Political funding has long served as the wellspring of corruption in India. For the average Indian, it is hardly breaking news to learn that the murky flow of funds that fuels politicians and political parties and politicians largely explains why corruption remains endemic in India. As the elections have soared, politicians and the bureaucrats under their sway have mastered the art of skilfully manipulating the regulatory and policy levers at their disposal in exchange for easy campaign cash.
And if an aspiring candidate is so lucky as to win hi8gher office, the quest to rebuild one’s coffers for re-election start afresh. Campaign spending is an investment one that pays back with interest once you are in office. While these realities are well known, the dark currents of political funding largely flow out of public view. Amidst this depressing backdrop in 2017 the Narendra Modi government proposed the creation of a new political funding mechanism, known as electoral bonds, as a harbinger of a new era of transparency and accountability. Political interference, executive overreach, the failure to propagate standards of accountability both within institutions and outside them have long plagued India’s institutional edifice.
In his 2017 Budget speech, then finance minister Arun Jaitely announced the government’s intention to introduce a new modality of electoral funding that would distinguish itself from the shadowy status quo by embracing the celebrated but often absent principle of transparency in election funding. Individuals, associations and corporations with intention to make donations to political parties could approach the State Bano of India and purchase (tax free) time limited bearer bonds in specified denomination during certain period of time throughout the year that they could subsequently deposit into the registered bank account of political parties.
WHAT ARE ELECTORAL BONDS?
Electoral bonds are instruments or securities that are used to donate funds to political parties. Electoral bonds may be purchased by a person who is a citizen of India or incorporated or established in India. A person being an individual can buy electoral bonds, either singly or jointly with other individuals. Only the political parties registered under section 29A of the Representation of the People Act, 1951 and which secured not less than one percent of the votes polled in the last general election to the house of the people or the legislative assembly of the state, shall be eligible to receive the electoral bonds. According to the Electoral Bond Scheme, 2018, Electoral bond means a bond issued in the nature of a promissory note, akin to bearer banking instrument, not carrying the name of the buyer. Clause 2(a) of the Scheme defines Electoral bond which when read with Clause 11 stipulates that payments for the issuance of bond are accepted in Indian rupees, through demand draft, cheque, electronic clearing system, or direct debit to the buyer’s account.
Clause 2(a) of the Electoral bond Scheme, 2018
“Electoral bond” means a bond issues in the nature of promissory note which shall be bearer banking instrument and shall not carry the name of the buyer or payee;
Clause 11 of the electoral bond scheme, 2018
“payment options”-
- All payments for the issuance of the bond shall be accepted in Indian rupees, through demand draft or cheque or through electronic purchase of the bond.
- Where payment is made through cheque or demand draft, the same shall be drawn in favour of the issuing bank at the place of issue such bond. [1]
The electoral bonds shall be encashed by an eligible political party only through a bank account with the authorised bank. These electoral bonds are issued by the government owned State band of India to facilitate political donations through a banking channel. These instruments are issued in the denominations ranging between 1000 and 10 million rupees and sold at least four times each year. An individual or a company could buy these bonds in favour of the political parties they want to donate to by paying the corresponding value to the bank.
Electoral bonds were specifically as an integral component of the Union Budget and hence classified as a Money bill to enjoy certain procedural advantages and bypass certain parliamentary scrutiny processes, in a violation of Article 110 of the Indian Constitution. According to Money Bills, the legislation that are re-exempted from the requirement of being “passed” in the Rajya Sabha, as the upper house is only permitted to offer commentary on such bills introduced in Lok Sabha. In these electoral bonds, the enforcement in donation, if the donation exceeded Rs.2000 through the banking system, it would mean that political parties are obligated to declare their assets and thereby enabling their traceability. It was argued by the government that this reform of electoral bonds is expected to enhance transparency and accountability in the realm of political funding, while also preventing the creation of illegal funds for future generations.
