“Electoral Bonds now Unconstitutional: another step towards Transparency and Our Rights”

   “Electoral Bonds now Unconstitutional: another step towards Transparency and Our Rights”

“Electoral Bonds now Unconstitutional: another step towards Transparency and Our Rights”

Author: Yashaswini Singh, B.com LL.B (H) UPES, LLM (JGLS)

Recently, on February 15th 2024 The Supreme Court declared the Electoral Bonds as “Unconstitutional”. The decision was made by the constitution bench comprising of the judges namely- Honorable Chief Justice DY Chandrachud, Honorable Justice Sanjiv Khanna, Honorable Justice BR Gavai, Honorable Justice JB Pardiwala and Honorable Justice Manoj Misra. The main reason of declaring it to be unconstitutional is that it is violating right to information and freedom of speech and expression as per Article 19 (1) (a) of our Constitution.

What are Electoral Bonds?

“The electoral bond is defined as a bearer banking instrument which does not carry the name of the buyer”.

In a layman language – “Electoral bonds are securities or instruments used to make financial contributions to political parties. Any individual who is an Indian citizen or who has been incorporated or founded in India may purchase Election Bonds.
Individuals may purchase Electoral Bonds alone or in combination with other people”.
To be eligible to receive the Electoral Bonds, a political party must be registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951), and “must have received at least one percent of the votes cast in the most recent general election for the House of the People or the State Legislative Assembly”.

What brought Electoral Bonds as an issue?

There were 2 main reasons/ issues which brought the Electoral Bonds to be reviewed again and they are- 

Firstly, that whether the Companies Act’s change to Section 182(1), which allows for limitless corporate funding to political parties, violates Article 14 of the Constitution and the idea of free and fair elections and secondly, that whether the Electoral Bond Scheme is leading to  non-disclosure of information on voluntary contributions to political parties and the changes made to Section 29C of the RPA, Section 182(3) of the Companies Act, and Section 13A(b) of the IT Act violate citizens’ constitutionally guaranteed right to information under Article 19(1)(a).

According to the Finance Act of 2017, Section 29C of the RPA, political parties are exempted from disclosing financial contributions made using electoral bonds. In a same vein, the political party is not required to keep a record of contributions for contributions made through electoral bonds under Section 13A of the IT Act as modified. Section 182 of the firms Act 2013 was modified by the Finance Act 2017 to remove the previous requirement that firms disclose specific information about the amount they donate to political parties in their profit and loss statements specifically of the political party that received the donation. Companies that have donated money to political parties were only obligated to reveal the total amount donated, not any specific information about the political party to which the payment was made.

The Electoral Bond Scheme and the Finance Act of 2017 changes are being contested on the grounds that failing to provide information regarding electoral donations violates voters’ rights to information, as stated in Article 19(1)(a) of the Constitution.

How the EB are violation of the voter’s right to information?

We all know that people’ rights to information are guaranteed by Article 19(1)(a) of the constitution.

In determining whether to disclose evidence pertaining to State matters, the Court outlined the parameters of the right to information. According to the Indian Evidence Act, if disclosing the evidence would be against the public interest, it need not be released to the party in question, even if it is pertinent and important to the proceedings. This Court viewed the debate over the release of State-related materials in the 1960s as a confrontation between the public and private interests. This Court noted that the fundamental tenet of the Indian Evidence Act’s provisions pertaining to the disclosure of evidence pertaining to State matters is that, in the event that such disclosure is withheld, the party’s private interest would be violated. Therefore, a conflict between private and public interests arises when a party requests document disclosure and that request is denied on the grounds that it would violate public interest. In later decisions, the courts saw the Indian Evidence Act’s disclosure rules as a contradiction between two different interpretations of the public interest. This Court determined that information sharing benefits the party involved in the proceedings. Furthermore, transparency promotes the public interest in the administration of justice.

