The electoral bond scheme, introduced by the Narendra Modi government of India in 2018, was recently struck down by the Supreme Court of India as unconstitutional. The scheme refers to an opaque system of corporate donation to political parties without any limit and without any disclosure, through which the current ruling party, the Bharatiya Janata Party (BJP), received millions in corporate “donations,” to the detriment of the already besieged Indian democracy.
The judgment
On February 15, 2024, a five-judge Constitutional Bench of the Supreme Court of India declared in a unanimous verdict that the electoral bond scheme of anonymous corporate donations to political parties was unconstitutional. The court considered that the electoral bond scheme was based on erroneous amendments of the Representation of the People Act (RPA) 1951, Income Tax Act 1961, Companies Act 2013, and the Foreign Contribution (Regulation) Act (FCRA) 2010, and therefore illegal. However, according to the court, the most glaring illegality of the scheme was the non-disclosure of voluntary political contributions that was violative of the right to information and freedom of expression guaranteed by Article 19 (1) of the Constitution.
In addition, the judges ruled that unlimited political funding by corporations is violative of the fundamental right to free and fair elections and therefore “manifestly arbitrary under Article 14” of the Constitution of India.
The court also struck down the corresponding amendments that the Indian government made to the Finance Bill 2017 in order to frame the electoral bond scheme.
The court directed the State Bank of India (SBI), the issuing bank under the scheme, to immediately stop the issuance of electoral bonds. The ruling further directed the SBI to submit data on electoral bonds purchased to date, including names of purchasers, denominations of the purchases, and names of political parties that received contributions.
The Election Commission of India, the electoral authority of the country, was directed to publish all the information by March 31.
Initially, the SBI, which is the largest public bank in India, was directed to submit all data associated with the buying and issuance of electoral bonds by March 6. The bank appealed for an extension of the deadline to September, that is, until after the general elections (scheduled for April-June 2024). The same constitutional bench rejected the appeal and the bank finally submitted relevant data on March 12, but it did not disclose the unique alphanumeric serial numbers associated with the transactions by which their paths could be traced.
The loopholes that aided corruption
The scheme was notified in 2018 by the Indian Ministry of Finance, which defined an electoral bond as “a bond issued in the nature of a promissory note which shall be a bearer banking instrument and shall not carry the name of the buyer or payee.”
Under the scheme, only those political parties registered under Section 29A of the Representation of the People Act (RPA), and which had secured not less than 1% of the votes polled in the last parliamentary election or the state legislative assembly election, were eligible to receive the bond.
After the scheme was put into action, several petitions were filed before the Supreme Court by legal experts as well as by a number of social organizations and leftist political parties, challenging the scheme on grounds of violation of fundamental rights enshrined in the Constitution and the possibility of corruption in electoral processes. The government, on the other hand, defended the scheme, claiming that it was crucial for “eradicating unclean and black money in elections.”
Yet, how that could have been possible under the scheme remains questionable, given that all the existing safeguards against money laundering and corruption—which were already quite weak—were removed from the amendments on which the electoral bond scheme was based.
According to Section 29C of the unamended RPA (declaration of donation received by the political parties), if a political party received contributions in excess of INR 20,000 (the equivalent of US$240) from a single person in a financial year, it was required to report such donations to the Election Commission of India. However, the amendment made in 2017 removed the reporting requirements if the contributions were made through electoral bonds.
Moreover, under the Companies Act, contribution to a political party by a corporation could not exceed the upper limit of 7.5% of the company’s average net profit during the three immediately preceding financial years. However, the 2017 amendment removed the clause of Section 182 (prohibition and restrictions regarding political contributions) of the Companies Act which mandated this requirement, thus effectively eliminating any upper limit for political donations by corporations.
Another amendment to the Companies Act, specifically in its Section 182(3), eliminated the requirement of disclosing the name of the political party to which a donation was made along with the particulars of the donation. The amended clause only requires the donation amount to be disclosed.
Similarly, before amendment, Section 13A of the Income Tax Act 1961 provided that any income by way of voluntary contributions to a political party was not included in the total income of an individual in the calculation of the income tax, provided that the political party maintained a record of such contributions, including the names and addresses of the persons who made such contributions. After the amendment, political parties did not have to maintain a record of such contributions if they were received in the form of electoral bonds.