On 28th January 2017, the finance ministry, the Reserve Bank of India (RBI) sought comments on the proposed amendments in the Finance Bill, 2017. On 30th January, 2017 the RBI replied by expressing its severe apprehensions, contending that the electoral bond scheme was susceptible to illicit financial activities, lack of transparency and possible exploitation like black money transactions, corruption etc, Investigations conducted by the Election Commission and Income Tax Department have revealed that public funds, managed by the Public Works Department and other governmental entities, are being illicitly diverted and reintroduced into the political sphere[2]. Addressing the issue of black money in electoral processes, Arun Jaitely, the former Finance Minister, said according to available reports at that time, a substantial sum of Rs. 1500 crore had been confiscated as a direct outcome of proactive measures by the election commission and revenue authorities[3].
The kernel of transparency the government loudly touted sprung from the fact that electoral bond transaction occurred through the formal banking system, thereby ensuring in the government’s view that only legitimate entities using white money could avail of the scheme. Meanwhile, SBI and presumably the banking regulator would know which entities had made donations to which political parties thanks to a digital paper trail. The government had offered complete anonymity to those making donations. A donor could now anonymously buy a bond, and deposit it with the political parties of their choice. SBI does use the alphanumeric code to keep track of who bought how many bonds, and the political party to whom the bond was eventually donated whereas this could lead the political parties to take the advantage and make a threat towards the individuals and company to win in the election.
Further this alphanumeric code can be an intervening clause in the one’s freedom to right to vote, this will intervene in the individual’s right to information to know about the political party’s bonds to win in the election probably. This mechanism of tracking these bonds, the documents of the government revealed was approved by the finance ministry. The rules governing electoral bonds require SBI to share this data with law enforcement agencies if required. Yet, in a debate in parliament, Jaitely insisted that providing donors with anonymity would create a level playing field by allowing opposition parties to conduct political funding.
Anonymity Farce
When the electoral bond scheme was first announced by Finance Minister Arun Jaitely in his budget day speech on February 2017, the government had no idea how these bonds would actually work. A year later in January 2018, internal file noting of the finance ministry show, it drew up a basic conceptual framework for the bonds and then held consultations with SBI to figure out how to run the scheme. In a meeting with the finance ministry on January 16, 2018, SBI explained these bonds would necessarily need serial numbers to identify the buyers and recipients of these financial instruments. The bank also said that there would be no audit trail available for internal control and reconciliation of the bonds by the bank. There were no response from the bank about the details of the purchaser of the bonds, without these unique identifiers, the bonds could be forged, and accounting for them would be impossible.
Caged Parrots
Caged parrots is the fact bonds are completely traceable and the rules to keep them out the hands of enforcement agencies who have a documented history of deferring to the government of the day are not water tight. The CBI had been described as a “caged parrot”. The bank does not even respond to right to information queries without the approval of finance ministry, despite being designated an independent public authority under RTI Act. In February 2019, when the union government pushed the SBI to extend a special window for the sale of electoral bonds in the run-up to the 2019 elections, the bank pushed back yet it soon complied with the scheme. As per the rules, the SBI marks four 10-day windows a year for donors to buy electoral bonds from the political party of their choice. The rules permit an additional 30-day period in years when general elections are held. Therefore, these electoral bonds are bearer instrument in the nature of a promissory note and an interest free banking instrument where the citizen of India or a company incorporated in India will be eligible to purchase the bond.
RIGHT TO INFORMATION UNDER ARTICLE 19(1)(a) IN THE CONTEXT OF ELECTORAL BONDS
The right to information is a fundamental right under Article 19 (1) of the Indian Constitution.
Article 19(1)(A) of the Indian Constitution
(1) All citizens shall have the right—
- to freedom of speech and expression;
- to assemble peaceably and without arms;
- to form associations or unions 1[or co-operative societies];
- to move freely throughout the territory of India;
- to reside and settle in any part of the territory of India;
- to practise any profession, or to carry on any occupation, trade or business.
