The Supreme Court of India has declared the electoral bond scheme introduced by the government as unconstitutional, arbitrary, and violative of Article 14 of the Indian Constitution. The scheme allowed corporations and individuals to anonymously donate money to political parties by purchasing electoral bonds from the State Bank of India (SBI).
Concerns about the scheme
The court specifically highlighted the amendments made to the Representation of People Act, 1951, and the Companies Act, stating that they were unconstitutional. The deletion of the proviso to Section 182(1) of the Companies Act, allowing unlimited corporate funding to political parties, was deemed arbitrary and violative of Article 14. The court emphasized the significant influence of companies in the political process through financial contributions, contrasting it with contributions from individuals.
There were also concerns about companies funnelling money without shareholders’ oversight. The electoral bond scheme allowed companies to make anonymous donations to political parties, which means that shareholders were not informed about the amount or recipient of these donations. This raised concerns about the use of company funds without proper disclosure and accountability.
Shareholders’ right to know
Shareholders have a right to know how their company’s resources are being used, especially when it involves potentially influencing political processes. Without transparency, shareholders cannot assess the impact of such donations on the company’s reputation, brand image, or potential legal or regulatory risks.
Potential misuses of the scheme
The anonymity provided by the scheme could have tempted companies to divert funds for political purposes that were not aligned with the interests of their shareholders. For instance, companies could have sought favours or policy changes from the government, or supported a particular party or candidate based on the personal biases of management, even if it conflicted with the company’s broader stakeholders or long-term goals. The scheme could also have been used to engage in corrupt practices, such as quid pro quo deals.
Background of the scheme
The electoral bond scheme was introduced by the government in 2017 as a way to address the problem of opaque political funding in India. However, the scheme was met with criticism from the outset, and many experts warned that it could be misused.
Impact of the court’s decision
The Supreme Court’s decision is a major blow to the government’s efforts to reform political funding in India. It is unclear what the long-term impact of the decision will be, but it is likely to lead to renewed calls for more transparency in political funding.
Source – https://indianexpress.com/article/india/supreme-court-electoral-bonds-9162593/
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