The Supreme Court Judgement

Scrapping Electoral Bonds Scheme

I Mallikarjuna Sharma

During the first phase ofthe current Bharatiya Janata Party (BJP) central government itself the Electoral Bonds scheme permitting funding of political parties by anonymous donors was introduced, mainly at the initiative of the then Finance Minister, late ArunJaitley, which resulted in almost unlimited and anonymous corporate funding of political parties, the maximum benefit going to the ruling party, BJP. Congress also got some hundreds of crores rupees through electoral bonds. On 15 February 2024, The Supreme Court struck down the electoral bonds scheme as unconstitutional and invalid and gave several directions in this regard.

 The Court identified the issues involved as follows: a.) Whether unlimited corporate funding to political parties, as envisaged by the amendment to Section 182(1) of the Companies Act infringes the principle of free and fair elections and violates Article 14 of the Constitution; and b.) Whether the non-disclosure of information on voluntary contributions to political parties under the Electoral Bond Scheme and the amendments to Section 29C of the RPA, Section 182(3) of the Companies Act and Section 13A(b) of the IT Act are violative of the right to information of citizens under Article 19(1)(a) of the Constitution.

Mr. Prashant Bhushan, senior counsel, argued on behalf of the petitioners. So did Sri Kapil Sibal, Senior Counsel, Mr. Vijay Hansaria, Mr. Sanjay Hegde, Senior counsels and yet other counsels on similar lines. Attorney General of India and Solicitor General of India argued supporting the electoral bonds scheme and underscoring that it was in effect curbing black money transactions in elections processes.

The Court felt that the challenge to the statutory amendments and the Electoral Bond Scheme cannot be adjudicated in isolation without a reference to the actual impact of money on electoral politics. And also that right to information of voters is crucial element in maintaining and promoting democratic elections process in the country. Case law relating both was extensively discussed. The court stated that Electoral democracy in India is premised on the principle of political equality which the Constitution guarantees in two ways. First, by guaranteeing the principle of “one person one vote” which assures equal representation in voting. Second, the Constitution ensures that socio-economic inequality does not perpetuate political inequality by mandating reservation of seats for Scheduled Castes and Scheduled Tribes in Parliament and State Assemblies. The Constitution guarantees political equality by focusing on the ‘elector’ and the ‘elected’. The Court came to the opinion that that the information about funding to a political party is essential for a voter to exercise their freedom to vote in an effective manner. The Electoral Bond Scheme and the impugned provisions to the extent that they infringe upon the right to information of the voter by anonymising contributions through electoral bonds are violative of Article 19(1)(a).

The Court also proceeded to determine whether the infringement of the right to information of the voters is justified vis-à-vis the purposes of (a) curbing black money; and (b) protecting donor privacy. Court came to the conclusion that Electoral Bond Scheme is not the only means for curbing black money in Electoral Finance. There are other alternatives which substantially fulfil the purpose and impact the right to information minimally when compared to the impact of electoral bonds on the right to information.

On donor privacy the Court came to the conclusive opinion that - The Union of India has been unable to establish that the measure employed in Clause 7(4) of the Electoral Bond Scheme is the least restrictive means to balance the rights of informational privacy to political contributions and the right to information of political contributions. Thus, the amendment to Section 13A (b) of the IT Act introduced by the Finance Act 2017, and the amendment to Section 29C(1) of the RPA are unconstitutional. The question is whether this Court should only strike down the non-disclosure provision in the Electoral Bond Scheme which is Clause 7(4). However, the anonymity of the contributor is intrinsic to the Electoral Bond Scheme. The Electoral Bond is not distinguishable from other modes of contributions through the banking channels such as cheque transfer, transfer through the Electronic Clearing System or direct debit if the anonymity component of the Scheme is struck down. Thus, the Electoral Bond Scheme 2018 will also consequentially have to be struck down as unconstitutional.

The Court also did not see the necessity of viewing the non-disclosure requirement in Section 182(3) of the Companies Act from the lens of a shareholder in this case when we have identified the impact of non-disclosure of information on political funding from the larger compass of a citizen and a voter. In view of the above discussion, Section 182(3) as amended by the Finance Act 2017 is declared unconstitutional.

The Court expressed the opinion that companies and individuals cannot be equated for the purpose of political contributions. The Court came to the following conclusions:

1. The Electoral Bond Scheme, the proviso to Section 29C (1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional; and b. The deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14.

2. The Court directed the disclosure of information on contributions received by political parties under the Electoral Bond Scheme to give logical and complete effect to its ruling. The Court made it clear that in its interim order dated 12 April 2019 itself, it directed that the information of donations received and donations which will be received must be submitted by political parties to the ECI in a sealed cover; that political parties submit detailed particulars of the donors as against each Bond, the amount of each bond and the full particulars of the credit received against each bond, namely, the particulars of the bank account to which the amount has been credited and the date on which each such credit was made. The Court observed that pursuant to that interim direction, the ECI must have collected particulars of contributions made to political parties through Electoral Bonds.

The Court issued the following directions consequent upon its final opinions: a.) The issuing bank shall herewith stop the issuance of Electoral Bonds; b.) SBI shall submit details of the Electoral Bonds purchased since the interim order of this Court dated 12 April 2019 till date to the ECI. The details shall include the date of purchase of each Electoral Bond, the name of the purchaser of the bond and the denomination of the Electoral Bond purchased; c.) SBI shall submit the details of political parties which have received contributions through Electoral Bonds since the interim order of this Court dated 12 April 2019 till date to the ECI. SBI must disclose details of each Electoral Bond encashed by political parties which shall include the date of encashment and the denomination of the Electoral Bond; d.) SBI shall submit the above information to the ECI within three weeks from the date of this judgment, that is, by 6 March 2024; e.) The ECI shall publish the information shared by the SBI on its official website within one week of the receipt of the information, that is, by 13 March 2024; and f.) Electoral Bonds which are within the validity period of fifteen days but that which have not been encashed by the political party yet shall be returned by the political party or the purchaser depending on who is in possession of the bond to the issuing bank. The issuing bank, upon the return of the valid bond, shall refund the amount to the purchaser’s account.

Sri Sanjiv Khanna, J. delivered a separate concurrent opinion agreeing with the opinions and conclusions of the Court Opinion delivered by Sri Chandrachud, CJI, but at the same time clarified that he arrived at the same by a different reasoning including application of the doctrine of proportionality and hence penned down a separate opinion. He extracted a table of donations received by various political parties in India as given in the petitioner’s averments wherein it was stated that BJP got the lion’s share of such donations through electoral bonds.

In general, the decision is welcome but the question how far corporations should be allowed to contribute to political parties and how much in the maximum they can contribute, seems not definitely decided. 

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Vol 56, No. 36, Mar 3 - 9, 2024