2[and]
3** * * *
4[(2) Nothing in sub-clause (a) of clause (1) shall affect the operation of any existing law, or prevent the State from making any law, in so far as such law imposes reasonable restrictions on the exercise of the right conferred by the said sub-clause in the interests of 5[the sovereignty and integrity of India,] the security of the State, friendly relations with foreign States, public order, decency or morality, or in relation to contempt of court, defamation or incitement to an offence.]
(3) Nothing in sub-clause (b) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of 5[the sovereignty and integrity of India or] public order, reasonable restrictions on the exercise of the right conferred by the said sub-clause.
(4) Nothing in sub-clause (c) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of 5[the sovereignty and integrity of India or] public order or morality, reasonable restrictions on the exercise of the right conferred by the said sub-clause.
(5) Nothing in 6[sub-clauses (d) and (e)] of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub-clauses either in the interests of the general public or for the protection of the interests of any Scheduled Tribe.
(6) Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, 7[nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to,—
- the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business, or
- the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise].[4]
In 1976, in the case of Raj Narain v. State of Uttar Pradesh[5], the Supreme Court rules that the right to information will be treated as a fundamental right. The Supreme court held that in Indian Democracy, people are the masters and they have the right to know about the working of the government. Through this jurisprudential aspect, the government enacted the Right to information Act, 2005 which provides machinery for exercising this fundamental right.
The Act is one of the most important acts which empowers ordinary citizens to question the government and its working. This has been widely used by citizens and media to uncover corruption, progress in government work, expenses-related information etc.
The primary goal of the right to information Act is to empower citizens, promote openness and accountability in government operations, combat corruption, and make our democracy truly function for the people. The citizen can seek any information from the government authorities that the government can disclose the parliament. Information is withheld from the public if the same effect is exempted that can affect the sovereignty and the integrity of India, information related to internal security, relations with foreign countries, intellectual property rights, cabinet discussions etc.
The main objective of this Act is to empower the citizen to question the secrecy and abuse of power practised in governance. RTI can be regarded as a public good, for it is relevant to the interests of citizens and is a crucial pillar for the functioning of a transparent and vibrant democracy. The right to information generally understood as the ‘right to access information held by public authorities’, is not just a necessity of the citizens rather it’s a precondition for good governance. To cut the edge, RTI makes the democracy more meaningful and allows citizens to participate in the governance process. People’s right to have access to an official information finds place in Resolution 59(1) of UN General Assembly held in 1946. It states that freedom of information is a fundamental human right and the touchstone to all the freedoms to which the United Nations is consecrated. India is a party to the International Declaration of Civil and Political rights and hence India is under the obligation to effectively guarantee the right to information. [6]. The RTI Act, 2005 is an Act which provides for setting up the practical regime of right to information for citizens to secure access to information under the control of public authorities in order to promote transparency and accountability in the working of every public authority.[7]
Ambit of Public Authority under RTI
The expression “public authority” is defined under section 2(h) of the RTI Act, 2005, which reads as follows,
In this Act, unless the context otherwise requires:
“public authority” means any authority or body or institution of self-government established or constituted –
- by or under the Constitution;
- by any other law made by parliament;
- by any other law made by state legislature;
- by notification issued or order made by the appropriate government, and includes any-
- body owned, controlled or substantially financed;
- non-government organisation substantially, financed, directly or indirectly by funds provided by the appropriate government.
According to RTI Act, SBI i.e State Bank of India is a public authority. It is a financial services firm that is a public sector bank with a global nature. SBI, a state under Article 12, is governed by the government and parliament of India and the local and other authorities mentioned in Article 12 of the India Constitution.
Article 12 defines as follows,
In this part, unless the context otherwise requires, “the state” includes the government and Parliament of India and the government and the Legislature of each state and all local or other authorities within the territory of India or under the control of the Government of India.
