Supreme Court to hear if pleas challenging electoral bond scheme can be referred to Constitution Bench

The validity of the electoral bond scheme is being challenged in petitions before the Supreme Court. The petitioners argue that the issue of funding for political parties is crucial to the functioning of democracy in India.

The Supreme Court will decide on April 11 whether to refer the case to a constitutional bench. During a hearing on Tuesday, the Chief Justice of India and Justice PS Narsimha did not proceed with the case as the union government requested more time to respond to the petitions.

In 2017, the Association for Democratic Reforms (ADR) which is a non-profit organization filed the initial petition in this case. Other petitions followed from the Communist Party of India (Marxist) congress leader Jaya Thakur and various other individuals. During the hearing, Advocate Shadan Frasat, representing the CPI (M) asked the court to refer the case to a constitutional bench consisting of at least five judges.

He identified seven fundamentals constitutional questions that arose from the case stating that “this issue affects the democratic system and funding of political parties which requires a decisive ruling from a constitution bench.” 

Furthermore, during the hearing the senior advocate Dushyant Dave who represents ADR supported Farasat’s argument and said that the issue at hand is fundamental to how democracy operates as most of the funds go to only one political party.

Farasat’s note presented two main issues for the court to consider. Where first is whether citizens have the right to know about the funding of political parties under Article 19(1) (a). The second is if so then whether the electoral bond scheme is justified in limiting this right since the government can only restrict the right under Article 19(1) (a) based on the grounds allowed by the constitution of India such as national sovereignty, state security, foreign relations, public order, decency, morality, contempt, defamation or increment to an offence. 

The note argued that since the funding of political parties is essential for a democracy to function this case raises constitutional questions since “democracy” and “free and fair elections” are part of the constitution’s basic structure.

The court stated that they will decide whether to refer the matter to a constitution bench on April 11 and allowed the government to file its response before the next hearing date. The electoral bond scheme was introduced in 2018 to provide a means of political funding with the donor’s identities kept confidential.

The State Bank of India issued the bonds and the corporate and foreign entities who donate under this scheme receive a 100% tax exemption. The government has responded to the ADR petition but it requested additional time to review the requests in the accompanying petitions.

ADR has opposed the scheme from the start arguing that the anonymous nature of the funding effectively legalized bribery allowing corporations to fund the ruling party in a state or at the national level in exchange for favours. 

Moreover, since no stay order has been issued on the sale of electoral bonds, ADR filed applications to prevent any new issuance of these bonds ahead of the assembly elections. In April 2019 the Supreme Court ordered all political parties to submit details of their receipt of electoral bonds to the Election Commission in a sealed cover as an interim measure until the validity of the bonds was finally decided in the petitions.

The Election Commission has endorsed the electoral bond scheme and has been submitting reports to the court in sealed covers in the past indicating the receipt of funds by various political parties.

ADR claims that the political parties received INR 6,500 crore through the scheme between 2017-18 and 2020-21 with INR 4,238 crore going to the Bharatiya Janata Party. In 2021-22 approximately INR 2,700 crore in donations were made using electoral bonds with the BJP receiving INR 1,033 crore of that amount. 

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