𝐓𝐡𝐞 𝐈𝐧𝐯𝐢𝐬𝐢𝐛𝐥𝐞 𝐇𝐚𝐧𝐝

On the 15th of February, the Indian political landscape was shaken up when the Supreme Court of India released the verdict stating that the electoral bonds scheme was unconstitutional. The ruling said that the scheme violated the Right to Information Act and freedom of speech and expression under Article 19(1(a)) of the constitution. 

The electoral bonds scheme was introduced on January 2nd, 2018. It abolished the ceiling on the contributions made by corporations to political parties, which earlier was limited to 7.5% of the organization’s average net profits over the preceding 3-year period. This allowed corporations to donate unlimited sums of money to political parties anonymously through this financial instrument. 

By using the electoral bonds, companies, and individuals were eligible for tax exemptions under section 80GG and section 80GGB of the Income Tax Act of 1961. The State Bank of India (SBI) was the only bank allowed to issue and sell electoral bonds. 

Why was it introduced?

It was introduced to enhance the transparency in political funding. The claim was that by routing donations through the bonds, the identities of individual donors would remain anonymous but transactions are recorded by the banks and monitored by regulating authorities.

Who cried foul?

The ones who were opposed to the electoral bonds scheme upon its inception were the likes of the Congress Party, the Communist Party of India, the Association for Democratic Reforms (ADR), and the Election Commission of India (ECI). The ECI and ADR filed an affidavit opposing the scheme on 25th March 2019 which was finally considered by the Supreme Court and provided the verdict that we have today. The ECI filed the affidavit claiming that the scheme is contrary to the goal of transparency regarding political finance.

Who benefited the most?

The total number of bonds encashed between 2018 and 2024 was worth 127 billion rupees. The amount received by each political party is given here. the top three beneficiaries are as follows:

• Bhartiya Janata Party (BJP)- 60.6 billion rupees (47.7%)
• All India Trinamool Congress (TMC)- 16.1 billion rupees (12.7%)
• Indian National Congress Party (INC)- 14.2 billion rupees (11.2%) 

Why is it considered a scam?

The opposition claims that the center uses the electoral bonds scheme as a tool for a cacophony of scams including the likes of; tax evasion, illegal grants to unworthy companies, and extortion. The scam is considered to be one in which the political party in power receives bribes and large donations of money by corporations in return for public projects and exemptions to taxes; a quid pro quo model.

According to the Quint, which analyzed the top 30 highest donor companies, 14 out of 30 companies had raids called upon them by the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) regarding cases of income tax, but eventually were called off when they purchased electoral bonds. A summary by the Mint on this data Is linked here. This reveals a pattern that once the companies paid bribes to the political party in power, they were exempted from any alleged wrongdoings.

This opened up the floodgates to claims of extortion. A theory has arisen that many of these companies may have been innocent, but the political party in power used ED and CBI to extort money out of them through the bonds.

The analysis also reveals that political parties granted public projects to companies despite them being unworthy of performing the task. This applies to multiple pharmaceutical companies and several engineering firms, highlighting this is a company called Nava Yuga Engineering Company Limited.

This also links the scheme to another alleged scam of money laundering. Due to the anonymity provided by the electoral bonds, corporations can route black money through shell companies to political parties without leaving a money trail. According to the Quint, many companies donated bonds worth more than their profits that year. Thus, a question was raised; where is this money coming from? 

The government claimed that donations and individuals donating would be completely anonymous, but it was revealed in 2019 that there was a secret serial number in each bond that only showed up under UV light. The finance ministry claimed that it was a safety measure to avoid forgery, but in reality, it allowed SBI and other investigative agencies to track the bonds, donations, and donors. 

The opposition also petitions that there should be a Special Investigation Team (SIT) to investigate this. Petitioners argue that the 2G scams and the coal scams had no money trail but still had a SIT investigation and since the alleged electoral bonds scam has a money trail, it should be investigated using a SIT.

In conclusion, although these claims are made by unofficial investigating agencies and the opposition, the data paints a clear picture of how the electoral bond scheme is used for multiple scams. This will only be proven once a final investigation by official investigative agencies such as an SIT is undertaken and the Supreme Court releases a final verdict. Only time will tell…

– Eshaan Dutta, AS B