This article on ‘Supreme Court Ruling On Electoral Bonds Scheme was written by Tosani Lal, an intern at Legal Upanishad.
INTRODUCTION
On February 15,2024, the Supreme Court of India delivered a pivotal judgment in Association for Democratic Reforms v. Union of India[1], providing a much-needed boost to our democratic principles. The unanimous verdict by five judges, including Chief Justice DY Chandrachud and Justice Sanjiv Khanna, underscored the inherent connection between our right to political equality and the freedom to vote with comprehensive information. The court deemed unconstitutional a set of parliamentary laws that had a profound and adverse impact on India’s democratic process.
Furthermore, the Supreme Court upheld a High Court order that directed the Election Commission to acquire and publicly disclose background information about candidates, such as details regarding their assets, criminal records, and educational background. In this context, the court asserted that the right to access information about public officials emanates from the constitutional right to freedom of expression. This dual affirmation by the Supreme Court marks a significant stride towards promoting transparency and safeguarding the democratic principles integral to our nation.
In this article, we will delve into the recent landmark ruling by the Supreme Court of India in the case of Association for Democratic Reforms v. Union of India. By examining the intricacies of the judgment, we aim to provide readers with a comprehensive understanding of the implications of the Supreme Court’s stance on Electoral Bonds and its significance in shaping the future of electoral transparency and accountability in the country.[2]
FACTS AND ISSUES OF THE CASE
The Association for Democratic Reforms initiated legal proceedings by filing a comprehensive petition with the High Court of Delhi, aiming to compel the implementation of specific recommendations geared towards bolstering the fairness, transparency, and equity of the electoral process in India.
At the explicit request of the Government of India, these recommendations, meticulously crafted by the Law Commission, articulated that the Election Commission should necessitate all candidates to publicly disclose a comprehensive array of personal background information. This information encompassed crucial details such as criminal history, educational qualifications, personal financial intricacies, and other pertinent data necessary for a nuanced evaluation of a candidate’s capacity and capability to serve in public office.[3]
In a landmark ruling that underscored the imperative of transparency in a democratic system, the High Court of Delhi pronounced that withholding a candidate’s background information was contrary to the interests of democracy. Consequently, the court mandated the Election Commission to actively procure and disseminate such information for the enlightenment of voters.
However, this directive faced opposition from the Union of India, prompting them to challenge the decision through an appeal presented to the Supreme Court of India. The Union argued that neither the Election Commission nor the High Court possessed the constitutional authority to compel the disclosure of such extensive personal information, contending that voters did not have an inherent right to such comprehensive disclosure.[4]
Within the ambit of this legal dispute, the Supreme Court identified and deliberated upon two pivotal issues. First and foremost, the Court examined whether the maintenance of secrecy concerning the identity of political contributors and the extent of their contributions would infringe upon the fundamental right to information.
Secondly, the Court probed into the potential ramifications of limitless corporate funding, scrutinizing whether such an approach would transgress the foundational principles of free and fair elections and, in turn, violate the right to equality. This multifaceted legal discourse seeks to unravel the intricate intersection of electoral transparency, democratic principles, and constitutional rights within the Indian context.[5]
ANALYSIS OF THE DECISION
Before the Court were challenges to amendments brought about by the Finance Act, 2017, impacting various statutes, such as the Representation of the People Act, 1951, the Income Tax Act, 1961, and the Companies Act, 2013. These changes introduced a novel financial contribution mechanism for political parties known as the “Electoral Bond Scheme.”[6]
Under the modified law, individuals or any “artificial juridical person,” including corporations, could acquire bonds issued by the State Bank of India during specified periods. These bonds, similar to promissory notes, were available in denominations ranging from Rs. 1,000 to Rs. 1 crore. Upon obtaining a bond, a buyer could donate it to any political party of their choosing, with the party having the ability to redeem the instrument on demand. Notably, recipients were not required to disclose these contributions, allowing donors to keep the details of their contributions private.[7]
