In a democratic type of government, elections are inevitable. Holding of periodical elections, ensures proper representation of all sects of the society and ensures development of every community in the society. Elections provide a chance to an adult to participate in government making decisions and choose the better one, which they think can be their representator at every forum of decision making.
India being a democratic State always emphasized on the importance of elections. Part XV[1] of the Constitution of India deals exclusively with elections, providing extensive guidance as to holding of elections in India. It can be said the elections have a Constitutional backing and that is what is stressed by Supreme Court as well by declaring democracy as part of Basic Structure which implicitly means free and fair timely elections are inevitably part of the Basic Structure of the Constitution[2]. However, free, and fair elections have been a long-cherished dream in India [3]. The political parties under the garb of getting vote banks, commercialize the very important process of government making. They only focus on winning of elections and nominations, by resorting to unfair electoral practices to gain more and more votes , without taking into consideration the effectiveness of free and fair elections .Thereby diluting the true essence of holding of elections.
Legislative background:
To increase the level of votes, political parties need funds with which they can attract more people towards their party and for that they issue electoral bonds. The political parties issue electoral bonds to their financiers, who donate funds to their political parties and that’s why Central Government thought of passing a Scheme that will address their need for funds during election campaigning. The Central Government passed the Electoral Bonds Scheme[4], which was notified in 2018 with the objective of transparency and reduction in the influx of Black money in the Electoral Funding as highlighted by the then Finance Minister, Arun Jaitley [5].
Electoral bonds are the monetary instruments that can be purchased by individuals and companies. These bonds are sold in multiples of Rupees thousand , ten thousand, one Lakh, ten lakh ,one crore. These bonds can be purchased through a KYC – account while making donations to a political party. Such electoral bonds are to be encashed by an eligible political party through authorized bank, within the stipulated time of 15 days. The amount received as donation used to get deposited in the Prime Minister Relief Fund. State Bank of India has been authorized to accept and encash the bonds through its 29 authorized branches. There is no sealing cap on the number of electoral bonds that an individual or company can purchase. Also, the name and other credentials of the donor are not submitted on the bond, thus ensuring anonymity as to the personal information of the donor. These bonds, however, are not available all the time for purchasing. They are available for a time period of 10 days in a span of four months (January, April, July and October). The political parties who secured at least 1% of votes in the recent Lok Sabha or State Assembly elections and are registered under the Representation of People Act, 1951 [6],can get authentic and verified account from Election Commission of India.
The Government inserted the Electoral bonds Scheme by amending the four legislations through Financial Act of 2016 and 2017 [7] [8] . The four amended legislations included:
- Representation of the People Act ,1951
- Companies Act, 2013[9]
- Income Tax Act, 1961[10]
- The Foreign Contributions Regulation Act, 2010 [11]
Prior to the Amendments in these legislations, political parties were obliged to make public all donations above 20,000, also no company was authorized to make donations amounting to more than 7.5 % of their total profit or 10% of the revenue. But with the Amendments sought in the above cited legislations, Electoral Bonds were issued up to the mark of 1 crore. Also, the anonymity kept as to the financiers information made it a big obstacle in the process of holding free and fair elections.
Facts:
The petitions filed by Non Governmental Organizations like Common Cause[12] and Association for Democratic Reforms (ADR)[13] and the Communist Party of India (Marxist)[14] have challenged the validity of the scheme as “an obscure funding system which is unchecked by any authority”. The very scheme was criticized for legalizing unlimited anonymous donations to political parties and for breaching the sealing cap of 7.5% of the profits on the companies donating to the political parties. It is approximated that around 12,000 crores have been donated to political parties through electoral bonds and majorly two third of the amount received have been received by a single party (BJP)[15]. Also, the transparency and citizen’s right to know was eclipsed due this scheme. In view of the importance of the issue raised, the matter was referred to a Constitution Bench comprising of 5 judges headed by Chief Justice of India, D Y Chandrachud and other judges included Justice Sanjeev Khanna , Justice B R Gavai, Justice Manoj Mishra and Justice J B Pardiwala. The case which finally addressed the matter was titled as Association for Democratic Reforms & anr as Petitioner vs Union of India & anr[16] as Respondent.
Issues:
The issues that Supreme Court of India was to decide upon included:
- The violation of Right to information guaranteed under Article 19(1)(a) of the Constitution.
- Unlimited donations by donors impeding the free and fair elections.
- Efficient mechanism to curb black money.
- Quashing of the Amendments sought in 4 legislations through Financial Act of 2016 and 2017.
