What is the electoral bonds scheme? Why did the Supreme Court strike it down?

The electoral bonds scheme, notified by the Central government on January 2, 2018, was pitched as an alternative to cash donations made to political parties as part of efforts to bring in transparency in political funding.

According to the provisions of the scheme, electoral bonds could be purchased by any citizen of India or entity incorporated or established in the country. A person could buy electoral bonds, either individually or jointly with others.

State Bank of India (SBI) was the only lender that was authorised to issue electoral bonds, and had sole access to the details of those who purchased electoral bonds.

The scheme, therefore, allowed entities to make anonymous donations to political parties.

The political party had to encash the bond within 15 days of the issuance, only through an account with the authorised bank SBI.

The constitutionality of scheme was challenged in the Supreme Court immediately after it was notified.

Petitioners including CPI(M) and the Association for Democratic Reforms argued that voters have the right to know which individual, company, or organisation funded which party and to what extent.

The appeals also argued that the ruling party could grant concessions to their donors, in the form of licenses, leases, policy changes and government contracts, if funders remained anonymous to the public.

The Supreme Court passed a judgment on Thursday, in favour of the petitioners, and struck down the electoral bonds scheme.

A five-judge Constitution bench held the scheme unconstitutional and violative of freedom of speech and expression under Article 19(1)(a) of Constitution.

Chief Justice D Y Chandrachud said the scheme may lead to a quid pro quo arrangement between political parties and donors.

The apex court ordered SBI to stop issuing electoral bonds immediately, and asked the lender to furnish details of donations made through the scheme to the Election Commission.

Upholding the citizens' right to information, the court asked the poll panel to publish the information on its official website by March 13.

The Centre had argued that the purpose of electoral bonds was to ensure 'right to privacy' and confidentiality of the donors, and not their anonymity. The Government said the scheme would help stop the circulation of black money in politics.

However, the Constitution bench held that Centre's stated objective of fighting black money and maintaining the confidentiality of donors cannot justify the scheme. Electoral bonds, the court said, are not the only way to curb black money.