Background Of The Case

1. The constitutional validity of the Electoral Bond Scheme introduced through the Finance Act, 2017 was challenged before the Supreme Court of India. This scheme was introduced by the late former Finance Minister Shri Arun Jaitley Ji during the 2017 budget session, aiming to ‘cleanse the system of political funding in the country’, enhance transparency in political donations and to save the identity of the person funding for the election purposes.
2. The scheme was officially launched on 02nd January, 2018, following amendments to four key legislations through the Finance Acts 2017^[1]. The scheme made a shift from the norm and exempted political parties from keeping a detailed record of contributions received through electoral bonds.^[2] Furthermore, the scheme:

1. eliminated the previously existing cap on corporate donations, which were limited to 5 percent of a firm’s average net profits over the preceding three years;
2. relinquished the requirement for companies to disclose the particulars of their political contributions. Instead of providing a detailed breakdown of political donations in their annual statement of accounts, firms would now only need to reveal an aggregate figure;
3. Imposed no limit on the purchase of electoral bonds.
   2017. The electoral bond scheme was challenged before the Supreme Court of India in 2017. The petitioners included Congress leader Dr. Jaya Thakur, the Communist Party of India (Marxist), and the NGO Association for Democratic Reforms (ADR). They alleged that the scheme opens the “floodgates” to anonymous political donations thereby infringing upon the voters’ right to information. Their contention was primarily based upon the following two grounds:
4. The legalisation of anonymous donations to political parties and potential encroachment on citizens’ RTI regarding the funding of political parties.
5. The provision that allows unlimited corporate donations as a violation of free and fair elections.

Timeline

Table 1: Timeline of the Electoral Bond Scheme

Ratio Delivered By The Supreme Court

D.   Issue 1: Whether amendments related to Electoral Bonds Scheme were violative of right to information under Article 19(1)(a)?

1. The Court held that the amendments related to Electoral Bonds Scheme vide Finance Act, 2017 were violative of right to information under Article 19(1)(a).
2. The court stated that it deemed anonymous electoral bonds to infringe upon the right to information and Article 19(1)(a) of the Constitution. It underscored the importance of political parties in the electoral process and stressed that information regarding their funding is crucial for shaping electoral decisions. The court acknowledged that economic disparities impact levels of political involvement and highlighted the vital role of access to information in influencing policy making. Additionally, it mentioned that unrestricted access to information not only aids in shaping policies but also acts as a deterrent against potential exchanges of favours. The court recognized that such exchanges may benefit the ruling party and stressed the importance of transparency in upholding the integrity of the electoral process.
3. The Chief Justice of India (CJI) remarked that the electoral bonds scheme is not the exclusive or proportionally justified method for curbing black money. The court opined that the least restrictive means test was not satisfied, asserting that alternative methods, such as contributions through electronic transfer and electoral trusts, could achieve the same purpose. The CJI highlighted that curbing black money alone is not a sufficient ground to justify the existence of the electoral bonds scheme.
4. Expanding on the fundamental right to privacy, the CJI emphasised that it encompasses a citizen’s right to political privacy and affiliation. The court recognized that disclosing information about a citizen’s political affiliation could subject them to restrictions or online harassment, potentially leading to voter surveillance and disenfranchisement. The CJI noted that factors like book purchase history and ideological leanings could be used to gauge political affiliations.
5. Addressing financial contributions to political parties, the CJI acknowledged that such contributions are often made to express support or for quid pro quo. While the law permits political contributions by corporations and individuals, the CJI emphasised the duty of the constitution to protect such contributions, even if they are in support of non-major parties.
6. The court applied a double proportionality standard and criticised Clause 7(4) of the scheme for granting anonymity to contributors without establishing a nexus to balancing measures. The exemption of Electoral Bonds contributions from disclosure requirements was deemed insufficient for achieving transparency in political funding. The CJI pointed out that contributions beyond ₹20,000 could also signify support rather than quid pro quo.
7. Ultimately, the court declared the electoral bonds scheme unconstitutional, striking it down. The amendments to Section 29(1)(c) of the Representation of the People Act, 1951^[3] and the IT Act was also deemed unconstitutional. The court concluded that the amendment to Section 182(3) of the Companies Act becomes unnecessary after holding the electoral bonds scheme, IT Act amendments, and RP Amendment as unconstitutional.

E.    Issue 2: Whether unlimited corporate funding violates principles of free and fair elections?

1. The Court held that the unlimited corporate funding introduced through amendments to Companies Act, 2013 violates principles of free and fair elections.
2. The court has declared that the amendment to the Companies Act, 2013 permitting unrestricted corporate political funding, is unconstitutional. CJI Chandrachud emphasised that this amendment, specifically Amendment to Section 182 of the Companies Act, 2013 becomes redundant in light of the court’s determination that the electoral bonds scheme is unconstitutional.
3. The CJI highlighted the potentially significant impact of corporate contributions on the political process, asserting that companies wield a more substantial influence than individual contributions. Describing corporate contributions as purely business transactions, the court deemed the Amendment to Section 182 of the Companies Act, 2013^[4] as manifestly arbitrary for treating companies and individuals on equal footing.

The Judgement Of The Court

1. The court declared that the Electoral Bonds Scheme, along with the amendments to Section 29C of Representation of the People Act, Section 183(3) of the Companies Act, Section 13A(b) of the Income Tax Act were found to beviolative of the right to information under Article 19(1)(a) of the Constitution.
2. As a consequence, it was directed that the issuing bank should cease the issuance of electoral bonds.
3. The State Bank of India (SBI) was instructed to provide detailed information regarding political parties that had received electoral bonds, including all relevant particulars. This information was required to be submitted to the Election Commission of India (ECI) by March 6, 2024. The details encompassed bond purchase information, such as the date of purchase, the name of the purchaser, and the denomination.
4. Additionally, SBI was mandated to furnish details of parties that received contributions through Electoral Bonds, disclosing specifics for each bond that had been encashed.
5. It was also instructed that Electoral Bonds which were not cashed by political parties should be returned and refunded to the buyers, thus completing this aspect of the electoral funding system.

Impact Of The Judgement

^[1]The Finance Act, 2017 amended a proviso to Section 29C of the Representation of the People Act, 1951 (RoPA), Section 31 of the Reserve Bank of India Act, 1934, Section 13A of the Income Tax Act, 1961, and Section 182 of the Companies Act, 2013.

^[2] Section 13A of the Income Tax Act

^[3] Representation Of The Peoples Act, 1951

^[4] Section 182 Of The Companies Act, 201

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