Finally, under the FCRA, foreign contributions were prohibited to political parties and public servants, as it had been defined as foreign intervention in the internal affairs of the country. After the amendment, the government effectively allowed foreign donations through electoral bonds.
The modus operandi: BJP extorted companies for party fund
Project Electoral Bond, a joint investigation on the electoral bonds scam carried out by the independent media outlets The News Minute, Scroll, and Newslaundry, revealed that at least 30 companies were essentially extorted by the Modi government to contribute vast sums of money to the ruling party. The “chronology” of events was always the same: first the company would be raided by Central agencies such as the Enforcement Directorate (ED), the Income Tax Department, the Central Bureau of Investigation (CBI), or the Goods and Service Tax (GST) authorities for some financial crime allegation; then the company would buy electoral bonds; and after that there would be no progress in the investigations against the company in question. Some companies even won government contracts after having bought electoral bonds. This is an unprecedented scenario, with no such parallel in India during any time in the post-independence period.
According to the investigation, the companies that were extorted in this way include the top buyer as per the data made public, Future Gaming and Hotel Services Private Limited, based in Coimbatore, Tamil Nadu state. Run by “lottery king” Santiago Martin, the company was under the scanner of financial crime agencies since 2007 and was raided several times over the last few years for allegations of money laundering. From April 2022 to May 2023, the ED attached the company’s assets as part of the investigations. At the same time, between October 2020 and January 2024, the company bought electoral bonds worth INR 1,368 crore (equivalent to US$164.76 million). Since May 2023, the investigations against the company remain stagnant, while its online lottery business continues to grow. Moreover, Martin’s son, Charles José Martin, has joined the BJP.
Another such company is Megha Engineering and Infrastructure Limited (MEIL), a construction company headquartered in Hyderabad, Telangana, that, together with its three subsidiary companies, bought electoral bonds worth over INR 1,200 crore (the equivalent of US$144.53 million) during 2020-2024, which puts the company in the second spot among the top spenders. The company’s bond-buying spree began after an Income Tax raid on its headquarters in October 2019 for allegations of rampant corruption in the Kaleshwaram Lift Irrigation Scheme (KLIS) in Telangana state. Branded as the “world’s largest lift irrigation project,” the project and MEIL are being investigated by the Comptroller and Auditor General for “gross irregularities.” Despite this, after buying electoral bonds, MEIL won several other contracts from both the state government and the central government, including a project for building electric buses for Telengana’s public transport system, which the company won by beating the Chinese EV maker BYD.
Another company in the top ten, the mining giant Vedanta Group, belonging to Anil Agarwal, spent a total of INR 376 crore (equivalent to US$44.98 million) on electoral bonds between April 2019 and November 2023, and in return received environmental concessions for its oil drilling projects in the state of Rajasthan. According to revelations by The News Minute, throughout the pandemic period Agarwal “ran a covert operation to weaken India’s environmental laws… The company’s oil business, Cairn India, lobbied to have public hearings scrapped for exploratory drilling in oil blocks it won in government auctions. Since then, six of Cairn’s controversial oil projects in Rajasthan have been approved despite local opposition.” Another mining giant, the Aditya Birla Group, resorted to similar tactics to get a pollution certificate for its controversial aluminum mining project in a protected forest area in Odisha state of eastern India.
Several other companies associated with mining, energy, telecom, and pharmaceuticals bought electoral bonds—and paid the ruling party—to receive lucrative government contracts or got legal norms discarded for their profits. The top 50 spenders received government contracts worth a total of INR 3.7 lakh crore (US$44.262 billion).
At a press conference on Friday, March 22, renowned advocate Prashant Bhushan, who was one of the litigants against electoral bonds in the Supreme Court case, revealed that the Modi government misused the investigative agencies to extort a total of INR 2,471 crores (US$295.6 million) from 41 companies for BJP. In addition, at least 30 fictitious companies bought electoral bonds worth INR 143 crore (US$17.11 million) that were largely encashed by the BJP.
Other indications of corruption
The top 50 spenders are overwhelmingly represented by the sectors most heavily plagued with corruption, such as mining, energy, telecommunications, real estate, and pharmaceuticals. Moreover, among the top 10 figures the empire of one of the richest families of India and the world, the Reliance Group of Mukesh Ambani, who is very close to the Modi government and the Indian prime minister Narendra Modi himself.
