The Supreme Court of India has recently struck down the electoral bonds scheme, which allowed corporations and individuals to anonymously donate money to political parties by purchasing electoral bonds from the State Bank of India (SBI). The court held that the scheme violated the right to information under Article 19(1)(a) of the Constitution, and was unconstitutional and arbitrary. The verdict is set to pave the way for increased transparency in political funding and facilitate a level-playing field for political parties. In this article, we will explore the electoral bonds scheme, the issues raised by the Supreme Court in its verdict, and how the verdict could shape political funding transparency in India.
The Electoral Bonds Scheme
The electoral bonds scheme was introduced in 2017 by then Finance Minister Arun Jaitley as a solution to the issue of opacity in political parties’ funding. The scheme allowed corporations and individuals to anonymously donate money to political parties by purchasing electoral bonds from the State Bank of India (SBI). Notably, the SBI had sole access to the details of those who purchased electoral bonds. According to the scheme, the proceeds from any bonds, which were not encashed within 15 days of being issued, were to be deposited in the Prime Minister Relief Fund. The scheme was pushed as a solution to the issue of opacity in political parties’ funding. “Political parties continue to receive most of their funds through anonymous donations which are shown in cash. An effort, therefore, requires to be made to cleanse the system of political funding in India,” Jaitley said.
However, the electoral bonds scheme was challenged shortly after it was announced in January 2018, by a number of parties, including the Communist Party of India (Marxist), Common Cause, and the Association for Democratic Reforms (ADR). The case was heard by a 5-judge constitution bench of the Supreme Court led by Chief Justice of India for three days from October 31 to November 2 last year.
The Supreme Court’s Verdict
On February 15, 2024, a five-judge bench of the Supreme Court gave its verdict on the legality of the electoral bonds scheme, holding it “unconstitutional” in two opinions that pointed to a unanimous judgment. The court raised several issues in its verdict, including:
- Does the electoral bond scheme violate the Right to Information under Article 19(1)(a)?
- Does the infringement of RTI is justified for the protection of donor privacy?
- Is curbing the circulation of black money in electoral financing a legitimate reason to restrict the right to information?
The court held that information on the funding of political parties is essential for voting, and that the electoral bonds scheme violated the right to information under Article 19(1)(a), which guarantees the freedom of speech and expression. The court also considered whether the right to donor privacy includes information about a citizen’s political affiliation, and whether the infringement of RTI is justified for the protection of donor privacy. The court held that the RTI can only be restricted based on Article 19(2), which speaks of the reasonable restrictions to freedom of speech and expression. It does not include curbing black money as a restriction, the court said. Even assuming curbing black money is a legitimate purpose, it is not proportional to the restrictions posed by this scheme. Further, it said this scheme is not the only means to curb black money in electoral financing. Other options are less restrictive and fulfil this purpose.
The court also held that financial contributions to political parties are usually made for two reasons — as a quid pro quo measure or as a means of influencing the electoral process. However, it underscored that huge political contributions made by corporations and companies should not be treated at par with a student, a daily wage worker, an artist, or a teacher. The court held that the amendment to Section 182 Companies Act is manifestly arbitrary for treating companies and individuals alike.
The Impact of the Verdict
The Supreme Court’s verdict on the electoral bonds scheme is a significant step towards increasing transparency in political funding and facilitating a level-playing field for political parties. The verdict could shape political funding transparency in India by:
- Encouraging political parties to disclose their sources of funding: The verdict could encourage political parties to disclose their sources of funding, which could increase transparency in political funding and reduce the influence of money power in politics.
- Reducing the influence of corporations and companies in politics: The verdict could reduce the influence of corporations and companies in politics by holding them accountable for their financial contributions to political parties.
- Strengthening the right to information: The verdict could strengthen the right to information by ensuring that citizens have access to information on the funding of political parties, which is essential for voting.
In conclusion, the Supreme Court’s verdict on the electoral bonds scheme is a significant step towards increasing transparency in political funding and facilitating a level-playing field for political parties. The verdict could shape political funding transparency in India by encouraging political parties to disclose their sources of funding, reducing the influence of corporations and companies in politics, and strengthening the right to information.
[1] https://indianexpress.com/article/explained/explained-law/supreme-court-strikes-down-electoral-bonds-scheme-as-unconstitutional-what-issues-did-the-verdict-mention-9162710/
[2] https://www.bloomberg.com/news/articles/2024-02-15/india-s-supreme-court-bans-political-funding-via-electoral-bonds
[3] https://indianexpress.com/article/explained/explained-law/supreme-cour-electoral-bond-verdict-anonymous-donations-9162164/
[4] https://www.thehindu.com/news/national/why-did-the-supreme-court-strike-down-the-electoral-bonds-scheme-explained/article67848657.ece
[5] https://www.ndtv.com/india-news/financial-support-to-political-parties-can-lead-to-quid-pro-quo-supreme-court-5061117
