Supreme Court: In a petition challenging the constitutional validity of the Electoral Bond Scheme which introduced anonymous financial contributions to political parties , the 5-Judge Constitution Bench of Dr. DY Chandrachud*, CJ., Sanjiv Khanna**, BR Gavai, JB Pardiwala, Manoj Misra, JJ. arrived at a unanimous verdict, giving two opinions, one authored by Dr. Justice DY Chandrachud for Justice Gavai, Justice Pardiwala and Justice Misra, and other by Justice Sanjiv Khanna arrived at same conclusion, with slight variance in the reasoning, and held that anonymous electoral bonds are violative of the right to information under Article 19(1)(a) of the Constitution. Thus, the electoral bonds scheme has been struck down for being unconstitutional.
The petitioners instituted proceedings under Article 32 seeking a declaration that Electoral Bond Scheme and the following provisions be declared unconstitutional:
a. Section 135 of the Finance Act 2017 and the corresponding amendment in Section 31 of the RBI Act;
b. Section 137 of the Finance Act 2017 and the corresponding amendment in Section 29C of the RP Act;
c. Section 11 of the Finance Act 2017 and the corresponding amendment in Section 13A of the IT Act; and
d. Section 154 of the Finance Act 2017 and the corresponding amendment to Section 182 of the Companies Act.
The petitioners have also challenged the introduction of the Finance Act as a Money Bill under Article 110 of the Constitution
Issues:
Whether the non-disclosure of information on voluntary contributions to political parties according to the electoral bond scheme and the amendments to Section 29-C of the Representation of Peoples Act, 1951, Section 182(3) of the Companies Act, 2013, Section 13-A(b) of the Income Tax Act, 1961 is violative of the right to information guaranteed in Article 19(1)(a) in the Constitution.
Whether unlimited corporate funding of the political parties as envisaged by the amendment to Section 182(1) of the Companies Act violates the principles of free and fair election under Article 14 of the Constitution.
Analysis:
Concerning the issue that whether the Right to Information (‘RTI’) guaranteed by Article 19 (1) (a) includes the information relating to financial contributions made to the political parties, the Court classified the jurisprudence of this Court on the right to information into two phases. The Court said that the RTI is not restricted to information about state affairs, that is public information, it includes information which could be necessary to further participatory democracy in other forms. Political parties are a relevant political unit in the electoral process evident from the provision of tenth schedule of Constitution. Information about the funding by the political parties is essential for the effective exercise of the choice of voting. One factor contributing to political inability is the ability of the person to make political decisions.
The Court said that the Constitution guarantees political equality by focusing on the ‘elector’ and the ‘elected. However, political inequality continues to persist in spite of the constitutional guarantees. One of the factors which contributes to the inequality is the difference in the ability of persons to influence political decisions because of economic inequality. Thus, considering the nexus between economic inequality and political inequality, and the legal regime in India regulating party financing that the essentiality of the information on political financing for an informed voter must be analyzed.
It added that it is a legitimate possibility that financial contribution to a political party will lead to a quid pro quo arrangement because of the close nexus between money and political in the form of a introducing a policy change or granting a license to the person making financial contribution to the political party in power. Information about political funding would enable a voter to assess if there is a correlation between policy making and financial contributions.
The Union of India (‘UOI’) submitted that the political party which receives the contribution does not know of identity of the contributor because neither the bond would have their name nor could the bank discloses such details to the political party. The Court while rejecting this submission, said that the Scheme is not fool-proof. There are sufficient gaps in the Scheme which enable political parties to know the particulars of the contributions made to them
The Court opined that the information about funding to a political party is essential for a voter to exercise their freedom to vote in an effective manner. Thus, it held that the electoral bond scheme and the impugned provisions to the extent that they infringe upon the right to information the voter by anonymising contributions through electoral bond are violative of Article 19(1)(a) of the Constitution. Applying the proportionality standard to determine if the infringement of the right to information is justified. Concerning the issue that whether the infringement of the right information of the voter is justified in curbing the black money in electoral process, the Court took note of the proportionality standard to determine if the violation of the fundamental right is justified.
