Supreme Court holds Electoral Bonds Scheme as ‘unconstitutional’

New Delhi, Feb 15 (UNI) Supreme Court on Thursday held the Electoral Bonds Scheme as ‘Unconstitutional’ and directed the banks to stop issuing Bonds.

The bench directed SBI to furnish the details of electoral bonds encashed by the political parties.

The Top Court directed the Election Commission of India (ECI) to make all donations public within one week of the receipt of the information.

All Electoral Bonds within the 15-day validity period shall be returned by political parties to the purchasers, the Court directed.

A Supreme Court five-judge Bench headed by Chief Justice of India (CJI) Dr D Y Chandrachud struck down the 2018 electoral bonds scheme which allowed anonymous and unlimited contributions to political parties on the grounds of violating voters’ right to information.

The Constitutional bench comprising CJI, Justice Sanjiv Khanna, Justice B R Gavai, Justice JB Pardiwala, and Justice Manoj Misra said the Electoral bonds scheme has to be struck down as unconstitutional. Amendments to the Income Tax Act provision and the Section 29C of the Representation of Peoples Act are declared to be ultra vires.

‘The amendment to the Companies Act (allowing blanket corporate political funding) is unconstitutional,’ the bench held.

CJI Chandrachud said, ‘we have arrived at a unanimous decision. There are two opinions, one by myself and another by Justice Sanjiv Khanna. Both arrive at the same conclusion. There is a slight variance in the reasoning.’

Justice Chandrachud, while pronouncing the judgment said, the petitions raise the following issues (a) Whether amendments are violative of the right to information under Article 19(1)(a) and (b) whether unlimited corporate funding violates principles of free and fair elections.

The CJI said on issue 1 that courts have held citizens have the right to hold the government accountable. The crucial aspect of the expansion of the right to information is that it is not confined to state affairs but also includes information necessary for participatory democracy.

The CJI added that political parties are relevant units in the electoral process. Information about the funding of political parties is essential for electoral choices. Political contributors get access…this access leads to policy-making…because of the nexus between money and voting.

Justice Chandrachud said that ‘the Electoral bonds scheme is not the only scheme to curb black money. There are other alternatives.’

The CJI said ‘Infringement of the right to information is not justified by the purpose of curbing black money. Informational privacy applies to political contributions too.’

The Right to privacy of political affiliation does not extend to contributions made to influence public policy and applies only to contributions below the threshold, he added.

Justice Chandrachud also said that ‘the Union has been unable to establish the measure adopted in clause 7(4) (1) of the electoral scheme is the least restrictive measure.’

The CJI said that the financial contributions to political parties are made for two reasons – for support to a political party, or contribution may be the way of quid pro quo. Financial support to political parties can lead to a quid pro quo arrangement.

Not all political contributions are made with the intent to alter public policy, Justice Chandrachud said, adding that the students, daily wagers, etc also contribute. ‘To not grant an umbrella of privacy to political contributions only because some contributions are made for other purposes is not impermissible,’ the bench said.

There are two separate judgments in the Electoral Bond case with CJI & Justice Sanjiv Khanna have penned their separate but unanimous judgments.

Justice Chandrachud read out the judgment on behalf of himself and Justice B R Gavai, Justice JB Pardiwala, and Justice Manoj Misra.

Justice Sanjiv Khanna pronounced his version by saying, “I agree with the judgment of CJI. I have also applied the principles of proportionality but with slight variation. But the conclusions are the same,” he said.

The CJI, on whether the Electoral Bonds scheme violates the right to information of electors said Information about the funding of political parties is essential for the effective exercise of choice of voting and added the EB scheme is thus violative of Article 19(1) (a).

Justice Chandrachud commenting on the donors’ privacy as a reason for curbing the right to information said the lack of privacy of political would be catastrophic and could be used to disenfranchise voters or even for delimitation.

On the issue of the Right to informational privacy extending to political donations, the CJI said that ‘the Amendments to the Income Tax Act and Representation of People Act on absolute non-disclosure of donations are struck down.’

He said that the Amendments in the Companies Act permitting unlimited political contributions by companies is manifestly arbitrary, there is the possibility of quid pro quo and it violates the right to information of citizens, about possible quid pro quo.

The CJI said that Amendment to Section 182 of the Companies Act becomes impossible given our finding that the electoral bonds scheme is unconstitutional.

A company has a graver influence on the political process than contributions by individuals. Contributions by companies are purely business transactions. Amendment to Section 182 Companies Act is manifestly arbitrary for treating companies and individuals alike, he said.

Before the amendment, loss-making companies were not able to contribute. The amendment does not recognize the harm of allowing loss-making companies to contribute due to quid pro quo. The amendment to Section 182 Companies Act is manifestly arbitrary for not making the distinction between loss-making and profit-making companies, the bench held.

The constitution bench had also directed the Election Commission of India to submit before it the details of funds received by all political parties through Electoral Bonds till September 30, 2023.

The government notified the Electoral Bond Scheme in 2018. An Electoral Bond is a bearer instrument like a Promissory Note and an interest-free banking instrument. A citizen of India or a body incorporated in India will be eligible to purchase the bond. The government had declared that the electoral bond would be issued/purchased for any value, in multiples of 1,000, 10,000, 1,00,000, 10,00,000, and 1,00,00,000 from the specified branches of the State Bank of India (SBI).

During the arguments, Solicitor General of India Tushar Mehta had told the court that every country was grappling with the problem of black money being used in elections.

Defending the 2018 Scheme, Mehta said, “The present scheme is a conscious and deliberate attempt to ensure that A, clean money comes into the banking system to be used by political parties, and B so far as possible to eradicate unclean money in the elections.”

He added that donations made through electoral bonds were kept anonymous to protect the privacy and political affiliation of the citizens who make such donations to political parties.

The Supreme Court had in October 2023 set the constitution bench to look into the validity of the electoral bond scheme.

The CJI while concluding his judgement said The electoral bonds scheme is violative of Article 19(1)(a) and unconstitutional. Amendments to the Companies Act are unconstitutional. The issuing bank shall forthwith stop the issue of electoral bonds. The State Bank of India shall furnish the details of donations through electoral bonds and the details of the political parties that received the contributions.

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