Electoral Bonds Case: Transparency has Deep Roots in Indian Democracy

On 31 October, the Supreme Court commenced hearings in a batch of petitions challenging the Electoral Bonds Scheme introduced by the Finance Act 2017. A day before the hearings began, five years after the petitions were filed, the Attorney General of India informed the court that citizens do not have the right to know the source and amount of funds political parties receive. The Electoral Bonds Scheme has made the funding received by political parties non-transparent and obscure. Among other legislations, The Representation of the People Act 1951 was amended to dispense with the provision that political parties receiving more than Rs 20,000 are mandated to disclose the source and the amount received from any individual or entity, including business and corporate houses.  

BJP Biggest Beneficiary 

The stand of the government in the Supreme Court that sources and amount of funding of political parties should not be made public negates democracy, which is sustained by removing the veil around the monetary resources of political outfits. It goes against the open means of collecting money for election expenditures. Most funds channelled through the Electoral Bonds Scheme have gone to the ruling party, the BJP. It has been widely reported that it received a staggering Rs 5,000 crores through the scheme.

Opaque Funding Promotes Corruption 

Any opaque funding system is a source of corrupt practices, which include the functioning of political parties. This is particularly true of those who control the state apparatus and receive the people’s mandate for good governance. The KS Santhanam Committee on Prevention of Corruption, established by then-home minister Lal Bahadur Shashtri in June 1962, was the first to deal with the numerous causes of corruption. It categorically said widespread corruption could be attributed to mounting election expenditures of political parties. It observed, “The public belief in the prevalence of corruption at high political levels has been strengthened by how funds are collected by political parties, especially at the time of elections”. “Such suspicions,” the committee said, “attach not only to the ruling party but to all parties, as often the opposition can also support private vested interests as well as members of the government party.” It, therefore, recommended that the “conduct of political parties should be regulated…by strict principles in relation to the collection of funds and electioneering”. 

Transparency in Funding Political Parties 

One instructive observation of the Santhanam committee was: “If even one family in three pays one rupee a year to a political party, the total annual contribution will be more than what is needed for all legitimate purposes of all political parties in India.” Noting the reluctance and inability of those parties to make small collections on a broad basis, it observed: “... the desire to resort to shortcuts through large donations that constitutes the major source of corruption and even more of suspicion of corruption”.

According to the committee, “Nothing but a total ban on all donations by incorporated bodies to political parties and purposes will clear the atmosphere”. Therefore, it recommended that “all political parties should keep a proper account of their receipts and expenditure and publish annually an audited statement of such accounts giving details of all individual receipts”. It also said, “We do not see why any political party should object to this provision, and as it may not be easy to ensure compliance through voluntary agreement, simple legislation obliging the keeping of such accounts and its publication may be necessary.”

RBI & ECI Opposed Electoral Bonds

The Santhanam Committee recommendations have far-reaching significance for India, considering the Electoral Bonds Scheme has survived despite opposition from the Reserve Bank of India as well as the Election Commission of India (ECI). While the ECI opposed it because it would make funding sources anonymous and increase unaccounted cash in the electoral process, it hoped that the issue of transparency would be considered at the final argument stage in the Supreme Court. 

The RBI, on the other hand, reportedly objected to the scheme on the grounds that it would set a “bad precedent” by encouraging money laundering and undermining faith in Indian banknotes. It felt that the scheme would, therefore, erode a core principle of central banking legislation. It observed: “The bonds are bearer bonds and are transferable by delivery. Hence, who finally and actually contributes the bond to the political party will not be known.”  

In this context, the government's stand before the Supreme Court is perplexing. How can citizens not have the right to know the source and quantum of funds received by political parties in a democracy?

Report of Second Administrative Commission 

If the Santhanam Committee Report located the root cause of corruption in election expenditure, successive commissions and committees on electoral reforms backed that assertion. The fourth report (on “Ethics and Governance”) of the Second Administrative Reforms Commission headed by former minister Veerappa Moily, observed that by curbing election expenditures and making the sources of funding of political parties more transparent, the scourge of corruption could be dealt with very effectively. This would uphold the ethical orientation of the governance process. 

Given these clear-eyed observations on corruption and its causes, there is no doubt that the non-transparent funding of political parties through secret electoral bonds constitutes a reservoir of corruption in our country.  

State Funding of Elections 

A peep into our constitutional history would reveal a far-sighted idea by a distinguished member of the Constituent Assembly, Loknath Mishra. Addressing the Constituent Assembly on 29 November 1948, Mishra had said that state funding of elections—as opposed to money flowing from business houses to political parties—would make elections transparent and respect the people’s mandate. 

Mishra also observed that corporate funding would reduce elections and the electoral process to a private business and commercial affair. He also cautioned that entry to legislatures should not be seen as a “profiteering business”. His cautionary remarks have, sadly, become a grim reality in today’s India. 

C Rajagopalachari’s Warning on Elections and Corruption 

While in Vellore Jail from 1921-22, C Rajagopalachari wrote, “We all ought to know that Swaraj will not at once or, I think, even for a long time to come, be better government or greater happiness for the people”. He far-sightedly predicted, “Elections and their corruptions, injustice, and the power and tyranny of wealth, and inefficiency of administration, will make a hell of life as soon as freedom is given to us.”

“Hope lies only,” he wrote, “in universal education by which right conduct, fear of God, and love, will be developed among the citizens from childhood”. He then remarked, “It is only if we succeed in this that Swaraj will mean happiness. Otherwise, it will mean the grinding injustices and tyranny of wealth.” 

A hundred years after Rajaji’s warnings, India confronts ever-growing electoral non-transparency, opacity and malpractices. Almost every problem with the electoral system can be traced to uncontrolled and unregulated election expenditures of political parties. That political outfits can receive funds through a scheme of electoral bonds, which protects them from having to disclose their sources of funding and the amount they receive, is a travesty. 

It is, therefore, earnestly hoped that the legal and constitutional validity of the Electoral Bonds Scheme would judged keeping in mind the vision of the Constituent Assembly and the numerous committees led by legal and constitutional stalwarts that have traced corruption to flaws in the election process. 

The author served as an Officer on Special Duty to President of India, KR Narayanan. The views are personal.