Writ Petition (C) No. 880 of 2017 

             Association for Democratic Reforms & Anr.                  …Petitioner

         Versus

        Union of India & Ors.                                      …Respondents

Date of judgement:- 15^th february, 2024  

Presiding judges:- 

1. DY Chandrachud CJ.,
2. Sanjiv Khanna
3. BR Gavai,
4. JB Pardiwala,
5. Manoj Misra, JJ…

Case Summary:-

The Supreme Court, in a landmark ruling, struck down the Electoral Bond Scheme as unconstitutional, holding that anonymous political donations violate the right to information under Article 19(1)(a) of the Constitution. A 5-judge Constitution Bench, led by Chief Justice Dr. D.Y. Chandrachud, delivered a unanimous verdict with two concurring opinions. The Court ruled that transparency in political funding is crucial for an informed electorate and that the scheme’s anonymity undermines democratic principles by enabling quid pro quo arrangements.

The petitioners challenged the scheme’s validity under Article 32, contesting amendments made through the Finance Act, 2017, and its classification as a Money Bill. The Court analyzed the right to information jurisprudence, emphasizing the link between economic and political inequality. It found that financial contributions to political parties significantly impact voters’ decision-making and that anonymity in funding hinders public scrutiny of potential policy influences.

Rejecting the government’s argument that the scheme prevents black money in elections, the Court noted that alternative legal mechanisms, such as electronic transfers and Electoral Trusts, provide better transparency. Applying the proportionality test, it ruled that the scheme is not the least restrictive measure for achieving the stated objective.

Consequently, the Court directed the immediate cessation of electoral bond issuance, mandated the State Bank of India (SBI) to disclose details of past bond transactions to the Election Commission of India (ECI), and instructed the ECI to publish this data on its website. Bonds still within their validity period were ordered to be returned and refunded.

Issues in the case:-

1. 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.
2. 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.

Case Analysis:-

The Supreme Court examined whether the Right to Information (RTI) under Article 19(1)(a) of the Constitution includes access to details about financial contributions made to political parties. In doing so, the Court divided its jurisprudence on RTI into two phases. It emphasized that the RTI is not confined solely to government-related matters or public affairs but extends to information that is crucial for strengthening participatory democracy. Given that political parties play a vital role in the electoral process, as recognized in the Tenth Schedule of the Constitution, transparency regarding their funding is essential for voters to make informed choices.

The Court acknowledged that political equality is a fundamental constitutional principle, ensuring that both the electorate and elected representatives are treated fairly. However, despite constitutional guarantees, political inequality persists, largely due to economic disparities. Those with greater financial resources often have a disproportionate influence over political decisions, thereby undermining democratic fairness. The Court underscored the need to assess the significance of financial transparency in political funding, particularly in light of India’s legal framework governing political party finances.

A major concern highlighted was the potential for financial contributions to create quid pro quo arrangements, where monetary support to a political party translates into favorable policy changes or licensing benefits for the donor. This close connection between financial power and political decision-making raises concerns about undue influence on governance. Voter access to information regarding political donations is crucial for evaluating whether policymaking is being swayed by financial contributions.

The Union of India (UOI) contended that political parties receiving contributions through electoral bonds remained unaware of donor identities, as the bonds did not display names and banks were prohibited from disclosing this information. The Court, however, dismissed this argument, stating that the scheme was not foolproof. It identified several loopholes that allowed political parties to discern the identities of donors, thereby negating the claim of anonymity.

Ultimately, the Court ruled that information regarding political funding is indispensable for voters to exercise their franchise effectively. By anonymizing political donations, the electoral bond scheme infringed upon voters’ right to information, rendering it unconstitutional under Article 19(1)(a). The Court applied the proportionality test to determine whether this infringement could be justified.

Additionally, the Court examined whether restricting voter access to financial contributions was justified in the interest of curbing black money in elections. Applying the proportionality standard, it assessed whether the electoral bond scheme was the least restrictive means to achieve this goal. The Court concluded that the scheme failed this test, as alternative legal mechanisms such as contributions through cheques, bank drafts, and electronic transfers already existed to address concerns related to black money in electoral financing.

Specific Direction

1. The Court issued specific directives regarding the Electoral Bond Scheme. Firstly, the issuing bank was instructed to immediately halt the issuance of any new electoral bonds. Additionally, the State Bank of India (SBI) was mandated to provide the Election Commission of India (ECI) with comprehensive details of all electoral bonds purchased since the Court’s interim order dated April 12, 2019. These details were to include the date of purchase, the name of the purchaser, and the denomination of each bond.
2. Furthermore, SBI was required to disclose information regarding the political parties that received contributions through electoral bonds during this period. It was also instructed to furnish details on the encashment of these bonds, specifying the date and denomination of each encashed bond. SBI was given a deadline of three weeks from the date of the judgment, i.e., by March 6, 2024, to submit this information to the ECI.
3. Following this, the ECI was directed to publish the data received from SBI on its official website within one week, ensuring transparency. This publication was to be completed by March 13, 2024.
4. For electoral bonds that remained valid within their 15-day encashment period but had not yet been redeemed by political parties, the Court ordered that they be returned to the issuing bank. The responsibility of returning the bonds was placed on either the political party or the original purchaser, depending on who was in possession. Upon receiving the returned bonds, the issuing bank was directed to refund the corresponding amount to the purchaser’s account.

Conclusion

In conclusion, the Supreme Court found that the electoral bond scheme undermined democratic principles by restricting voters’ access to crucial financial information while failing to provide a justifiable means to curb black money. Accordingly, the scheme and its related provisions were deemed unconstitutional.