The Supreme Court has struck down the Narendra Modi government’s electoral bonds scheme as “unconstitutional” in two separate judgments. It has asked the State Bank of India to submit the details of these bonds to the Election Commission of India which should publish it on its website by March 31.
A five-judge Constitution bench, led by Chief Justice DY Chandrachud, and including Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra, reserved its verdict in a set of petitions challenging the validity of the scheme on November 2 last year.
Electoral bonds, introduced controversially by former finance minister Arun Jaitley in the financial year 2017-18, have been criticised for reducing transparency of political funding in India. These bonds serve as a financial instrument allowing individuals and businesses to contribute funds to political parties discreetly, without revealing their identities. Any citizen of India or entity incorporated or established in the country can purchase electoral bonds, which are available in various denominations, ranging from Rs 1,000 to Rs 1 crore, and can be obtained at all branches of the State Bank of India. These donations are interest-free.
What did the court say?
Quid pro quo
The Supreme Court said that financial support to political parties can lead to quid pro quo.
This is in line with the court’s first observations when it began hearing the challenge. It suggested a situation with influential entities covertly setting up persons with verified accounts to purchase electoral bonds for them through the regular banking route in order to get favour or anonymously enter into a quid pro quo with ruling political parties.
“Suppose ‘A’, a person, purchases electoral bonds worth Rs 100 crore. ‘A’ is only put up by ‘B’ for the purchase as he has a [verified or know-your-customer] KYC account. It is ‘B’ who actually gives the donation to the political party… ‘B’ can also be an aggregator of electoral bonds by having a 100 people buy bonds worth Rs 1 crore each,” CJI Chandrachud had observed last year.
The right to information
The court noted that anonymous electoral bonds are violative of the right to information and Article 19(1)(a). It asked the State Bank of India to furnish to the Election Commission of India, the details of donations through electoral bonds and the details of the political parties which received the contributions.
The petitioners had argued that the scheme defeats the citizen’s right to be informed about the sources of funding of political parties which is a fundamental right under Article 19(1)(a) of the Constitution. Appearing for the petitioners, senior advocate Prashant Bhushan had said that the “opaque” and “anonymous instrument” promotes corruption.
However, Attorney General R Venkataramani argued that Article 19(1)(a) does not guarantee citizens an absolute right to information regarding the source of funds used for political party funding through electoral bonds. He said that the scheme promotes transparency and clean money in elections.
Proportionality
“Constitution does not turn a blind eye only because there is a possibility of misuse. We have use the double proportionality standard. Clause 7(4) of the scheme tilts the balance is favour of informational privacy because it grants anonymity to the contributors but there is no nexus to balancing measures adopted.”
The CJI held that there are other means apart from electoral bonds to tackle black money and the restrictive means test is not satisfied. He said a double proportionality standard was applied to balance the conflicting rights to information and to informational privacy. It rejected the government’s argument that the scheme balances the two rights.
Amendments struck down
The amendments to Section 13A of the Income Tax Act, which exempted political parties from keeping a detailed record of contributions received through bonds, were struck down by the court.
The court has also declared arbitrary the change to Section 29C of Representation of People Act, exempting political outfits from publishing contributions received through electoral bonds.
The CJI also found the amendment to Section 182 of the Companies Act, 2013 manifestly arbitrary. This change had removed the ceiling on company donations, and the court noted that this treated corporate houses and individual voters alike, violating the principle of ‘one person, one vote’.
Two verdicts
Justice Khanna penned a concurring opinion with a different reasoning while the CJI delivered the lead judgement on behalf of the rest of the bench. Both the judgements focused on the questions of whether non-disclosure of information and unlimited corporate funding were constitutional.
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