SC to hear a batch of petitions challenging the electoral bond scheme for the political funding of parties on October 31

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Today, the Supreme Court (SC) of India fixed October 31, 2023, for a final hearing on a batch of petitions challenging the validity of the electoral bond scheme for the political funding of parties. The matter was heard by a three-judge bench of the Supreme Court including Chief Justice of India DY Chandrachud, Justice Manoj Misra, and Justice JB Pardiwala. Because the issue pertaining to money bills is yet to be resolved by a seven-judge bench, the petitioners have decided not to argue that the scheme should be passed as a money bill. The SC order reads, “Petitioner’s counsel and Attorney General have made preliminary submissions. Mr. Prashant Bhushan (petitioner’s counsel) submits that they wish to open the matter. Compilations have been filed. If further submissions are to be made, it is to be filed by Saturday. Soft copies are to be complied with by nodal counsel. The matter is to be listed for final hearing on October 31 and should there be a spill over it shall continue till November 1.” 

Following the amendment made in 2017 to Section 29C of the Representation of Peoples Act 1951 (RPA), individuals who wish to contribute to political parties can purchase electoral bonds from designated banks and branches using electronic payment methods. To do so, they must fulfill the KYC (know your customer) requirements. However, it is not mandatory for political parties to disclose the origin of these bonds to the Election Commission of India (ECI). These bonds are available in various denominations, such as Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, or Rs 1 crore. The bond does not contain the name of the donor. It remains valid for 15 days from the date of issuance and must be redeemed by the recipient political party within that time frame. The face value of these bonds is considered as income derived from voluntary contributions received by eligible political parties. Consequently, they are exempt from income tax under Section 13A of the Income Tax Act, of 1961. 

The petitions challenging the provisions of Finance Act 2017 which paved the way for electoral bonds were filed in 2017. This Act of 2017 introduced amendments to the Income Tax ActReserve Bank of India Act, Representation of Peoples Act, Companies Act, and Foreign Contributions Regulations Act to make a way for electoral bonds. The Communist Party of India (Marxist), and NGOs Common Cause and Association for Democratic Reforms (ADR) filed the petitions and challenged the scheme as ‘an obscure funding system which is unchecked by any authority’. During the assembly elections in certain states in 2021, the Supreme Court refused to stay the release of electoral bonds. The SC bench when it heard preliminary issues today decided to list the matter for hearing on October 31, 2023, as well as said that it may continue the hearing on November 01 if the proceedings spill over.