Supreme Court Strikes Down Electoral Bonds Scheme

electoral bond

Introduction

The Supreme Court delivered a groundbreaking unanimous judgment, deeming the electoral bonds scheme “unconstitutional and manifestly arbitrary.”
Led by Chief Justice of India (CJI) DY Chandrachud, a five-judge Constitution Bench unanimously struck down the scheme, citing infringement on voters’ right to information and disproportionate restrictions.

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Petitioners argued that the scheme violates Right to Information under Article 19(1)(a) of the Constitution, emphasizing voters’ right to information regarding political party funding.
Despite the government’s stance that citizens lack a “right to know” about political contributions, the court upheld voters’ right to such information, citing the inherent connection between money and politics.
The court highlighted the “deep association” between money and politics, stressing the need for transparency to prevent quid pro quo arrangements.

The scheme’s anonymity for donors, aimed at curbing black money, was deemed disproportionate to its goal.
Advocates highlighted potential loopholes allowing for cash donations, undermining its efficacy in combating black money.
The court emphasized the availability of alternative, less restrictive measures to achieve the scheme’s objectives, such as Section 29C of the Representation of People Act, 1951.

While the government argued for donor anonymity to protect privacy rights, advocates stressed the importance of public scrutiny in political funding.
The court clarified that donor privacy extends only to genuine forms of public support, rejecting absolute anonymity facilitated by the scheme.

Advocates underscored the adverse impact of unlimited corporate contributions on free and fair elections.
The court reinstated the cap on political contributions from companies, citing the need to prevent undue corporate influence in politics.
It noted concerns that unlimited contributions could incentivize quid pro quo arrangements, especially by loss-making companies.

Representation of the People Act, 1951: The court struck down amendments exempting political parties from disclosing donations above Rs. 20,000, reinforcing the balance between voters’ right to information and donor privacy. (Section 29C)
Companies Act, 2013: Amendments allowing unlimited corporate contributions were overturned, restoring the cap on political donations by companies and preserving electoral integrity. (Section 182)
Income-tax Act, 1961: Exemptions for political parties to maintain records of donations received via electoral bonds were annulled, safeguarding voters’ right to information. (Section 13A)

The proportionality test assesses the balance between competing fundamental rights or interests and the measures taken by the state to achieve its objectives.
It involves four criteria: legality, necessity, proportionality in the strict sense, and balancing of interests.

The government defended the scheme, citing legitimate aims such as tackling black money and protecting donor anonymity.
Solicitor General Tushar Mehta argued that the right to information does not extend to information not in the state’s possession.

Applying the proportionality test, the court scrutinized the balance between competing fundamental rights, emphasizing the necessity of the “least restrictive” methods.
It underscored the importance of less intrusive alternatives, such as the electoral trusts scheme, in achieving the scheme’s objectives.

Burden of Proof: The court held that the state must demonstrate that its measures are the “least restrictive” and that no other “equally effective” methods exist to achieve its objectives.
Balancing Competing Rights: Unlike previous approaches prioritizing public interest over individual rights, the court’s focus is on balancing competing fundamental rights.
Structured Proportionality Test: The verdict applies a structured proportionality test, requiring the state to demonstrate that its actions restricting fundamental rights are proportional to its objectives.
Application of Legal Precedents: While the right-to-privacy ruling laid down the law, subsequent cases like Aadhaar (2018) and Demonetization (2023) applied the structured proportionality test. The electoral bonds verdict represents a significant departure in this regard.

The Supreme Court’s verdict reaffirms its commitment to upholding constitutional principles and safeguarding democratic processes.
By striking down the electoral bonds scheme and reinstating key legal provisions, the court emphasizes the primacy of transparency and accountability in electoral financing.