Supreme Court strikes down electoral bonds as illegal, says infringement on RTI, leads to quid pro quo

NEW DELHI: The Supreme Court of India, in a landmark judgment on Thursday, declared the electoral bonds scheme unconstitutional. The court found that the scheme violated the right to information under Article 19(1)(a) of the Constitution, which guarantees the right to freedom of speech and expression, and declared amendments to the Income Tax Act, Representation of Peoples Act, and Companies Act as unconstitutional.

The eagerly awaited judgment came after a three-day hearing before a constitution bench comprising Chief Justice DY Chandrachud and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra. The court had reserved its verdict in November after hearing a batch of cases challenging the electoral bonds scheme.

Chief Justice Chandrachud emphasised the importance of information about political party funding in ensuring the effective exercise of voting rights. The court found that the electoral bonds scheme, which anonymised contributions, infringed upon the right to information guaranteed by Article 19(1)(a). The judges unanimously concluded that the restrictive means employed by the scheme did not meet the doctrine of proportionality, and alternative methods could achieve the legitimate objective of curbing black money without compromising the right to information.

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The Supreme Court observed, "At a primary level, political contributions give a seat at the table to contributors, i.e., it enhances access to legislators. This access also translates to influence over policymaking. There is also a legitimate possibility that financial contributions to a political party would lead to quid pro quo arrangement because of the close nexus between money and politics. 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 Supreme Court also issued specific directives to address the implications of its ruling. The State Bank of India (SBI), the issuing bank of electoral bonds, was ordered to cease the issuance of electoral bonds immediately. Furthermore, the SBI is required to submit comprehensive details of electoral bonds purchased and encashed since April 12, 2019, to the Election Commission of India (ECI). This information, including the date of purchase, name of the purchaser, and denomination of the electoral bond, is to be published on the ECI's website by March 13, 2024. Electoral bonds within their validity period, yet unencashed by political parties, are mandated to be returned to the purchasers, with the issuing bank refunding the amount.

The court's ruling extended beyond the electoral bonds scheme to address concerns related to Section 182 of the Companies Act. The court observed that the amendment allowing unlimited political contributions by companies was manifestly arbitrary for various reasons. It emphasised the disproportionate influence of companies in the electoral process compared to individuals, the failure to differentiate between profit-making and loss-making companies, and the authorisation of unrestrained corporate influence in elections. The court held this amendment as unconstitutional, stating that it contradicted the principles of free and fair elections and political equality.

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Chief Justice Chandrachud observed, "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 electoral bonds case was brought before the court by petitioners such as the Association for Democratic Reforms (ADR), the Communist Party of India (Marxist), and Congress leader Jaya Thakur. The petitioners argued that the anonymity of the electoral bonds undermined transparency in political funding and compromised the right to information. The government, in defense of the scheme, cited its role in promoting legitimate funds in political financing and ensuring regulated transactions.

Senior Advocate Kapil Sibal, Advocate Prashant Bhushan, Advocate Shadan Farasat, Advocate Nizam Pasha, Senior Advocate Vijay Hansaria appeared for the petitioners.

Attorney General for India R Venkataramani and Solicitor General of India Tushar Mehta appeared for the Union.