-By Muhammad Iftekhar Khan, student of LLB (Hons.) at Banaras Hindu University
On 15th February 2024, a five judges Bench headed by CJI D.Y. Chandrachud, struck down the Electoral Bond Scheme on ground of violation of voters Right to information entrusted under Article 19(1), giving primacy to it over Right to Privacy of the donor. SC ordered the SBI to furnish all the related data and to publish the same on Election Commission of India website.
Supreme Court gave this decision while hearing case of Association for Democratic Reforms & Anr. v. Union of India & Ors. [ Writ Petition (Civil) No. 880 of 2017]. The other judges of the Bench were Justice Sanjiv Khanna, Justice B.R. Gavai, Justice J.B. Pardiwala, and Justice Manoj Mishra.
Background of the case
In 2018 Union Government has brought Electoral bond scheme, as a means for individuals and entities to make donations to registered political parties. The most highlighting part of this scheme was that, it intends to hide the identity of every donor.
This scheme replaced the old donation regime, which was done as per The Representation of Peoples Act 1951. Union Government had made several amendments in the existing statutes and provisions to remove any type of obstruction in achieving the desired objective and introduced The Finance Act 2017 for the same.
As soon as the scheme was introduced discussions started relating to its objective and transparency in the donation procedure. Critics directed it as violation of Right to privacy of voters and a means of financial blockade to the opposition party.
In view of this two PIL were filed in the apex court regarding its constitutionality. One by Association For Democratic Reform, an NGO and the other was by CPI(M), a political party. Supreme Court clubbed both the PIL and took the case as a writ petition.
Electoral Bond
Electoral Bonds are interest free bearer bonds which citizen could purchase from State Bank of India, and then donate to political parties to fund election expenses. In more simple terms these are the promissory note which can be purchased by any individual or entity.
State Bank of India is the issuing authority of these bonds and is issued in denomination of RS 1000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore. It has the validity of 15 days, means that the party benifitting should redeem it in within 15 days.
Any political party registered under section 29A of The RPA 1951 and has obtained atleast 1% of the total vote in the last general election of lok Sabha or in any assembly election, is eligible to take these bonds.
According to the Association for Democratic Reforms (ADR), a non-government civil society group ,Individuals and companies had bought a total of 165.18 billion rupees worth of Electoral bonds up to January 2024.
Scheme and the concern raised
In 2017, India’s central bank, the Reserve Bank of India (RBI), cautioned the government that the bonds could be misused by shell companies to facilitate money laundering. Election Commission of India (ECI) in its letter to the law ministry warned that electoral bond would help in hiding illegal donation and leads to mushrooming of shell companies to turn their black money to white.
Again in 2019, ECI described the system as “a retrograde step as far as transparency of donations is concerned”.
Major-General Anil Verma (retired), head of the ADR on expressing his concern said “The Electoral Bonds legalises backroom lobbying and unlimited anonymous donations.”
Former RBI Governor Raghuram Rajan observed “Since the bond is issued by a public sector bank, an unprincipled government might get to know the list of donors and recipients.”
Critics stated that the Donors will look at these anonymous donations as an ‘investment’ which will lead to status of quid pro quo. And by permitting uncapped anonymous donations, it open the doors to “legalised corruption”, allowing corporate donors to sponsor the governing party and influence government decisions.
Government arguments and the Proportionality test -balance between Right to know and Right to privacy
The test of proportionality is a commonly employed legal method used by courts around the world, to decide cases where two or more legitimate rights clash. The test ensures that state actions do not disproportionately infringe upon fundamental rights while pursuing legitimate government interests.
The proportionality test gained prominence in the K.S. Puttaswamy v. Union of India, 2017 ruling, affirming privacy as a fundamental right, further upheld in the Aadhaar Act ruling of 2018. Justice Sanjay kishan in is this case stated that the state action to be upheld must show –
- the action is sanctioned by law.
- the proposed action must be necessary in a democratic society for the legitimate aim.
- the extent of such interference must be proportionate to the for such interference.
- there must be procedural guarantees against abuse of interference.
Now let us see what government argues to defend the EB scheme. Government argued that this scheme is necessary-
- to curb black money and
- to protect donors anonymity and these both are the legitimate aims of the state.
- To prevent the citizen from victimization, retaliation or retraction on favouring any political party.
Here the point of black money is surely non contentious and in relation to the second point, government argued that donors identity is a legitimate state interest since it seeks to give effect to a fundamental right- the right to privacy of the donor.
With this the question arises relating to the balance between the right to privacy and right to know. Since right to information is guaranteed under article 19(1) of the constitution and the “reasonable restriction” could be imposed on this right in accordance with the grounds mentioned under clause 2 of the same article.
J. khanna by applying this test, observed that the donor anonymity cannot be the legitimate state aim and voters Right to know supersedes anonymity in political party funding.
CJI Chandrachud, however, applied double proportionality test as the case involves balance between two competing fundamental right i.e. the Right to information and Right to privacy. He said only proportionality test will not be enough.
Apart from the issue of balancing between the voters Right to Know and anonymity of donor, the major problem which catches the attention of the court is the donation made by corporation and companies and the risk of political favour to the corporate. i.e. the condition of quid Pro quo.
