The Electoral Bond Scam: Explained in Simple Terms

The Electoral Bond Scam is one of the biggest financial frauds in the history of independent India. It is a collection of scams that involve a vast extortion racket and a series of corrupt practices that have severely impacted the country. The scandal revolves around the Electoral Bonds Scheme introduced by the Modi government in 2017, which was used as a means of collecting kickbacks for political parties. The scheme allowed for hidden actions, with citizens being kept in the dark about which companies paid what amount to which parties, and political parties being able to cash the bonds while keeping their sources anonymous.

After the Supreme Court declared the scheme unconstitutional in 2024, a flood of revelations about the scams that took place in the 7 years prior started coming to light. The scheme allowed for business opportunities to be provided in exchange for kickbacks and those who refused to provide kickbacks were harassed by the Enforcement Directorate (ED). This created a vast extortion racket, shattered the principles of democracy, and ultimately led to the theft of the nation’s public funds.

What is an Electoral Bond?

An electoral bond is a promissory note or bearer bond that can be purchased by any individual, company, firm, or association of individuals as long as the person or entity is an Indian citizen or is incorporated or established in India. The bonds are specially issued for the aim of contributing funds to political parties.

Only political parties registered under Section 29A of the Representation of the People Act, 1951, that received at least 1% of the votes cast in the most recent Lok Sabha or state legislative assembly elections are eligible to acquire electoral bonds.

What is Electoral Bond Scheme?

The Electoral Bond Scheme was introduced by the Modi government in 2017 as a means of collecting kickbacks for political parties. The scheme allowed for hidden actions, with citizens being kept in the dark about which companies paid what amount to which parties, and political parties being able to cash the bonds while keeping their sources anonymous.

After the Supreme Court declared the scheme unconstitutional in 2024, a flood of revelations about the scams that took place in the 7 years prior started coming to light. The scheme allowed for business opportunities to be provided in exchange for kickbacks and those who refused to provide kickbacks were harassed by the Enforcement Directorate (ED). This created a vast extortion racket, shattered the principles of democracy, and ultimately led to the theft of the nation’s public funds.

How the Electoral Bonds Worked

An electoral bond is essentially a coupon that companies purchase from the bank and then give to political parties. The parties can then redeem the coupons and access the money paid to the bank. The scheme allowed for complete anonymity, with the buyer’s name not mentioned on the electoral bond, and a secret unique alphanumeric number only visible under ultraviolet light.

Scandal Unearthed

Retired Navy Officer Lokesh Batra filed an RTI and received a file from the Finance Ministry, revealing that the SBI had to provide the details of the electoral bond to any law enforcement agency if they asked for it. This meant that if ED or CBI wanted, they could have easily found out which company donated which Electoral Bond, and therefore, the identity of the donor could be ascertained.

Implications of the Electoral Bond Scheme

The implications of the Electoral Bond Scheme are far-reaching and have severe consequences for the country as a whole. Let’s break down the implications of this fraudulent scheme:

Impact on Democracy

The scheme has shattered the principles of democracy by allowing hidden political donations and kickbacks. This has resulted in a lack of transparency and accountability in the political system, undermining the very foundation of democracy.

Extortion Racket

The Electoral Bond Scheme has effectively been used as an extortion racket, where companies are coerced into making political donations in exchange for business opportunities. Those who refuse to comply are harassed and targeted by government agencies such as the Enforcement Directorate (ED).

Public Fund Theft

One of the most damaging implications of the scheme is the theft of the nation’s public funds. By diverting public money into the hands of companies and political parties, the scheme has deprived the citizens of essential public services and infrastructure development.

Corruption and Scams

The entire scandal has unveiled a web of corruption and scams, where political parties, companies, and government agencies have colluded to manipulate the system for their benefit. This has undermined the trust of the public in the political and financial institutions of the country.

What is Electoral Bond Scam?

The Electoral Bond Scam refers to a situation where there’s suspicion or evidence of wrongdoing related to the use of electoral bonds in political financing. Electoral bonds are a way for individuals and companies to donate money to political parties in India, but without revealing their identities publicly. This lack of transparency raises concerns about potential corruption or misuse of funds. The scam could involve illegal activities such as bribery, money laundering, or influencing elections unfairly. Investigating and addressing the Electoral Bond Scam is crucial for upholding the integrity of democratic processes and ensuring fairness in political funding.

Unveiling the Frauds: Examples of Corruption

In the wake of the Electoral Bond Scam, numerous examples of corruption and fraudulent practices have come to light. These examples provide a deeper understanding of how the scam unfolded and how it impacted the country as a whole.

