BREAKING | Supreme Court Declares Electoral Bonds Scheme Unconstitutional

CJI in Supreme Court: “Amendment to Section 29(1)(c) of RPA and IT act amendment is declared to be unconstitutional, Electoral Bonds scheme is struck down as unconstitutional.”

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BREAKING | Supreme Court Declares Electoral Bonds Scheme Unconstitutional — *Supreme Court Declares Electoral Bonds Scheme Unconstitutional*

TODAY (15 Feb 2024), the Supreme Court invalidated the electoral bonds scheme, which permitted anonymous donations to political parties.

A five-judge Constitution bench consisting of Chief Justice of India (CJI) DY Chandrachud and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra unanimously quashed the scheme along with amendments made to the Income Tax Act and the Representation of People Act, which had facilitated anonymous donations.

ALSO READ: Electoral Bonds Judgment | In The Supreme Court

The Court ruled that the anonymous nature of the electoral bonds scheme violated the right to information and impinged upon free speech and expression under Article 19(1)(a) of the Constitution.

“The Electoral Bonds Scheme, as well as the proviso to Section 29(1)(c) as amended by Section 139 of the Income Tax Act and Section 13(b) as amended by the Finance Act 2017, violates Article 19(1)(a),”
-the judgment stated.

The Court mandated that the State Bank of India, as the issuer of electoral bonds, must disclose details of political parties that received electoral bonds and provide all relevant information to the Election Commission of India (ECI) by March 6.

By March 13, the ECI must publish this information on its official website, and political parties must subsequently reimburse the amount of electoral bonds to the purchasers’ accounts.

Two judgments were rendered, one by CJI DY Chandrachud and the other by Justice Sanjiv Khanna, both concurring.

The Court asserted that the scheme could advantage the party in power.

“Economic inequality results in varying levels of political engagement. Access to information influences policy-making and may also lead to quid pro quo arrangements, which may benefit the party in power,”
-the judgment stated.

Furthermore, the Court concluded that the electoral bonds scheme could not be justified by claiming that it would combat black money in politics.

Lastly, while acknowledging the importance of donor privacy, the Court emphasized that transparency in political funding cannot be achieved by granting absolute exemptions.

The bench had on November 2, 2023 reserved its judgment on the case concerning the legal validity of the scheme, after a three-day hearing.

The Supreme Court while reserving its verdict had asked the Election Commission of India (ECI) to submit data up till September 30, 2023 regarding electoral bonds sold under the scheme.

CJI Issues Directions

Electoral Bonds Scheme, proviso to Section 29(1)(c) as amended by Section 139 of Income Tax Act and Section 13(b) as amended by Finance Act 2015 is violative of Article 19(1)(a).
The issuing bank shall herewith stop issuing electoral bonds.
SBI shall issue details of the political parties which received electoral bonds and all the particulars received and submit them to ECI by March 6. SBI shall furnish bonds’ purchase details with date of purchase, name of purchaser, denomination. SBI shall also submit details of parties who received contributions through Electoral Bonds. SBI should disclose details of each bond encashed.
By March 13, ECI shall publish this information on official website.
Electoral Bonds which are not encashed by political parties shall be returned and refunded to purchasers.

“The only purpose of amending Section 182(3) of the Companies Act becomes otiose after we hold that Electoral Bonds Scheme, IT Act making non disclosures acceptable and RP Amendment as unconstitutional.”
-CJI

“It is quite possible that contribution beyond ₹ 20,000 could also be support and not for quid pro quo… Union of India has been unable to establish that Clause 7(4) is the least restrictive means to curb right to information. Amendment to Section 29(1)(c) of RPA and IT act amendment is declared to be unconstitutional. Electoral Bonds scheme is struck down as unconstitutional.”
-CJI

“SBI shall furnish the details of donations through electoral bonds and the details of the political parties which received the contributions. SBI shall furnish the details of electoral bonds encashed by the political parties. SBI shall submit the details to the ECI. ECI shall publish these details on the website by March 31, 2024,”
-added the Chief Justice.

The electoral bonds scheme, introduced in 2018, was intended to increase transparency in political donations. However, critics argued that the anonymity provided by the scheme fostered corruption and upset the level playing field among political parties.

Three petitioners had approached the Supreme Court challenging the amendments made by the Finance Act 2017 that created the electoral bonds scheme. They argued that the secrecy surrounding these bonds reduces transparency in political funding and violates voters’ right to know. They also said the scheme allows contributions from shell companies.

The central government defended the scheme, saying it ensures that only legitimate money is used for political funding through proper banking channels. They argued that keeping donors’ identities secret protects them from retaliation by political parties.

However, during the hearing, the court asked the government about the scheme’s “selective anonymity” and raised concerns about it legalising kickbacks for parties. The bench also questioned why the limit on how much companies can donate to political parties was removed, allowing them to give more than before.

Major Remarks Made by the Supreme Court Regarding Electoral Bonds

The electoral bonds scheme is unconstitutional and violates citizens’ right to information, potentially leading to quid pro quo arrangements.

The issuing bank, particularly the State Bank of India, must immediately cease the issuance of electoral bonds. Additionally, details of donations made through electoral bonds and the recipient political parties must be disclosed.

Financial contributions to political parties serve two purposes: either to support a political party or as a form of quid pro quo.

Not all political contributions aim to influence public policy; some are made by students, daily wage workers, etc. Thus, denying privacy protection to political contributions solely based on certain motives is impermissible.

Contributions by companies have a more significant impact on the political process compared to individual donations. Such contributions are often business transactions. Treating companies and individuals alike under the Companies Act Section 182 amendment is arbitrary.