Court observed in its ruling that the “ability of a company to influence the electoral process through political contributions is much higher when compared to that of an individual … contributions made by companies are purely business transactions made with the intent of securing benefits in return”
CJI Chandrachud observed “The huge political contribution made by the corporation and companies should not be allowed to conceal the reason for financial contribution made by another section of the population: a student, a daily wage workers, an artist or a teacher”
Further on the argument of preventing citizens from victimization and retaliation Justice Sanjiv Khanna observed “Retribution, victimization or retaliation against any donor exercising their right to donate to a political party is an abuse of law and power. This has to be checked and corrected. since it is a wrong, the wrong itself cannot be a justification.”
Amended Laws and the Court’s Decision
The Representation of people Act 1951
Section 29C of this act requires all the party to declare all the contribution higher than RS 20000.
The Finance Act 2017 amended the RP Act and added exception of no disclosure if funded through electoral bond
SC struck down the amendment and said that older provision was of nature which balances the voter right to know and donor anonymity
Companies Act 2013
Section 182(1) put a cap of 7.5% of net profit on any companies donation. Section 182(3) requires company to disclose the total amount donated to political party with name and particulars.
With the finance act 2017 the company is no longer required to declare which party it has donated, nor the amount.
SC held that this would violate right to free and fair election and restored the old provisions.
Income Tax Act 1961
Section 13A(b) requires to maintain the record of all the contribution made above 20000 with the name and the address of the donor.
The finance act 2017 amended the provision and added the word “other than contribution by way of electoral bond.”
SC struck down this also as violative of Article 19(1)
Regulation of Funding and the rules in contemporary democracies
Expert point to four key aspect that future generation must tackle regulation of donation.
- Donation limit, so that party will not be captured by few large donors. US imposes restriction on contribution based on the kind of donor
- Expenditure limit, to safeguard the politics from financial arm race and removing the pressure of competing for money and giving room to small candidates to compete. UK imposes restriction of 30k euro per seat
- Public financing of election, in Germany political parties receives public funds on the basis of their importance (generally measured on the basis of no. of votes they received in previous election and membership fee etc.)
- Disclosure requirement, this is the aspect which is most vague and on this itself the crux of the judgment of Electoral Bond is based. It has it pros and cons and there is a need of balance to be maintained.
Chilean experiment- A balancing effort
Q- Is it possible to take the benifit of anonymity and still prevent quid pro quo arrangements ?. Chile made the experiment to ensure complete anonymity of party funding.
Under the Chilean system, known as “Reserved contribution”, donor would transfer to the Chilean Electoral Service the money they wish to donate to parties, and the Electoral Service would then transfers the sum to the party without revealing the donors identity. However, several news of scandals and corruption in Electoral Service came out, questioning the reliability of the Electoral Service.
In UK party a party needs to report donation received from a single source amounting to a total of more than 7500 € in a calender year. The limit in Germany is 10000 €. Interestingly in India there is no donation limit on the individual and nor legal expenditure limit on the parties.
Effect of decision on ground zero
The ban on the sale of electoral bonds is unlikely to have any major impact on the funding of political parties, said a political analyst Amitabh Tiwari.
He pointed out that Individuals and companies had bought a total of 165.18 worth of bonds up to Jan. 2024, according to ADR. This is very less compared to the total expenditure in one Lok Sabha Election (2019) estimated to be 55,000-60,000 crore according to (report by think tank CMS India, titled “Poll Expenditure, The 2019). Donations could be given to political parties through cheques, sale of coupons, crowd-funding and corporate donations.
It is true that in absence of electoral bonds, there might be an issue for the corporates and companies which do not generate cash, like IT services companies”, they might not replace electoral bonds with cash donations, but Political parties will continue to get cash donations and it cannot be curbed.”
conclusion
The Supreme Court of India by striking down the Scheme, made it clear that it is the true guardian of the citizens right and whenever there is any infringement it will put curb on the state action. The action of the SC testifies the remark of Justice Shastri in case of State of madras v. V G Row in which he titles SC as ‘Sentry on Watch” (sentry means someone who is to guard some place or office), translating SC a the guard of fundamental rights.
However the contention in favour the schemes could not be completely neglected. By mandating that all political donation be made through formal banking channels the government took a bold step toward dismantling the stronghold of black money in politics. This feature was designed as a protective filed of donor, safeguarding them from political backlash and victimization.
It is also important to note that the decision is critical for the continued health of India’s democracy but the rejection of the electoral bonds scheme does not means an end to the idea of reforming electoral financing. The SC has not laid down any alternative scheme for electoral finding. Since all the amendments made by the government held violative and no further schemes has been proposed the pre scheme regime of cash donation and corporate donation will be restored.
The SBI has not been asked to provide the specific identification no of each bond issued and received. it is also not been asked to match the purchaser and depositor for each bond. Therefore the information to be furnished by SBI and to be placed on ECI on its website will not lead to the discovery of exact information relating to which company provided which bond to which political party. Perhaps a data analyst would figure it out in due course, but that will not be the easy task.
