petition by an NGO, The Association for Democratic Reforms (ADR), seeking interim stay on sale of electoral bonds scheduled between April 1 and 10. The ADR is known to be working for electoral and political reforms.
The ADR argued that the bonds’ sale should be barred until issues linked to political parties’ funding and transparency of their accounts are thrashed out. It suspected that front companies would push in cash for parties just before Assembly polls in various states.
Prashant Bhushan representing ADR argued that the bonds had turned into a tool for receiving bribes in the garb of donations by the ruling party. He also cited the Reserve Bank of India’s misgivings about it. “The RBI has said that this system of bonds is a type of weapon or medium for financial scams,” Bhushan said.
The RBI in 2019 had reportedly warned the government on the perils of electoral bonds and its impact on the country’s currency just before its announcement on Budget 2017. However, the Finance Ministry had overlooked it, stating the apex bank had not “understood the proposed mechanism”.
“Bearer instruments have the potential to become currency and if issued in sizeable quantities can undermine faith in banknotes issued by RBI. The bonds are bearer bonds and are transferable by delivery. Hence who finally and actually contributes the bond to the political party will not be known,” the bank had stated.