Tax Evasion and Extortion

Companies involved in the scam were found to be engaging in tax evasion, depriving the public fund box of essential resources. Rather than facing consequences for tax evasion, these companies made political donations through electoral bonds in exchange for leniency from the government. This essentially amounted to an extortion racket where the government turned a blind eye to illegal activities in exchange for kickbacks.

Among the top 30 donors listed in the electoral bonds, 14 companies had been raided by government agencies such as ED and the Income Tax Department. This raised serious concerns about the government’s complicity in allowing these companies to operate without repercussions.

Misuse of Public Funds for Business Opportunities

Several companies that made significant political donations through electoral bonds were awarded lucrative government contracts and projects. This raised red flags about the quid-pro-quo relationship between political parties in power and the companies that donated to them. Projects such as the Kaleshwaram Multipurpose Irrigation Project in Telangana and the Zojila tunnel project were awarded to companies that had purchased electoral bonds worth billions of rupees.

These instances pointed to a clear misuse of public funds, as the government seemed to favor companies that had made substantial political donations. The awarding of contracts without following due process and environmental rules also raised concerns about the integrity of government decision-making.

Influence of Political Donations on Government Contracts

Companies that had been involved in instances of negligence, subpar construction, and even financial irregularities were found to have received government contracts after making political donations. This raised questions about the influence of these donations on the awarding of contracts and projects. Instances such as the collapse of under-construction flyovers and housing projects by companies that had purchased electoral bonds further highlighted the potential impact of corruption on public safety and welfare.

It became evident that political parties in power were willing to overlook the track records and legal issues of companies in exchange for financial contributions. This compromised the integrity of government decision-making and raised serious questions about the accountability of political parties.

What did the Supreme Court say regarding electoral bonds?

The Supreme Court declared the electoral bonds program illegal. According to the Supreme Court, anonymous electoral bonds violate the right to knowledge and free speech guaranteed by the Constitution.

The Electoral Bond program, which permits political parties to receive anonymous money, was the subject of several petitions that the Supreme Court decided to rule against. The ruling was made on February 15th. Two distinct but unanimous rulings on appeals contesting the plan were rendered by a five-judge Constitution bench led by Chief Justice D Y Chandrachud.

Highlights of the Decision

  1. SC disqualifies election bonds program: The Supreme Court declared the election bonds program to be unlawful, leading to its dissolution. 
  2. Not the only strategy to limit the use of dark money in election funding: The Supreme Court ruled that restricting black money is not justifiable by violating someone’s right to information. “When compared to the impact of electoral bonds on the right to information, there are other alternatives which substantially fulfil the purpose and impact the right to information only.
  3. The electoral bond plan violates freedom of speech and expression: The CJI ruled that the program violates the right to free speech and expression under Article 19(1)(a) of the Constitution. According to the bench, the fundamental right to privacy includes people’s political privacy and allegiance.
  4. Advantage for the ruling party: According to the Constitution bench, the Electoral Bonds plan will benefit the ruling party. “Because of the close relationship between money and politics, there is also a legitimate possibility that financial contributions to a political party will result in a quid pro quo arrangement,” the Supreme Court stated.
  5. The State Bank of India (SBI) has been ordered by the Supreme Court to stop issuing Electoral Bonds immediately: The top court ordered the SBI to provide details of political parties that have received Electoral Bonds after April 12, 2019, as well as all other information received, to the Election Commission of India by March 6. The SBI will provide details about each electoral bond encashed by political parties, including the date of encashment and the denomination of the bond. The Supreme Court ruled that by March 13, the ECI must disclose information about Electoral Bonds on its official website.

Disadvantages of Electoral Bonds

  1. According to some opponents, electoral bonds were implemented primarily to limit the amount of cash available to opposition parties.
  2. Electoral bonds pose no threat to financially solid businesses.

What is an electoral bond issue?

Individuals and businesses can buy bonds to make political donations, which provides tax breaks and donor privacy. Critics contend that the program encourages corruption and damages honesty, while the government claims it monitors illegal money use in elections.

What is the use of Electoral Bonds?

An electoral bond is a sort of instrument that works as both a promissory note and an interest-free banking tool. Any Indian resident or entity registered in India can purchase these bonds after meeting the RBI’s KYC requirements.

Who may sell Electoral Bonds in India?

The Electoral Bonds may only be cashed by an eligible Political Party through an Authorised Bank account. The State Bank of India (SBI), in the XXX Phase of sale, has been authorized to issue and cash Electoral Bonds through its 29 Authorised Branches.

Details of Electoral Bonds submitted by SBI on 21st March 2024

Abhishek Parmar

Thakur Abhishek Yuvraj Parmar crafts captivating content on India, celebrating its diverse culture and heritage, creating stories that resonate with the heart of every Indian.

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