The Author, Shourya Parihar is a third-year law student pursuing B.A. L.L.B (Hons) at Vivekananda Institute of Professional Studies (VIPS), GGSIPU, New Delhi. He writes on constitutional law, transparency, and democratic accountability
The Electoral Bonds verdict isn’t just a judgment – It’s a death knell to opaque political funding in India.
On February 15, 2024, the Supreme Court of India gave a collective judgment in Association for Democratic Reforms v. Union of India (2024) SCC OnLine SC 149, striking down the Electoral Bonds Scheme, 2018, as unconstitutional. The five-judge Constitution Bench headed by Chief Justice D.Y. Chandrachud held the scheme was inconsistent with the right of voters to information under Article 19(1)(a) of the Constitution. The Court also struck down amendments to the Representation of the People Act, 1951, the Companies Act, 2013, and the Income Tax Act, 1961, brought through the Finance Act, 2017, that facilitated confidential political donations. Though welcomed as a landmark moment for transparency, the effectiveness of the judgment in the long run is still under questioning.
Overview of Electoral Bonds Scheme: Objectives and Legal Framework
Electoral bonds are unique financial instruments utilized for donating money to political parties in India. The bonds were introduced to promote greater transparency in political funding and minimize the utilization of black money in elections. The idea was first mentioned in finance bill of 2017 and it was official introduced in 2018. The buyer can donate the bond to political party of his/her choice. The ultimate aim is to ensure the political parties received money is clean and is properly accounted.
The electoral bonds concept has come into effect with an intent to address unaccounted cash contributions to parties. Before this scheme, political parties had to declare all donations above Rs 20,000 under Section 29C of the Representation of People Act.
According to the rules, only certain banks are authorized to issue these bonds, and they can be bought during specific periods announced by the government. The scheme had been subject to legal challenges since 2017, and this reached a climax in a three-day hearing in October 2023 before a Constitution Bench of Chief Justice Chandrachud and Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala, and Manoj Misra. Petitioners such as ADR and the Communist Party of India (Marxist) argued that it violates Article 19(1)(a), which talks about freedom of speech, whereas the Union argued that it protects donor identity.
Majority Judgment: Affirming the Right to Transparency in Political Funding
Chief Justice Chandrachud, on behalf of Justices Gavai, Pardiwala, and Misra, emphasized in this judgment regarding the right to information of the voter regarding where and how the money is being pumped and also by whom. This was observed in the case of People’s Union for Civil Liberties (PUCL) v. Union of India (2003) 4 SCC 339 where the Supreme Court held that the right to information about the criminal antecedents and assets of electoral candidates is a fundamental right under Article 19(1)(a), reinforcing the idea that it is necessary to inform voters. The Court found that the anonymity of the scheme violated Article 19(1)(a), which covers right to know as it is important provision in a democratic country.
The Court conducted the proportionality test and concluded that anonymity provided by the scheme was not appropriate to its declared purpose. The Court also struck down amendments to Section 29C of Representation of the People Act, Section 182(3) of Companies Act, and Section 13A(b) of Income Tax Act, because it allowed political parties to hide the name of donors who gave money through electoral bonds and termed it as unreasonable.
In regards to limitless financing of money by private individuals and corporations, the Court struck down amendments to Section 182(1) of the Companies Act, which emphasized that there would be 7.5% profit limit on company donations. It was termed as dangerous to the fabric of democracy as political contributions can lead to access to legislators and various other connections with political entities which could skew the perception of free and fair election under Article 14. of the Indian Constitution.
The directions issued by the majority was that SBI should stop issuing bonds, it should also reveal bond purchases from 12 April 2019 to 6 March 2024, and also refund unpresented bonds. The Election Commission of India (ECI) was directed to publish information by 13 March 2024.
Constitutional Significance: Reinforcing Voters Right
The ruling can be termed as constitutional victory in a number of ways. First reason is it helped in broadening of Article 19(1)(a), as it also included the right to information from government matters to political funding, an underpinning of participatory democracy. Through the connection between transparency in funding and meaningful voting, the Court established political equality, offsetting economic inequalities that enhance corporate dominance.
Second, the judgment helped in diminishing of unbridled corporate power. As it overturned unlimited donations by corporates that as it due to that there was always risk of policy capture through money which was arbitrary. It also re-established disclosure of names under the Representation of the People Act,1951 through which voters can now examine and check sources from where fund was generated which promoted accountability as well.
Remaining Concerns: The Limitations of Court’s Ruling
Despite seen as a constitutional victory, there are some concerns that are yet to be solved. First, the disclosure mandate applies only from April 2019, as earlier bonds which were issued by donors are still confidential which raises many concerns regarding this judgment. It does not take accountability for the funds which was donated in past elections.
Second, the judgment did not focus on various types of funding other than bonds such as cash donations which are major source of untraceable money as it is also not regulated. The Union's argument that bonds curbed black money, as much as it was rejected, points towards wider reforms, which the Court did not emphasized on.
Third, substitute funding schemes can also be created by political parties especially Bhartiya Janata Party as it is a prime beneficiary of bonds. The court's dependency on ECI and SBI for enforcement creates institutional impartiality, a dangerous gamble in light of previous accusations of politically motivated delays.
Conclusion: A Constitutional Advancement with Unfinished Business.
The Supreme Court ruling on Electoral Bond scheme is undoubtedly a step in right direction. It mainly reinforces the idea that voters have fundamental right to know about the names of donor who are funding political parties and that there should be transparency as it strengthened the fabric of democracy.
While this judgment is seen as a constitutional victory but many issues still persist which are yet to be dealt with such as donations which were made before April 2019 still remain hidden from public view and other forms of donations such as cash donations are also not taken into account as it could also be one of the biggest contributors to political parties during elections.
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