In SP Gupta vs Union of India “in order to prevent the publication of the letters between the Law Minister, the Chief Justice of the Delhi High Court, and the Chief Justice of India about the reappointment of Additional Judges, the Union of India claimed immunity. During his discussion of the legal position on charges of non-disclosure, Justice P N Bhagwati said that the Constitution provides the right to know, which is essential to obtaining “true facts” about the nation’s administration”. “The opinion acknowledged that two crucial components of democratic governance are accountability and openness. The learned Judge noted that democratic governance is a continuous process in which citizens not only select representatives to represent them but also hold the government responsible for its deeds and inactions, for which the public needs to be informed”.

Also, by referring to Union of India v. Association for Democratic Reforms (ADR), the Court linked Article 19(1)(a) of the Constitution to voters right to know about the backgrounds, including criminal records, of contesting elections.

Therefore, by the justification of  above two case laws by the petitioner the court observed that “the Union government’s scheme, and preceding amendments made to the Representation of the People Act, the Companies Act, and the Income Tax Act, violated the voters’ right to information about political funding under Article 19(1)(a) of the Constitution”. Even if reducing black money is a justifiable goal, the court determined that the restricted means test of the proportionality doctrine is not met and that there are alternative ways to accomplish this goal without electoral bonds. The Court determined that the infringement of the right to information is not warranted. “Chief Justice Chandrachud acknowledged that the right to informational privacy extends to financial contributions, which are a component of political activity, and stated that a double proportionality method was employed to balance the competing rights to information and informational privacy”. 

The court dismissed the Union’s contention that the scheme’s Clause 7(4)(c) balances the two rights, stating that the provision favors the right to informational privacy because it only partially satisfies the proportionality standard’s appropriateness element. As a result, “Chief Justice Chandrachud ruled that the union government had not proven that the policy enacted in clause 7(4)(1) of the electoral scheme is the least onerous”. 

As a result, it has been decided that the amendments to the Companies Act, the Representation of Peoples Act, and the Income Tax Act are unconstitutional.

Furthermore, by providing companies with financial clout an unbeatable edge over regular citizens in the political and electoral process, the plan and its revisions fostered “economic inequality”. One person, one vote a premise that upholds free and fair elections and political equality- is violated by this.

The Union administration argued that the anonymity of electoral bonds encouraged political donors to donate money through banking channels, a contention that the court dismissed.
The court determined that a person’s basic right to privacy includes protection for their political affiliation. However, it declared that voters’ right to privacy and their right to knowledge should coexist together. 


 The deletion of the proviso to Section 182(1) of the Companies Act, which permits unlimited corporate contributions to political parties, is arbitrary and violates Article 14. All of the following are unconstitutional and in violation of Article 19(1)(a): the Electoral Bond Scheme; the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017); Section 182(3) of the Companies Act (as amended by Section 154 of Finance Act 2017); and Section 13A(b) (as amended by Section 11 of Finance Act 2017).

And following are the directions by the court-

The issuing bank shall immediately cease issuing Election Bonds.  SBI shall furnish the ECI with a list of all Election Bonds purchased from the date of this Court’s interim order on April 12, 2019, to the present. The information must contain the date each electoral bond was purchased, the buyer’s name, and the denomination of the bond that was bought.

Political parties that have received contributions through Electoral Bonds after this Court’s interim decision on April 12, 2019, up to this point, will have their information submitted by SBI to the ECI. Every Election Bond that political parties encash must have its details disclosed by SBI, including the date of encashment and the Bond’s denomination;

Election bonds that have not yet been cashed by the political party but are still within their fifteen-day validity period will be returned, either by the political party or the buyer, depending on who is in bond ownership to the bank that issued it. The payment will be refunded to the buyer’s account by the issuing bank upon the return of the valid bond and upon the return of the valid bond; the buyer’s account will be credited with the refund.

And with this our judiciary has once again cleared the air and brought us (the citizens of India) one more step closer to the transparency and our rights.

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