On January 2, 2018, the Ministry of Finance notified the Electoral Bond scheme 2018 (“EB Scheme”) in exercise of the power u/s 31(3) of the RBI Act. The electoral bond is in the nature of a promissory note which is a bearer banking instrument and does not contain the name of the buyer.
The following are some key features of the scheme:
- The bonds may be purchased by a citizen of India or a company or any other entity;
- It can be encashed only by an eligible political party as defined i.e. one which is registered u/s 29A of the Representation of People Act, 1951;
- The bond is valid for 15 days from the date of issue;
- The value of the bond should be considered as income by way of voluntary contribution received by the eligible political party
The petitioners instituted proceedings u/s 32 of the Constitution of India challenging the constitutional validity of the EB scheme and also various related provisions.
In a detailed judgement after dealing with a large number of issues, the Supreme Court held as follows:
- The EB scheme and provisions like Section 182(3) of the Companies Act which in its amended form permits uncapped political contributions are violative of the constitution;
- The issuing bank i.e. State Bank of India (“SBI”) shall stop issuing electoral bonds;
- SBI shall submit details of the electoral bonds purchased since the interim order of the Court dated 12th April 2019 to the election commission of India;
- Electoral bonds which are within the validity of 15 days, but not yet encashed shall be returned by the political party in possession of the bond to the issuing bank and the issuing bank shall refund the amount to the purchaser;
- It may be mentioned that it was a 5 bench judgement led by Chief Justice of India, Dr. Dhanananjaya Chandrachud, but with a separate judgement by Justice Sanjiv Khanna who agreed with the conclusions, but with a different reasoning.
For detailed discussion on the above order, please feel free to contact devadhaantu@devadhaantu.in