Verdict:
On 15 February 2024, the Court unanimously scraped out the Electoral Bonds Scheme. The Bench held that the Scheme violated the voters’ right to information enshrined in Article 19(1)(a)[17] of the Constitution. The Supreme Court prioritized the voter’s right to information as to the funding of political parties. Court said that there should be balance between informational privacy and voter’s right to information. Court said it is crucial for people to have complete information when they cast vote. Court opined that information as to the funding of the political parties is important element for the effective use of voter’s choice of voting. Court said in a democratic set up which aims at public participation, the right to know or right to information is equally important and needs to be safeguarded. In such a case information related to the funding of the political parties is necessary to make better electoral choices. It is only when the voter will be given information relating to funding of political parties, transparency and fairness in electoral processes can be achieved. Court observed that efficiency, transparency and accountability can only be ensured when the veil of secrecy will be lifted, and everything will be made open to public so that they can go for informed choices. Further, the Court held that the scheme resulted in political inequality by giving a whimsical tool in the hands of people who have financial ability to impact the political decisions.
Court also enjoined upon the fact that issuance of electoral bonds by political parties leads to quid pro quo arrangements between political parties and donors. Court held that the absolute non-disclosure of the source of political funding through electoral bonds promoted corruption, and a culture of quid pro quo with the ruling party to introduce a policy change or for bagging a license. Court said the anonymous donations by different corporates ensure a return favour from those political parties to whom they have made donations. Court drew a visible demarcation as to donation made by companies for return favours and donations made by individuals as a sign of their political beliefs and opinions.
As to Government’s defence of curbing the Black money, the Court held that Government should evolve other mechanisms for curbing the menace of Black money that are less harmful in impeding the voter’s right to information than the anonymity as to funding that can be seen in electoral bonds. Court said the scheme does not effectively curb Black money rather allows anonymous donations from donors to the political parties just like a business transaction. Court deliberated upon the fact that electoral bonds lack regulatory mechanism and does not fulfil the least restrictive means test.
Accordingly, the Supreme Court also nullified the Amendments sought in four legislations by declaring such Amendments as arbitrary and unconstitutional, as these Amendments in the four legislations permitted the unlimited corporate funding to the political parties . Court said that the contributions as made by companies are purely business transactions with an intent of return benefit. Court also said that uncontrolled funding to political parties by the corporates affects the fair election process.
Court also directed that the sale of electoral bonds be stopped with immediate effect[18]. State Bank of India which was the authorized Bank to accept such bonds, was directed to submit details of the Electoral Bonds purchased from 12 April 2019 till date to the Election Commission of India. This will include details of the donor as well as the political parties that the bonds were issued to. Court also insisted the Bank to return the bonds to the purchasers who have not been encashed by the political parties.
Further, the Court ordered the Election Commission of India to publish the information shared by State Bank of India on its official website within one week from the receipt of the information. Though the State Bank of India failed to provide the information within a week, they have requested the Apex Court for extension for further period of time (June 30) for disclosure of information as to electoral Bond encashed by the political parties. However on 11th March, 2024 Supreme Court dismissed the State Bank of India’s plea for extension and asked them to furnish information as to the electoral bonds numbers .
Conclusion:
It thus can be inferred that from the perspective of a democratic type of Government, issuing of electoral bonds truly hampers the fair election process. Particularly the Country like India where Democracy has been embraced as part and parcel of the Basic Structure of the Constitution [19]and in such a case allowing the political parties to issue electoral bonds will be a clear cut violation of Basic Structure. Supreme Court through this landmark judgment preserved the chastity and sanctity of fair election process. By declaring the Electoral Bonds Scheme as unconstitutional, The Supreme Court of India once again continued the legacy of safeguarding the rights and liberties of a citizen. Supreme Court through its remarkable decision declared the Electoral Bonds Scheme as arbitrary, ultra vires the Constitution and violative of Citizen’s Right to know guaranteed by Article 19(1)(a) of the Constitution. Therefore, Supreme Court’s opinion as to Electoral bonds holds good and the Court through its decision not only safeguarded India from becoming a Totalitarian tyranny but also preserved and maintained the true ethos of the Constitution.
[1] Part XV of the Constitution – Elections
[2] Keshvananda Bharti vs State of Kerala AIR 1973 SC 1461
[3] State of Uttar Pradesh vs Raj Narain AIR 1975 SC 2299
[4] Electoral Bonds Scheme , 2018
[5] Arun Jaitley – Finance Minister of India ( 2014- 2019)
[6] Representation of People Act , 1951 ( 43 of 1951)
[7] Financial Act of 2016 ( 28 of 2016)
[8] Financial Act of 2017 ( 7 of 2017)
[9] Companies Act of 2013 ( 18 of 2013)
[10] Income Tax Act of 1961 ( 43 of 1961)
[11] The Foreign Contributions Regulation Act of 2010 ( 42 of 2010)
[12] Common Cause – Non profit organization , non- governmental Organization
[13] Association for Democratic Reforms – Non governmental organization
[14] Communist Party of India ( Marxist) – A national political party in India from 1964
[15] BJP ( Bhartiya Janta party) – A national Political party in India since 1980
[16] Association for Democratic Reforms vs UOI ( 2024)
[17] Article 19 1 (a) of the Constitution – Freedom of speech and expression .
[19] Keshvananda Bharti vs State of Kerala AIR 1973 SC 1461
Author: Raqib Mehraj
Juris Centre 