Supreme Court in the Association for Democratic Reforms & Anr. v. Union of India (UoI) & Ors., unanimously struck down the Electoral Bonds (EB) Scheme.
Electoral Bond Scheme (EBS)
Electoral bond means a bond issued in the nature of promissory note which shall be a bearer banking instrument and shall not carry the name of the buyer or payee.
Features of Electoral Bonds
Issued to the Purchaser on a non-refundable basis.
Could be purchased by a A citizen of India or a body incorporated in India will be eligible to purchase the bond, from authorised branches of the State Bank of India (SBI).
Could be used for donating only to the registered political parties which secured not less than 1% of votes polled in the last general election to the Lok Sabha or a Legislative Assembly.
The rationale of the scheme was to enhance transparency in electoral funding since electoral bond transactions can only be made through legitimate banking channels.
Each EB had a unique alphanumeric number visible under ultraviolet rays.
Highlights of the judgement
Key question
SC verdict
Whether the non-disclosure of information on voluntary contributions to political parties is violative of the right to information?
Electoral Bond Scheme, by anonymising contributions, violates the right to information traceable to Article19(1)(a) and thus, is unconstitutional.
Accordingly, amendments made by the Finance Act, 2017 to the Income Tax (IT) Act 1961, the Representation of Peoples Act 1951, and the Companies Act 2013, to allow donations through Electoral Bonds have been held to be unconstitutional.
Whether unlimited corporate funding to political parties as envisaged by the amendment to the Companies Act violates the principles of free and fair elections?
Amendment to Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14.
The court emphasised the amendment's authorisation of unrestrained corporate influence in elections, which contravenes the principles of free and fair elections and political equality.
Other Key highlight of the judgement
The court issued the following directions:
The issuing bank shall stop the issuance of electoral bonds.
Directed SBI (State Bank of India) to submit to the ECI (Election Commission of India) the following information (within three weeks of judgment),
Details of electoral bonds purchased since the court’s interim order (April 12, 2019), with details like date of purchase, name of purchaser and denomination of electoral bond purchased.
Details of political parties which have received contributions through Electoral Bonds since the interim order, with details like encashment date and denomination of Electoral Bond.
Directed ECI to publish the information shared by the SBI on its official website within one week of the receipt of the information.
Valid Electoral Bonds which are not encashed must be returned to the issuing bank, which would refund the amount to the purchaser’s account.
EBS not proportionally justified to curb black money: Relying on the Proportionality test, the court held that the government did not adopt the least restrictive method to achieve balance in the rights of informational privacy and the right to information of political contributions.
Right to privacy of political affiliations: It only extends to contributions made as a genuine form of political support, the disclosure of which may curb various forms of political expression and association.
It does not extend to contributions which may be made to influence policies.
Change in Political Funding in India with Finance Act 2017
Subject
(Laws amended by Finance Act 2017)
Before Finance Act 2017
After Finance Act 2017
Corporate Contributions
(Section 182 of the Companies Act 2013)
Political contributions by a company in financial year (FY) shall not exceed 7.5% of its average net profits during the 3 preceding FYs.
Required companies to disclose political contributions in its profit and loss account along withparticulars of the total amount and of name of the party.
Omitted the cap on corporate funding to political parties.
Allowed any company incorporated or established in India to contribute via Electoral Bonds.
Only required disclosure of the total amount of political contribution and not the particulars of the amount contributed to each political party.
Curbing black money
(Section 13A to the IT Act, 1961)
Political party to maintain a record of voluntary contributions in excess of Rs. 20,000 along with the name and address of the contributor.
Cash mode for political donations allowed for individuals.
Political parties not required to maintain a record of contributions from electoral bonds.
Donation in excess of Rs. 2000 must be received only by a cheque, bank draft, electronic clearing system or through electoral bond.
Transparency
(Section 29C of the RP Act, 1951)
Political parties to report on all contributions above Rs 20,000 to the ECI.
Parties will not have to submit records of electoral bonds received to the ECI.
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