Mains Practice Question


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What are electoral bonds and how they are different from electoral trusts? Discuss the Supreme Court’s ruling on the Electoral Bonds Scheme.
A Simple Introduction about Electoral Bonds and Electoral Trusts
Electoral bonds were introduced in 2017 as interest-free bearer instruments. They allow individuals and entities, including corporations, to make anonymous donations to political parties.
Electoral trusts, on the other hand, were established in 2013 and operate under Section 25 of the Companies Act, 1956. They are entities formed by companies to channel their political donations.
It is the central part of the answer and one should understand the demand of the question to provide rich content.
Key features of electoral bonds include:
  • Available in denominations ranging from Rs. 1,000 to Rs. 1 crore.
  • Purchased from authorized State Bank of India (SBI) branches through accounts complying with Know Your Customer (KYC) norms.
  • Exempt from disclosure requirements, providing anonymity to donors.

Key aspects of electoral trusts include:

  • Any company registered under Section 25 of the Companies Act, 1956, can form an electoral trust.
  • Donors to electoral trusts include individuals, companies, firms, Hindu Undivided Families (HUFs), or associations of persons living in India.
  • Electoral trusts must donate at least 95% of contributions received in a financial year to registered political parties.
  • Require renewal every three financial years.

Supreme Court's Ruling on Electoral Bonds: The Supreme Court of India has addressed the issue of transparency and accountability in political funding through electoral bonds. Key rulings and directives include:

  • In an interim order dated April 12, 2019, the Supreme Court directed political parties receiving donations through electoral bonds to submit details of the bonds to the Election Commission of India (ECI).
  • The Court emphasized the importance of disclosing particulars of donors, including the amount of each bond and credit details, to ensure transparency.
  • A subsequent ruling referred the case to a five-judge bench to address constitutional challenges and broader issues related to political funding and transparency.
  • Petitioners have sought to declare all political parties as public offices under the Right to Information Act, compelling them to disclose income and expenditure details.
The ending of the answer should be on a positive note and it should have a forward-looking approach.
While electoral bonds and electoral trusts serve as avenues for political donations, they differ in their structure and regulatory requirements. The Supreme Court's interventions aim to balance the need for transparency in political funding with the anonymity provided by electoral bonds.
Other Points to Consider 

The stance of the Election Commission of India and the Government of India on Electoral Bonds


Previous Year Questions

1. Discuss the procedures to decide the disputes arising out of the election of a Member of the Parliament or State Legislature under The Representation of the People Act, 1951. What are the grounds on which the election of any returned candidate may be declared void? What remedy is available to the aggrieved party against the decision? Refer to the case laws. (2022)

2. The most significant achievement of modern law in India is the constitutionalization of environmental problems by the Supreme Court.” Discuss this statement with the help of relevant case laws. (2022)


05-Apr 2024