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The Election Commission (EC) had, in 2019, flagged its concerns in the Supreme Court on the changes made in several laws relating to political funding to facilitate the electoral bonds scheme, saying it will have 'serious repercussions' on transparency.
In a landmark verdict delivered within a spitting distance of the Lok Sabha polls, the electoral bonds scheme was scrapped by the Supreme Court on Thursday.
The court termed the scheme 'unconstitutional' and ordered a disclosure of the purchasers' names, the value of the bonds and the details of their recipients.
In an affidavit filed on March 27, 2019, the EC informed the top court that it had written to the Centre, saying the changes made in several laws relating to political funding will have 'serious repercussions' on transparency.
The poll panel had also said the changes in the Foreign Contribution (Regulation) Act (FCRA), 2010 will allow unchecked foreign funding of political parties, which could lead to Indian policies being influenced by foreign companies.
The EC said on May 26, 2017, it had written to the Ministry of Law and Justice about its views that the changes made in the Income Tax Act, the Representation of the People Act and the Finance Act would be against the endeavour to have transparency in the funding of political parties.
The affidavit said the EC had informed the ministry that 'certain provisions of the Finance Act, 2017 and the corresponding amendments carried out in the Income Tax Act, the RP Act, 1951 and the Companies Act, 2013 will have serious repercussions/impact on the transparency aspect of political finance/funding of political parties'.
The affidavit was filed by the poll panel in a batch of petitions challenging the issuance of electoral bonds by the government.
Referring to its communication with the ministry, the EC had said: 'It is evident that any donation received by a political party through an electoral bond has been taken out of the ambit of reporting under the contribution report as prescribed under section 29C of the RPA.
'In a situation where electoral bonds were not reported, it cannot be ascertained whether the political party has taken any donation from government companies and foreign sources.'
It had also said the changes in the FCRA, 2010 allowed donations to be received from foreign companies having a majority stake in Indian companies provided that they follow the guidelines pertaining to foreign investment in the sector in which they operate.
'This was a change from the existing law that barred donations from all foreign sources as defined under the FCRA. This would allow unchecked foreign funding of political parties, which could lead to Indian policies being influenced by foreign companies,' the EC had said.
Nearly a week after the EC's affidavit, the Centre filed a fresh affidavit in the top court on April 3, 2019, opposing the concerns raised by the poll panel on the issuance of electoral bonds and justifying the changes introduced in the laws, saying it was a 'pioneer step' to bring poll reforms, 'ensuring transparency' and 'accountability' in political funding.
The government had said the massive amount of political donations were earlier made in cash by individuals or corporations, using 'illicit means of funding' under the old system, and unaccounted black money was pumped in for financing elections.
On Thursday, the top court held that the 2018 scheme was 'violative' of the fundamental right to freedom of speech and expression and the right to information.
A five-judge Constitution bench headed by Chief Justice D Y Chandrachud did not agree with the Centre's contention that the scheme was meant to bring about transparency and curb black money in political funding.
Ordering a closure of the scheme forthwith, the top court also directed the State Bank of India, the authorised financial institution under the scheme, to submit by March 6 the details of the electoral bonds purchased since April 12, 2019 till date to the EC, which will publish the information on its website by March 13.
Under the electoral bonds scheme, ruling parties can coerce people and entities to contribute, the court said and rejected as 'erroneous' the Centre's argument that it protects the contributors' confidentiality, which is akin to the system of secret ballots.