Supreme Court Strikes Down Controversial Electoral Bond Scheme

The petitioners filed a petition under Article 32 seeking a declaration that the Electoral Bond Scheme and the following provisions be declared unconstitutional:

• Section 135 of the Finance Act 2017 and the corresponding amendment in Section 31 of the RBI Act which talks about amendments to the Income Tax Act regarding distributions made by companies, 
• Section 137 of the Finance Act 2017 and the corresponding amendment in Section 29C of the RP Act which made it mandatory for the companies to disclose the contributions made by them to the political party;
• Section 11 of the Finance Act 2017 and the corresponding amendment in Section 13A of the IT Act which made it mandatory for political parties to disclose the details of donations received through electoral bonds;
• Section 154 of the Finance Act 2017 and the corresponding amendment to Section 182 of the Companies Act talks about disclosure requirements for political contributions made by companies.

Issues in the present case are:

• The question that was raised was whether keeping the information regarding voluntary donations private under the electoral bond scheme and the changes made under 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 violates the right to information provided under Article 19(1)(a) of the Constitution.
• The second question that was raised if allowing unlimited donations from companies to political parties, as provided by the changes to Section 182(1) of the Companies Act, goes against the principles of fair and impartial elections as outlined by Article 14 of the Indian Constitution.

Analysis:

Talking about the issue of whether the Right to Information which is guaranteed by Article 19 (1) (a) includes information about financial contributions made to political parties, the Court divided its jurisprudence on the right to information into two opinions. The Court stated that the RTI is not limited to information about state affairs, which is public information; it also includes information that may be required to advance participatory democracy in other forms. Political parties are a relevant political unit in the electoral process, as evidenced by the tenth schedule of the Constitution. Information about political party funding is essential for exercising one's voting rights effectively. One factor contributing to political inability is an individual's ability to make political decisions.

The Court stated that the Constitution ensures political equality by emphasizing the 'elector' and 'elected. Despite constitutional guarantees, political inequality persists. One of the factors contributing to inequality is the disparity in individuals' ability to influence political decisions as a result of economic inequality. Thus, considering the nexus between economic inequality and political inequality, as well as the legal regime in India regulating party financing, the importance of political financing information for an informed voter must be analyzed.

The Union of India claimed that the political party receiving the contribution was unaware of the contributor's identity because neither the bond nor the bank could disclose such information to the party. The Court rejected this submission, stating that the Scheme needs to be more foolproof. There are sufficient gaps in the Scheme that allow political parties to know the details of the contributions made to them. The Court determined that information about a political party's funding is required for a voter to exercise their right to vote effectively. Thus, it held that the electoral bond scheme and the challenged provisions violate Article 19(1)(a) of the Constitution to the extent that they infringe on the right to information of voters by anonymizing contributions made through electoral bonds.

The Court issued the following directions:

• The issuing bank was directed to cease issuance of Electoral Bonds immediately;
• SBI was directed to submit details of the Electoral Bonds, including the date of purchase of each electoral bond, the name of the purchaser of the bond, and the denomination of the electoral bond, purchased since the interim order of this Court dated 12-04-2019 to the ECI.
• SBI was directed to submit to the ECI the names of political parties that have received contributions through Electoral Bonds since the Court's interim order dated April 12, 2019, until the present.
• Political parties must disclose the date and denomination of electoral bonds they encashed.
• SBI was directed to submit the above information to the ECI within three weeks from the date of this judgment. The ECI was required to publish the material given by the SBI on its official website within one week of receiving it, on March 13, 2024.
• Electoral Bonds that are still valid for fifteen days but have not yet been cashed by the political party were directed to be returned to the issuing bank by the political party or the purchaser, depending on who has the bond.
• When a valid bond is returned, the issuing bank is required to refund the amount to the purchaser's account.

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