 "SC strikes down electoral bond scheme as 'unconstitutional', against rights")
The Supreme Court on Thursday struck down the electoral bonds scheme, calling it “unconstitutional” and “arbitrary”. It ordered State Bank of India (SBI), the issuing bank, to immediately cease issuing electoral bonds, share the names of the purchasers, value of the bonds and their recipients with the Election Commission, and asked the latter to disclose those details by March 13.
The court held that the scheme infringes on citizens’ right to information about potential quid pro quo arrangements, and ruled that an amendment to Section 182 of the Companies Act, which permitted Indian companies to donate any amount to a political party, was unconstitutional.
The petitioners in the case, as well as Opposition parties, welcomed the Supreme Court's decision. The Bharatiya Janata Party (BJP), on the other hand, said it respected the verdict, but argued that the scheme had brought transparency to political funding.
A five-judge Bench, led by Chief Justice of India DY Chandrachud, unanimously ruled that the electoral bonds scheme and preceding amendments to the Representation of People Act, Companies Act, and the Income Tax Act violated voters’ right to information about political funding under Article 19(1)(a) of the Constitution.
The court stated that corporate contributions have a more profound impact on the political process than individual donations. “Contributions by companies are purely business transactions. The amendment to Section 182 of the Companies Act is manifestly arbitrary for treating companies and individuals alike,” it said.
The apex court also criticised the amendment for failing to distinguish between loss-making and profit-making companies. “Before the amendment, loss-making companies were not able to contribute. The amendment does not recognise the harm of allowing loss-making companies to contribute due to quid pro quo. The amendment to Section 182 of the Companies Act is manifestly arbitrary for not making a distinction between loss-making and profit-making companies,” it said.
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The amendment to the Companies Act, which removed the cap on corporate donations, previously set at a maximum of 7.5 per cent of a company’s net profit, was also struck down by the court.
The Bench said: “State Bank of India shall furnish the details of donations through electoral bonds and the details of the political parties which received the contributions.”
The bank has been directed to submit the details to the Election Commission of India in three weeks (until March 6, 2024), which will be published by the poll body on its website by March 31, 2024. The Supreme Court gave its verdict on pleas challenging the validity of the electoral bonds scheme.
The bank will submit details of bonds purchased from April 12, 2019, to the present to the Election Commission. The Supreme Court had previously instructed the Election Commission on April 12, 2019, to submit the records of bonds purchased up to that point in a sealed cover.
Meanwhile, electoral bonds, with a validity period of 15 days and yet to be encashed, would be returned by political parties or purchasers to the bank, which must refund the amount to the purchasers’ accounts.
The court’s Constitution Bench, comprising Chief Justice D Y Chandrachud, Justices Sanjiv Khanna, B R Gavai, J B Pardiwala, and Manoj Misra, had on November 2 last year reserved its verdict in the matter.
The Association for Democratic Reforms (ADR), the lead petitioner, described the verdict as “a big boost to Indian democracy”. Its founder, Jagdeep Chhokar, said the judgment has “comprehensively removed the latest mischief in the electoral system introduced in 2017”, but warned that issues that existed prior to 2017 still need to be addressed. “In the euphoria of this judgment, we must not forget or overlook the ground reality,” Chhokar said.
Lawyer Prashant Bhushan, who argued the ADR’s petition, said that the scrapping of the scheme “will not do away with illicit political funding or the role of money in electoral politics”. “For that we need to prohibit dealing in cash by political parties and candidates. Also there needs to be a limit on the expenditure of political parties,” he posted on X.
The CPI (M), the only political party among the petitioners, said the “unscrupulous scheme designed to finance the ruling party by anonymous corporate donors has been completely scrapped”. Party chief Sitaram Yechury said the country will get to know in March the quid pro quo that the government has done with corporates. Congress President Mallikarjun Kharge said the SC has struck down the “black money conversion” scheme of the government and hoped the judgment would make the government stop resorting to “mischievous ideas” in the future. “The BJP has made electoral bonds a medium for taking bribes and commission. Today a stamp has been put on this,” Congress leader Rahul Gandhi said.
Ravi Shankar Prasad, BJP spokesperson and former Union law minister, on the other hand, said the electoral bond scheme brought a measure of transparency in electoral funding, but that his party respected the SC verdict. He said the verdict has been delivered by a Constitution Bench of the apex court, runs into hundreds of pages, and requires a comprehensive study before a structured reply.
“Any order of the Supreme Court or its judgment has to be accepted and respected. But those political parties who are trying to politicise it are doing it primarily on the grounds that they have no alternative to (PM Narendra) Modiji's leadership,” said BJP national spokesperson Nalin Kohli.
The Aam Aadmi Party, DMK, AIADMK, Trinamool Congress, and others also welcomed the judgment. “This will ensure a transparent electoral process and the integrity of the system,” Tamil Nadu CM M K Stalin posted on X.
The scheme, which was notified by the government on January 2, 2018, was pitched as an alternative to cash donations made to political parties as part of efforts to bring transparency to political funding. It was spearheaded in the 2017-18 Union Budget by the then Finance Minister, the late Arun Jaitley.
“Clause 7(4) of the scheme completely exempts information on the purchasers of electoral bonds. This information is never disclosed to the voters. The purpose of securing information about political funding cannot be fulfilled by absolute disclosure,” the Chief Justice said.
ADR, the Communist Party of India (Marxist), and Dr Jaya Thakur challenged the amendments introduced by the Finance Act 2017, which paved the way for the electoral bonds scheme.
The petitioners said the anonymity attached to the electoral bonds affects the transparency of political funding and infringes on the voters' right to information. They also argued that the scheme allowed contributions to be made through shell companies.
The government had defended the scheme, saying it is a method to ensure that “white” money is used for political funding through proper banking channels and that it was necessary to keep the identity of donors confidential so that they would not face any retribution from political parties.
After the verdict was delivered, Advocate Prashant Bhushan told the Bench that it was a sound judgment in the interest of the nation. Solicitor General Tushar Mehta then interjected telling Bhushan to say all this outside the courtroom where there are “cameras”.