#ElectoralBond Scheme
Association for Femocratic Reforms and Another v. Union of India and Others
WP(C) 880/2017
Before Supreme Court of India
Writ Petition was allowed on 15.02.2024
On 2 January 2018, the Ministry of Finance in the Department of Economic Affairs notified the Electoral Bond Scheme 2018 in exercise of the power under Section 31(3) of the RBI Act.
The Electoral Bond is issued in the nature of promissory note which is a bearer banking instrument and does not carry the name of the buyer.
The scheme allowed anonymous donations to political parties through interest-free financial instruments.
The scheme was challenged by several petitioners, including the Association for Democratic Reforms, who argued that it violated the voter’s right to information, the principle of free and fair elections, and the equality clause of the Constitution.
On 15 February 2024, a five-judge Constitution Bench of the Supreme Court, led by Hon’ble Mr. Chief Justice D.Y. Chandrachud, unanimously struck down the scheme as unconstitutional, holding that it infringed on the fundamental right of the voters to know the source of funding of the political parties
The features of the Scheme are as under:
The Bond may be purchased by a person who is (i) a citizen of India; or (ii) incorporated or established in India. ‘Person’ includes (a) an individual; (b) a Hindu undivided family; (c) a company; (c) a firm; (d) an association of persons or a body of individuals, whether incorporated or not; (e) every artificial juridical person, not falling within any of the above categories; and (f) any agency, office, or branch owned or controlled by such a person. An individual can buy bonds either singly or jointly with other individuals;
An Electoral Bond can only be encashed by an eligible political party. A political party, to be eligible to receive an electoral bond, has to be registered under Section 29A of the RP Act, and ought to have secured not less than one per cent of the votes polled in the last general election to the House of the People or the Legislative Assembly of the State. An eligible political party can encash a bond only through a bank account with an authorised bank. The scheme has notified the State Bank of India as the bank authorised to issue and encash bonds;
The instructions issued by the Reserve Bank of India regarding KYC apply to buyers of the bond. The authorised bank may call for additional KYC documents if necessary;
Payments for the issuance of the bond are accepted in Indian rupees, through demand draft, cheque, Electronic Clearing System or direct debit to the buyer’s account. Where payment is made by cheque or demand draft, it must be drawn in favour of the issuing bank at the place of issue;
The bonds are issued in denominations of Rs 1000, 10,000, 1,00,000, 10,00,000 and 1,00,00,000;
The bond is valid for fifteen days from the date of issue. No payment will be made to a political party if the bond is deposited after the expiry of fifteen days. If the bond is not encashed within fifteen days, it will be deposited by the authorised bank with the Prime Minister’s Relief Fund;
A buyer who wishes to purchase electoral bond(s) can apply in the format specified in Annexure II of the Scheme. issue the bond if all the requirements are fulfilled. The application shall be rejected if the application is not KYC compliant or if the application does not meet the requirements of the scheme;
The bond issued is non-refundable;
The information furnished by the buyer is to be treated as confidential by the authorized bank. It shall be disclosed only when demanded by a competent court or upon the registration of criminal case by any law enforcement agency;
The bond shall be available for purchase for a period of ten days on a quarterly basis, in the months of January, April, July, and October as specified by the Central Government. Bonds will be available for an additional period of thirty days as specified by the Central Government in a year when General Elections to the House of People are to be held;
No interest is payable on the bond. No commission, brokerage, or any other charges for issue of a bond shall be payable by the buyer against purchase of the bond;
The value of the bonds shall be considered as income by way of voluntary contributions received by an eligible political party for the purpose of exemption from Income Tax under Section 13A of the IT Act; and
The bonds are not eligible for trading.
