Electoral Bonds | Day 2: Petitioners argue that the Scheme is a vehicle for foreign political funding

Constitutionality of the Electoral Bond Scheme

Today, the Court heard Mr. Prashant Bhushan and Mr. Raju Ramchandran for the petitioners and Mr. Rakesh Dwivedi for the Election Commission oppose the electoral bonds scheme for promoting anonymous political funding. It also heard the Attorney General defend the scheme for protecting donor privacy, while at the same time reducing the amount of black money in political funding.


The Supreme Court is hearing petitions challenging  the electoral bonds scheme. An electoral bond is a bearer instrument, like a promissory note, that is payable to the bearer on demand. These bonds can be purchased from the Scheduled Banks and can be encashed by political parties within 15 days. The Communist Party of India (Marxist), Association for Democratic Reforms (ADR) and Common Cause have challenged the scheme.

The electoral bonds scheme was introduced by the Finance Act, 2017.

Morning Session

Mr. Prashant Bhushan appearing for ADR began arguments. Mr. Bhushan argued that the scheme in its current form stifles all prior efforts to bring transparency to political funding. He sought an immediate stay on the Electoral Bond Scheme on the ground that 95% of purchased bonds have gone to the ruling party.

Next, he argued how the scheme and the corresponding amendments made to various statutes like the RBI Act, the Income Tax Act and the Representation of Peoples Act promote donor anonymity. He submitted that Electoral Bonds do not bear the name nor identity of the donor. Further, he submitted that the political party encashing bonds neither have to disclose the worth of electoral bonds in a Contribution Report to the Election Commission nor in their audit reports. He further said that electoral bonds are primarily meant to benefit corporates, citing that out of 3000 crore donated through bonds, most have been in the denominations of 10 lakhs or 1 crore.

The Bench enquired about the exact relief sought by the petitioner. Expressing their inability to scrap the entire Finance Act, 2017, the Bench asked about the specific amendments which are against the law. Mr. Bhushan submitted that the electoral bonds is a non-transparent instrument for funding political parties and violates the principles of democracy. Secondly, he said that the Electoral Bond Scheme has wrongly been passed as a Money Bill under the Finance Act 2017, emphasising the Scheme has no bearing on the Consolidated Fund of India.  Mr. Bhushan urged the Bench to either stay the scheme or issue directions that the name of persons purchasing and political parties receiving the donations are to be disclosed.

Next, Mr. Bhushan tried to establish how Amendments to various statutes – the Companies Act, the Income Tax, the FCRA (Foreign Contribution Regulation Act), the RBI Act, the Representation of Peoples Act – have been carried out to protect  donors’ identity from scrutiny and hide the amount received through electoral bonds.  He referred to the amendment brought to the Income Tax Act through Finance Act 2017, which does not require political parties to disclose donor details for the amount received through electoral bonds , even when they claim the Income Tax Rebates on those contributions.

Similarly, under the Amendment to the Companies Act, any Company can donate through electoral bonds. The Amendment removed an earlier cap which prohibited companies from donating beyond a certain percentage of profits. After the Companies Act Amendment, any company even if it is loss making, can donate through electoral bonds and it does not have to show it in their profit/loss balance account.

Next, Mr. Raju Ramchandran appearing for the petitioner CPI (Marxist) began arguments. He said that the electoral bond scheme is made to favour anonymous corporate funding into elections as mostly, it is the larger denominations of 1o lakh or 1 crore which have been purchased.

Next, Mr. Rakesh Dwivedi spoke on behalf of the Election Commission (EC). On being enquired about the stand of the Election Commission, he submitted that they are not opposed to electoral bonds in general, but rather only in their current form. He submitted that the bonds in their current form promote anonymity and non-transparency. He emphasised that this must be rectified. Mr. Dwivedi added that right to know of a voter is not limited to knowing about political candidates, but also extends to political parties.

Mr. Dwivedi argued that in its current form, electoral bonds can become a vehicle for foreign funding of political parties. Hence, bonds must become more transparent and contributions made through them to political parties should be disclosed to the EC.

Further, Mr. Dwivedi said that the insertion of the Proviso to Section 29C of the Representation of Peoples Act, 1951 (via the Finance Act  2017) must be reviewed. The Proviso exempts disclosure of donations received from electoral bonds to Election Commission. He reiterated that the electoral bond scheme should be reformed to bring transparency in its functioning.

Next, Attorney General KK Venugopal appearing for the Union began arguments in defence of the scheme. He argued that electoral bonds have been introduced so that the privacy of donors is protected and that they are not victimised by other political parties. He argued that making disclosures about names and identities of the donors under electoral bond scheme would be in violation of their right to privacy.

AG KK Venugopal further added that the scheme falls within the realm of economic policy decisions, in which the Court must not ordinarily interfere. He said that in a situation where there is no State funding of elections, protection of a donors identity must be allowed.

Post Lunch Session

The Attorney General resumed his arguments by stating that the scheme will help in eliminating black money from elections. He said that the objective of fighting black money is being achieved without compromising on transparency, as the donors have to adhere to Know Your Customer (KYC) banking norms when purchasing electoral bonds.  He stated that “a fly-by-person who is not known cannot buy these bonds”.

Further, he said that the bonds are valid only for 15 days after purchase, so it cannot be used for purposes other than political funding. He submitted that though the Bond itself neither has the party’s name nor does it have a donor’s name, but the funded political party may know the identity of the donor by checking with the Bank.  He concluded by saying that he will file a separate affidavit tomorrow.

The Bench rose and the matter has been listed for tomorrow.