Another troubling feature of the electoral bonds scam is that 14 major pharmaceutical companies, including multinationals, spent the equivalent of over US$60 million on electoral bonds during the pandemic years. These include well-known names like Dr. Reddy’s Labs, Torrent Pharmaceuticals, Natco Pharma, Cipla, Hetero Pharma, etc. The Indian pharmaceutical industry has become largely privatized over the last three decades, and all these companies promote the deregulation of medicine prices in the country. Over the last few years, the government of India has eliminated price controls on most medicines in the market, including life-saving medicines. A popular saying describing the situation has emerged in India: there is only a medical bill between the middle class and poverty.
Everything indicates that the issue of electoral bonds was the reason why the government of India essentially privatized its response to the COVID-19 pandemic. Although there are 10 state-owned vaccine manufacturing plants in India that have been producing for decades the vaccines used in India’s mass vaccination programs (polio, hepatitis-B, BCG, DTaP, cholera), the government “outsourced” the production of COVID-19 vaccines to private corporations and then bought the vaccines from them. Even worse, private hospitals and clinics were allowed to buy up and hoard large stocks during the peak of the pandemic in 2021 which created an artificial shortage, and people were forced to get their vaccines from private vaccination centers and pay for the doses they received there. The company that earned the most in this way was the Serum Institute of India, which produced the vaccine Covishield. The company repaid its “gratitude” to the ruling party (BJP) by buying electoral bonds worth the equivalent of US$60.11 in three phases—on August 1, August 2, and August 17, 2022, and the bonds were encashed by BJP on August 18, 2022. Only this example can reveal the gravity and extent of corruption surrounding the electoral bond scheme.
Reviewing the political parties that received and encashed the bonds, and the amounts that they received, it becomes clear that in reality, the bonds were bribes for getting some sort of benefit in return. It was a sort of win-win plan for political parties and corporations and even money launderers, to the detriment of the national economy and the expansion of corruption in politics. Even the Supreme Court, in its landmark judgment, observed that there is “a legitimate possibility that financial contributions to a political party would lead to a quid pro quo arrangement because of the close nexus between money and politics.”
This seems to have been the case, given that the top five recipients of electoral bond “donations” were those political parties that hold governments at national or state levels (the only exception were the communist parties that, despite being in power in Kerala, opposed the scheme and did not open bank accounts to receive electoral bond money). Investigations by several independent media outlets have shown that BJP, the party that holds both the Indian government and some state governments, encashed the majority of the donations—amounting to INR 6,060.5 crore (US$726.45 million), which is about 93% of the total money donated this way. According to a report by The Wire, BJP received most of its bonds before the 2019 parliamentary elections. In the second spot is the Trinamool Congress (TMC), a regional party that holds the government of West Bengal, and its electoral bond incomes rose after the 2021 state legislative elections. It received a total of INR 1,609.5 crore (US$192.92 million) between April 2019 and January 2024. The main national opposition party Congress’ bond-related incomes rose after its victories in Himachal Pradesh and Karnataka legislative assemblies, then dropped after its 2023 losses. It figures at the third spot, with INR 1421.8 crore (US$170.43 million) in electoral bonds. The fourth and fifth places are claimed by two other regional parties, each of which has a presence in only one state (similar to TMC)—Bharat Rashtra Samithi (BRS) of Telangana and Biju Janata Dal (BJD) of Odisha. While BRS’ incomes from electoral bonds dried up after its loss in the Telangana assembly elections in November 2023, BJD’s incomes have continued to rise without showing any sign of deceleration.
While for many national analysts the TMC surpassing the Congress in bond incomes appeared shocking, for those who live in West Bengal or are aware of the state’s political situation, it did not come as a surprise. The notorious Future Gaming and Hotel Services Pvt Ltd, led by India’s “lottery king” Santiago Martin and already mentioned as the top spender countrywide, was TMC’s top donor: 40% of its electoral bond money went to TMC’s coffers. The company and the party developed a unique method to cover up the scam, which was simply that multiple TMC leaders and their family members claimed to have won the company’s Dear Lottery top prizes. It turns out that Martin gave more money to West Bengal’s ruling party than the Dravida Munnetra Kazhagam (DMK), the ruling party in Martin’s home state.
