Electoral bonds: Amit Shah is right about return of black money; judicial activism has made perfect the enemy of good

Speaking at News18’s ‘Rising Bharat’ Summit in New Delhi, Amit Shah on Wednesday expressed apprehension that the Supreme Court’s ruling on electoral bonds may reintroduce black money into election funding. It is hard to disagree with the Union home minister.

Judicial activism on electoral bonds has made perfect the enemy of good. Nobody defends electoral bonds as a system that was ‘perfect’. There were legitimate concerns over quid pro quo – not just at the Centre but also at the level of the state governments – and fears over whether the bonds affected public interest by fostering an anti-competitive regulatory environment, extortion, corruption, or favouritism.

That said, the question that emerges with the cancellation of the scheme is whether the system couldn’t have been improved upon without it being totally scrapped, and whether its ending will result in more transparency, better accountability, and oversight. The Supreme Court verdict in its wake left these questions unanswered. The Opposition, that has now taken an anti-electoral bond stand under the assumption that its striking down will harm the BJP more, seems unbothered with what lies ahead.

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A combative Shah pushed back at accusations of crony capitalism involving the BJP at the Centre or in states. On charges of corruption, he said: “We have been accused that we got a lot of money via bonds but so did the INDI Alliance. We have 303 seats, 17 governments, party units in every state. In 2019, we got a sizeable proportion of funds in bonds when the Model Code of Conduct (MCC) was in place and no new schemes or policies could be announced. We got more than 90% of funds in bonds after the MCC was imposed. So, the argument that it was affecting government’s policies is false.”

It cannot be denied that the much-reviled electoral bonds did provide a semblance of balance between the need for cleaning up the murky world of political finance and donor privacy. What the judiciary, in its zeal for activism and ostensibly to bring greater transparency, has done is ensured that the donor, donee, and the amount will now go undisclosed. In terms of transparency, the ‘progress’ will be from the frying pan to fire.

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From a dominant system of no transparency when donations were made and received entirely in the form of hard cash, the electoral bond system introduced in 2018 by the Narendra Modi government brought a modicum of transparency. While it wasn’t comparable to, say, online transfer of money to political parties or donation through cheques, the fact that the bonds could only be purchased through a banking instrument and would necessarily be part of the donor companies’ or individuals’ books or accounts, made the money trail traceable while not compromising on privacy.

Concern over privacy isn’t trivial. The discourse around it during the debate over electoral bonds has been hypocritical. Privacy warriors who had accused the Modi government of running a ‘totalitarian state’ while Aadhaar was being implemented and linked to various welfare schemes for the poor, took a remarkably laissez-faire view on the privacy of donors when it came to electoral bonds.

It is unfortunate. This is one area where ‘right to information’ enshrined in Article 19(1)(a) of the Constitution, cited by the apex court while striking down the electoral bond scheme in a unanimous verdict, could be a double-edged sword. Let’s consider the recent predicament of industrialist Kiran Mazumdar-Shaw, the founder and executive chairperson of Biocon.

In a post on X on Monday, responding to reports that her company had donated money to Janata Dal (S) through electoral bonds in Karnataka, Shaw wrote: “Would like to clarify that Biocon did not make any political donation to JDS or any other party for elections. At a personal level I purchased electoral bonds which I donated to JDS & several parties (sic). My donations were nominal on the principle of funding election campaigns with white money.”

According to media reports citing data on electoral bonds shared by the Election Commission following an order from the apex court, the Biocon founder had donated Rs 6 crore in April to JDS last year a month before Assembly polls in Karnataka. On 15 March this year, following the data disclosure, Shaw was seen arguing with a user on X on whether she was coerced to donate the funds. She replied, “all parties want funding.”

Shaw, a known critic of the Modi government, had presumably made the contribution under the guarantee of non-disclosure. The release of the data put her in a position where she was the receiving end of a litany of accusations on social media and was forced to publicly clarify her position. This is unlikely to be a stray incident.

As then Union finance minister, the late Arun Jaitley had written in an article while introducing the bonds in 2018, in order to cleanse the political funding mechanism. “A major step was taken during the first NDA Government led by Atal Bihari Vajpayee. The Income Tax Act was amended to include a provision that donations made to political parties would be treated as expenditure and would thus give a tax advantage to the donor… It was hoped that donors would increasingly start donating money by cheque. Some donors did start following this practise but most of them were reluctant to disclose the details of the quantum of donation given to a political party. This was because they feared consequences visiting them from political opponents.”

Jaitley further wrote that in electoral bonds, “how much each donor has distributed to a political party would be known only to the donor.  This is necessary because once this disclosure is made, past experience has shown, donors would not find the scheme attractive and would go back to the less-desirable option of donating by cash.”

The witch-hunt that one industrialist has been subjected to following the release of the data exemplify that Jaitley’s assumption wasn’t incorrect. Money will now be funneled to political parties entirely through cash, and political finance ecosystem will now be pushed underground in a major blow to transparency. It may boost corruption manifold. Perhaps some political parties are desirous of exactly such a paradigm.

As Shah pointed out, “around 21% of funding to BJP was through cash from anonymous sources, in 2018 it reduced to 18% and then reduced to 3% in 2023… Congress was against electoral bonds as they want to cut money back through cash donations.”

Doing away with donor anonymity may earn the judiciary some applause but it hardly addresses the core issue: reform of political financing. That demands more than band-aid solutions.

Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.