A five-judge Constitution Bench of the Supreme Court on Thursday unanimously struck down the Centre’s electoral bond scheme which facilitates anonymous political donations for being unconstitutional. It underscored that the scheme violates the right to information under Article 19(1)(a) of the Constitution.
Electoral bond case Supreme Court verdict live updates
While Chief Justice of India (CJI) D.Y. Chandrachud authored the lead verdict, Justice Sanjeev Khanna penned a concurring opinion to arrive at the same conclusions. The court also struck down the amendments made to the Income Tax Act and the Representation of People Act which enabled such anonymous political contributions.
The verdict is set to pave the way for increased transparency in political funding and facilitate a level-playing field for political parties in the run-up to the general elections this year. As reported by The Hindu earlier, the Bharatiya Janata Party (BJP) has received ₹1,294.14 crore through electoral bonds in 2022-23, which was nearly 54% of its total income during the year, and seven times higher than that of its main rival, the Congress party.
Also read | The legality of the electoral bonds scheme | Explained
Here are the key takeaways from the verdict.
Violation of the right to information under Article 19(1)(a) of the Constitution
The court held that the scheme by permitting anonymous political donations infringed upon the fundamental right to information under Article 19(1)(a) of the Constitution. It pointed out that such a right is not only restricted to fulfilling the freedom of speech and expression but plays a key role in furthering participatory democracy by holding the government accountable. Thus, it is not just a means to an end but an end in itself.
It highlighted that economic inequality leads to differing levels of political engagement because of the deep association between money and politics. As a result, there is a legitimate possibility that financial contribution to a political party would lead to quid pro quo arrangements.
The Chief Justice also rejected the argument of the Centre that due to the expressed anonymity of the bonds, political parties do not know the identity of the donors. He pointed out that such de jure anonymity of the contributors does not translate to de facto anonymity since there are sufficient gaps in the scheme to enable political parties to know the particulars of the contributions made to them.
Not proportionally justified to curb black money in electoral financing
On the government’s argument that the scheme curbs black money and its circulation, the court said that it does not justify the encroachment into fundamental rights. Relying on the proportionality test laid down in its 2017 verdict in the KS Puttaswamy case which upheld the right to privacy, it underscored that the government did not adopt the least restrictive method to achieve its objective. As examples of such least restrictive methods, the Chief Justice cited the ₹20,000 cap on anonymous donations and the concept of Electoral Trusts which facilitate the collection of political contributions from donors.
“There will be a lesser degree of “political consequences” for contributions made to the Electoral Trust because the information about which of the contributors contributed to which of the parties will not be disclosed”, he reasoned.
The court also agreed with the contentions of the petitioners that since the purpose of curbing black money cannot be traced to any of the reasonable restrictions elucidated under Article 19(2), it cannot be said to be a legitimate purpose for restricting the fundamental right to information.
Right to donor privacy does not extend to contributions made as a quid pro quo measure
During the proceedings, the government argued that information about financial contributions to political parties is not disclosed to protect the contributor’s informational privacy to political affiliation. Thus, the court had to consider whether the fundamental right to informational privacy as recognised in the Puttaswamy verdict, includes information about a citizen’s political affiliation. If that were the case — is a financial contribution to a political party an aspect of political information?
The Puttaswamy verdict categorically recognised that the freedom of political expression cannot be freely exercised without the privacy of political affiliation. For instance, information about a person’s political beliefs can be used by the State at a political level, to suppress dissent, and at a personal level, to discriminate by denying employment. Thus, such a lack of privacy could disproportionately affect those whose political views do not match the views of the mainstream.
In the context of exercising electoral franchise, political affiliation can be used to disenfranchise voters through voter surveillance — by identifying voting patterns based on the information collected. For instance, data on books, clothing brands used, and newspapers purchased by a voter could indicate their relative ideological leaning. Thus, the court acknowledged that the Constitution guarantees a right to informational privacy of political affiliation.
The court then proceeded to point out that financial contributions to political parties are usually made for two reasons — as an expression of support and two, as a quid pro quo measure. However, it underscored that huge political contributions made by corporations and companies should not be treated at par with financial contributions made by another section of the population: a student, a daily wage worker, an artist, or a teacher.
Thus, the Chief Justice held that the right to privacy of political affiliation does not extend to those contributions, which may be made to influence policies. It only extends to contributions made as a genuine form of political support.
Unlimited corporate donations violate free and fair elections
The court found that the amendment made to Section 182 of the Companies Act, 2013, permitting unlimited political contributions by companies, to be manifestly arbitrary. The provision allows Indian companies to make financial contributions to political parties under specific conditions. However, through the Finance Act, 2017, crucial changes were introduced including the removal of the prior cap on the amount that companies can donate to political parties — 7.5 per cent of the average profits of the preceding three fiscal years. Additionally, the requirement for companies to disclose the names of the political parties to which contributions were made in their Profit and Loss (P&L) accounts was also eliminated.
The Chief Justice highlighted that Section 182 errs by treating political contributions by individuals at par with those made by companies as the latter is often made with the intent of securing benefits in return.
“The ability of a company to influence the electoral process through political contributions is much higher when compared to that of an individual. A company has a much graver influence in the political process, both in terms of the quantum of money contributed to political parties and the purpose of making such contributions. Contributions made by individuals have a degree of support or affiliation to a political association. However, contributions made by companies are purely business transactions made with the intent of securing benefits in return. The amendment to Section 182 is manifestly arbitrary for treating political contributions by companies and individuals alike”, the lead verdict asserted.
It was also opined that such an amendment authorises unrestrained influence of companies in the electoral process thereby violating the principles of free and fair elections.
Directions issued
i. The SBI has been ordered to immediately stop the issuance of any further electoral bonds and furnish details of such bonds purchased by political parties since April 12, 2019, to the ECI by March 6. Such details must include the date of purchase of each bond, the name of the purchaser of the bond and the denomination of the bond purchased.
ii. The ECI shall subsequently publish all such information shared by the SBI on its official website by 13 March 2024
iii. Electoral bonds that are within the validity period of fifteen days but have not yet been encashed by the political party will have to be returned following which the issuing bank will refund the amount to the purchaser’s account.