The Court took note of the objective of introducing the Electoral Bond Scheme to analyse if the objective of introducing the law is a legitimate purpose for the infringement of rights.
It notedthat RTI under Article 19 (1) (a) can only be restricted by Article 19 (2), and said that the purpose of curbing black money is traceable to public interest. However, public interest is not one of the grounds stipulated in Article 19(2).
The Court noted that the UOI urged that non-disclosure of information of political expenditure has a rational nexus with the goal of curbing black money.
The Court said that the legal regime itself provides other alternatives to curb black money, like contributions through cheques, bank draft, or electronic clearing system. The Court also added that Electoral Trusts is another means through which the objective of curbing black money in electoral financing can be achieved. Further, it said that electoral bonds would be the most effective means in curbing black money, followed by Electoral Trust, and then other means of electronic transfer, provided it curbs black money. However, the Scheme is not fool proof. The Electoral Bond Scheme does not provide any regulatory check to prevent the trading of bonds though Clause 14 of the Electoral Bond Scheme states that the bonds shall not be eligible for trading.
Thus, the Court held that the Electoral Bond Scheme does not fulfill the least restrictive means test. The Scheme is not the only means for curbing black money in Electoral Finance. There are other alternatives which substantially fulfill the purpose and impact the right to information minimally when compared to the impact of electoral bonds on the right to information.
The Court remarked that the lack of privacy of political affiliation would also disproportionately affect those whose political views do not match the mainstream. In the specific context of exercising electoral franchise, the lack of privacy of political affiliation would be catastrophic.
It also added that when law permits political contributions, and such contributions could be made as an expression of political support which would indicate political affiliation of the person, it is the duty of the constitution to protect them. Not all political contributions are made to alter public policy.
The Bench also stated that the Constitution does not turn a blind eye merely because of the possibilities of misuse. Thus, the Right of Informational privacy extends to financial contributions of political parties which is a facet of political affiliations. The Court has applied the double proportionality standard to balance the conflicting rights of right to information and the right to informational privacy.
Further, while rejecting the UOI’s argument that Clause 7(4)(c) of the scheme balances the two rights, the Court said that the provision tilts the balance in favour of the right to informational privacy because the suitability prong of the proportionality standard is only partly fulfilled. Thus, the Union government has failed to establish that the measure adopted in clause 7(4)(1) of the electoral scheme is the least restrictive measure.
Accordingly, the amendments to the Income Tax Act, the Representation of Peoples Act, and the Companies Act have been held to be unconstitutional.
The Court gave the following directions:
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The issuing bank was directed immediately stop the issuance of Electoral Bonds;
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SBI was directed to submit details of the Electoral Bonds including the date of purchase of each electoral bond, the name of the purchaser of the bond and the denomination of the electoral bond, purchased since the interim order of this Court dated 12-04-2019 till date to the ECI.
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SBI was directed to submit the details of political parties which have received contributions through Electoral Bonds since the interim order of this Court dated 12 —04-2019 till date to the ECI. Further, it 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.
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SBI was directed to submit the above information to the ECI within three weeks from the date of this judgment, that is, by 6 —03-2024
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The ECI was directed to publish the information shared by the SBI on its official website within one week of the receipt of the information, that is, by 13 —03- 2024.
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Electoral Bonds which are within the validity period of fifteen days but that which have not been encashed by the political party yet, were directed to 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, were directed to refund the amount to the purchaser’s account.
Also read:
Supreme Court refers 2018 Electoral Bonds Scheme Case to 5-judge Constitution Bench
[Association for Democratic Reforms v Union of India, Writ Petition (C) No. 880 of 2017, decided on 15-02-2024]
*Judgment Authored by: Chief Justice of India Dr. DY Chandrachud
** Concurring opinion by: Justice Sanjiv Khanna
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