TMC’s next top donor was the energy conglomerate RP-Sanjiv Goenka Group, which emerged as the fourth largest spender nationwide, with INR 571 crore (US$68.46 million) spent on electoral bonds, 76% of which—amounting to INR 444 crore (US$53.23 million)—went to TMC. Over the last 10 years, the RPSG group, which owns and operates the electricity supplier Calcutta Electricity Supply Corporation (CESC), raised its electricity prices by 25% per unit, although during the same time the price of coal, which is the main fuel used in the thermal power stations in the state, dropped by 40%, and goods and services tax (GST) was also reduced by 7%. Therefore, the company has been acting as an intermediary to transfer the wealth of the people of the state to the state’s ruling party, while the state government loses by providing tax concessions to the same company.
Together, Future Gaming and RPSG were responsible for 59% of TMC’s income through electoral bonds.
Several fictitious companies also donated to TMC through electoral bonds. The relationship between the TMC at all levels and phantom companies that launder money has become an almost normalized feature in the political scenario of West Bengal. Therefore, it shocked no one when it was revealed that the highest number of phantom companies in the country are registered in Kolkata, the capital of West Bengal, or that there have been companies that bought electoral bonds worth over 300 times their annual incomes and paid those bonds to TMC. Some of these companies have donated to both TMC and BJP, two parties that claim to be opposed to each other (although their history says otherwise). Needless to say, this was a method of “legalizing” black money, the same black money that the Modi government claims to be combating.
Similarly, among the “high-risk” companies that donated money to political parties through electoral bonds, several are headquartered in West Bengal. In 2018, the Indian Finance Ministry’s Financial Intelligence Unit (FIU) deemed 9,491 companies as “high-risk non-banking financial institutions” for alleged money laundering. At least three such companies: Kamna Credits and Promoters Pvt Ltd, Innocent Merchandise Pvt Ltd, and ABC Financial Services Ltd are headquartered in Kolkata, and all donated money to TMC through electoral bonds. ABC’s case is even more striking: in SBI’s list of electoral bond buyers, there is a Kolkata-based company called ABC India Ltd. The Ministry of Corporate Affairs’ documents show that ABC Financial Services Ltd and ABC India Ltd have the same registered postal address in Kolkata and a common director. Therefore, the two companies are one and the same, though the question remains as to why it was registered under two names.
Nevertheless, neither the BJP nor the Modi government is innocent in this regard either. While several other high-risk companies donated electoral bonds to the BJP, the Indian government’s FIU removed from its high-risk list 18 out of 19 such companies that donated to the BJP.
Although considered by many analysts and politicians as the worst financial scandal in independent India, the Indian mainstream media is carrying out a coordinated blackout of the electoral bonds scandal. A possible reason could be that owners of several influential media firms bought large sums worth of electoral bonds too. A report by The Wire revealed that Qwik Supply Chain Private Limited, owning company of Reliance Industries’ Network18 Media & Investments (which has agreements with Viacom18 and The Walt Disney Corporation), spent INR 410 crore (US$49.16 million) to buy electoral bonds, all of which went to BJP’s coffers. Another Reliance associate, and director of several Reliance companies, Laxmidas Vallabhdas Merchant, bought electoral bonds worth INR 25 crore (US$3 million). Other hefty spenders in the media world include Sun TV Network and RPSG Group (owner of three digital media and some lifestyle magazines), in addition to some regional media outlets. Most of these media houses have an openly pro-BJP stand. According to The Wire report, “the pattern emerging, of big media owners, who are also big business, now also some of the largest donors of hefty amounts to political parties anonymously, takes the problems of [media] independence to another level.”
According to veteran journalist and economics analyst M.K. Venu, the revelation that BJP was the largest beneficiary of the electoral bond scheme has “blown giant holes in Modi’s anti-corruption plank. Prime Minister Narendra Modi’s big claim that no corruption charge has ever tarnished his government lies in tatters after the Supreme Court declared the electoral bonds scheme illegal and unconstitutional.”
However, the scandal has revealed much more than BJP’s lies. It has exposed the unholy nexus among unscrupulous political parties, corporations looking for exceptional profits, and mainstream media that claim to be the fourth pillar of democracy.