Jaipur Dialogues Understanding the Supreme Court’s Verdict on Electoral Bonds

[Apoorva Devanshi]

The Supreme Court of India ruled in a landmark decision that the electoral bonds scheme violates Article 19(1)(a) of the Constitution and is unconstitutional. The court has struck down the amendments made to the Companies Act, the Income Tax Act, and the RPA. The issuing bank, SBI, has been instructed by the Bench to cease issuing electoral bonds. Additionally, SBI must provide the Election Commission of India (ECI) with the specifics of the electoral bonds purchase.

About Electoral Bonds-​

Electoral bonds are interest free bearer instruments. They were first announced on January 29, 2018, as a part of the finance bill 2017. They enables people to make anonymous contributions to political parties. Under the scheme, any person or organization can buy electoral bonds from SBI in denominations ranging from Rs 1,000 to Rs 1 crore. They can then donate to any officially registered political party. These bonds hold a 15-day validity period from the issue date, and they keep the donor’s name private. To receive the electoral bonds, political parties must establish a specific account that the ECI checks. Only the parties that received at least 1% of the total votes cast in the most recent general election of Lok Sabha or state legislative assemblies are eligible to receive electoral bonds.

Supreme Court’s Verdict Explained-​

Right To Information-​

• The Communist Party of India (Marxist), Common Cause, and the Association for Democratic Reforms filed the petition, claiming that the scheme violates Article 19(1)(a) of the Constitution.
• The Supreme Court held that the voters have right to know about the political parties and their funding sources. It highlighted that there exists a deep association between money and politics. Those who can afford to donate more to political parties can use money to influence favorable policies or arrange mutually beneficial agreements. It said that economic inequality leads to political inequality. Hence, voters have the right to know about the information on the funding of political parties.

Does “Curbing Black Money” Comes Under Reasonable Restrictions Under Article 19(2)? –​

• Solicitor General Tushar Mehta had contended that electoral bonds would replace cash donations and thus reduce the influence of black money in politics. The central government contended that by safeguarding donors’ confidentiality, there would also be a significant decrease in political retribution.
  

  According to Mehta, citizens’ rights to information are balanced by requiring political parties to still disclose the total amount of money they receive from electoral bonds.

• The Supreme Court held that the right to information in case of electoral bond scheme fails the test of Proportionality. This test was laid down by the KS Puttaswamy case verdict over right to privacy. It held that violating someone’s right to information for curbing black money is not proportionally justified. Hence, curbing black money does not fall under reasonable restrictions of Article 19 (2).

Right To Donor Privacy-​

• Mehta had contended that the scheme protects the right of privacy of the donors. He said that a citizen’s right to privacy includes their political affiliation and that an important aspect of this right is their ability to buy electoral bonds without having to reveal their identity. In response, Senior Advocate Kapil Sibal refuted this claim on behalf of the petitioners. He argued that public policy is influenced by political funding and therefore needs to be open to public review.
• The Supreme Court ruled that donations intended to sway a political party’s policies are not covered by the right to privacy of political advertisement; rather, contributions made as sincere expressions of public support are. Thus, public interest in free and fair elections must outweigh the private interest of privacy. Given that complete anonymity is fundamental to the EBS, the court decided to invalidate the entire scheme.

Constitutionality of Unlimited Political Contributions-​

• The court made a clear distinction between individual and corporate contributions. It said that corporate contributions were just business deals done with the hope of getting something in return. It also highlighted that corporations can exert more influence over politics through contributions, saying that “allowing corporations to make unlimited contributions authorises corporations to have unrestricted influence over the electoral process.” This would be against the right to free and fair elections, the court ruled.
• The Supreme Court stated that the absence of the cap on contributions would incentivise even loss-making businesses to contribute, as they hope to make deals with the government. Consequently, it upheld the original version of Section 182 of the Companies Act and restored the upper limit on corporate political contributions.

Implications-​

• This verdict shall facilitate transparency and accountability in political funding. The public will have access to information about the source and quantity of funding received by political parties through electoral bonds. This will make political parties more transparent and allow the public to examine their actions and behavior.
• It will reduce the influence of money and corporate power in politics- The ruling will prevent donors from using anonymity to conceal their identities and political agendas. It will prevent the political parties from being influenced by the donor’s vested interests. Thus enabling them to more likely to represent the interests of the general public.
• All political parties will now receive equal treatment, as they will not face discrimination based on factors such as popularity or vote share. It will provide level playing field to all political parties.

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