Additionally, the amendments removed crucial safeguards that were in place before. Previously, companies were limited to donating no more than 7.5% of their net profits over the preceding three years, with a requirement that a corporation must exist for at least three years before making a donation. The Electoral Bond Scheme eliminated these constraints, potentially enabling the creation of shell companies for channeling money into politics and facilitating virtually unlimited corporate funding.[8]
The Court identified two key issues for consideration. Firstly, it questioned whether maintaining secrecy over the identity of political contributors and the extent of their contributions would violate the right to information. Secondly, it probed whether unlimited corporate funding would infringe upon the principle of free and fair elections, thereby violating the right to equality.[9]
Addressing the first issue, the Court reaffirmed the longstanding principle that voters in a democracy must have the right to information. Recognizing that candidates must disclose all relevant information, Chief Justice Chandrachud asserted that this standard should extend to political parties, which are integral units in the electoral process.[10]
The Union government argued that the contributor’s identity was unknown even to the beneficiary, a claim the Court dismissed. The judgment illustrated situations in which a contributor could physically hand over an electoral bond to a party’s office-bearer, who could then submit the instrument for enactment.[11]
Exploring circumstances where the electorate’s right to information could be legitimately curtailed, the Court applied a rule of proportionality. The government needed to demonstrate that restricting the right was in pursuit of a legitimate goal, the chosen option was a suitable means, and the measure struck a balance between people’s rights and its goals.[12]
Regarding the purported aims of the scheme – curbing black money and protecting donor privacy – the Court found that even if curbing black money was a legitimate purpose, the scheme was disproportionate. Existing measures, such as limiting contributions in cash and mandating contributions above Rs. 2,000 to be made through banking channels, already addressed this concern.[13]
On the second aim, balancing the right to privacy with the electorate’s right to information, the Court applied a doctrine of “double proportionality.” This involved a three-step process: analyzing the comparative importance of the actual rights claimed, examining the justifications for the infringement of rights, and independently applying the proportionality standard to both rights.[14]
Chief Justice Chandrachud acknowledged a modification in the Indian context, involving a four-step proportionality test. The final stage included evaluating the cost of the interference with the right and its proportionality to the law’s perceived objective. The Court concluded that the Electoral Bond Scheme failed to harmonize the involved interests.[15]
Examining whether the scheme was “suitable, necessary, and proportionate” to the fundamental rights at stake, the Court ruled that the law failed this test. The Representation of the People Act (RPA) previously mandated disclosure of contributions exceeding Rs. 20,000, preserving privacy rights for individual donors below this threshold. Chief Justice Chandrachud argued that the RPA’s alternative achieved the objective of securing disclosure while maintaining privacy.[16]
The Court contended that the balance in the scheme tilted excessively towards donor anonymity, compromising the electorate’s right to know how political parties were funded. The judgment highlighted the need for a more thorough reform in electoral funding, while recognizing the decision as a robust defense of the republic’s cherished ideals.[17]
CONCLUSION
In summary, the Supreme Court’s ruling on the Electoral Bonds Case signifies a crucial development in the debate on political financing in India. The amendments introduced by the Finance Act, 2017, especially the Electoral Bond Scheme, faced scrutiny for its impact on transparency and democratic integrity. Chief Justice Chandrachud emphasized voters’ right to information and rejected claims of contributor anonymity.
The Court applied a proportionality test, deeming the scheme disproportionate. It also questioned the scheme’s aims of curbing black money and protecting donor privacy, concluding that existing measures addressed concerns effectively. The verdict highlighted the imperative for a more comprehensive electoral funding reform, solidifying the decision as a staunch defense of the republic’s fundamental ideals. This calls for a reevaluation of electoral financing mechanisms to align with principles of transparency, accountability, and democratic information rights.
Reference List
[1] Association for Democratic Reforms v. Union of India 2024 LiveLaw (SC) 118
[2] IBID
[3] IBID
[4] IBID
[5] IBID
[6] A Fillip To Democracy : Supreme Court’s Electoral Bonds Case Verdict, available at (www.livelaw.in/articles/a-fillip-to-democracy-supreme-courts-electoral-bonds-case-verdict-249803?infinitescroll=1 (last visited 20th february 20, 2024)
[7] Ibid
[8] Ibid
[9] Ibid
[10] Ibid
[11] Ibid
[12] Ibid
[13] Ibid
[14] Ibid
[15] Ibid
[16] Ibid
[17] Ibid