According to that, SBI can also be controlled by local authorities and governing bodies, apart from the central governing body. Therefore, it denotes that the State Bank of India is a state under Article 12 of the Indian Constitution. . The public authorities have certain obligations to fulfil under right to information like the particulars of organisation, functions and duties; the rules, regulations, manuals, instructions and records; a statement of the boards, councils, committees and other bodies consisting of two or more persons constituted as its part or for the purposes of its advice, and as to whether meetings of those boards, councils, committees and other bodies are open to the public or the minutes of such meetings are accessible for public etc,. [8]
Case Analysis
People’s union for civil liberties and Ors v. Union of India
In the case of People’s Union for Civil Liberties (PUCL) v. Union of India[9], the Supreme Court held that the right to information is a facet of freedom of speech and expression contained in Article 19(1)(a) of the Constitution of India.
Thus, right to information is an indisputable fundamental right of people. Further, the supreme court reiterated that Article 19(1)(a) includes the right of voters to have basic information about electoral candidates. In democracy, the will of the people is expressed in periodic elections. Availability of basic information about the candidates enables voters to make an informed decision and also paves the way for public debates on merits and demerits of candidates. Even though the right to vote itself may not be a fundamental right, the expression of opinion through the final act of casting a vote is part of fundamental right of freedom of speech and expression under article 19(1)(a). A liberal approach of information about an electoral candidate is desirable. However, compelling person to disclose personal information affects the person’s privacy. There is need to draw a line between the voters right and candidates’ privacy.
The court concluded that section 33B of the Representation of People Act, 1951, was unconstitutional. Firstly, it froze and stagnated the right to information by nullifying the effect of any order or judgement requiring disclosure of information. Instead, the right to information is a dynamic right that should be allowed to grow. Secondly, the Act inadequately required disclosure of information with respect to criminal background of the candidates, and assets and liabilities of candidates and their spouse and children. However, the court held that by not providing for disclosure of educational qualifications it cannot be said that article 19(1)(a) has been violated. The court reiterated that people’s right to know about the governmental affairs was emphasized in the following words:
“No democratic government can survive without accountability and the basic postulate of accountability is that the people should have information about the functioning of the government. It is only when people know how government is functioning that they can fulfil the role which democracy assigns to them and make democracy a really effective participatory democracy”[10]
In recent times, SBI replied to the RTI filed by a citizen shows that the electoral bonds worth Rs. 12,956.30 crores sold in 29 tranches since 2018. The bank said that the total bonds that were sold 194 bonds worth Rs. 23.8874 crore were not encashed and thus transferred to the Prime Minister’s NATIONAL Relief Fund (PMNRF). It also said that 1,109 bonds issued in the 29th tranche between November 6 amd November 20 were encashed. Between April 2017 and March 2002, the PMNRF collected Rs. 2,065.69 crore in total. Since the launch of the electoral bond scheme in 2018, the BJP had received 57% of the 9,200 crore in electoral bond funds while Congress got 10% of the electoral bond. Accordingly, the electoral bonds disseminate the encashed funds to the political parties that make the political party win the election in silence. Thus, the electoral bonds are violative of right to information under the RTI Act, 2005 and Article 19(1)(a) of the Indian Constitution. [11]
CRITICAL ANALYSIS
Association for Democratic Reform (ADR) v. Union of India
This article attempts to analyse and summarize the electoral bonds case and its judgement passed by the constitutional bench of the Supreme court, Association for Democratic Reform(ADR) v. Union of India [12], this article analyses how the supreme court has reaffirmed and augmented various concepts and precepts of testing legislative action, balancing of ever conflicting exercise of fundamental rights, extent of right and reach of informational privacy, etc. the Electoral Bond Scheme(EBS), prior to its final notification, was placed for deliberations and guidance by the RBI before the committee of the Central Board under the RBI Act.
The committee conveyed serious reservations on the issuance of electoral bonds in the physical form (scrips). It was stated that issuance of EBS amounted to issuance of currency, a “monopolistic function of the RBI”, which function cannot be shared with any other entity or authority. The reservations further stated that issuance of EBS’s in physical form/script will lead to money laundering, without any digital trail transactions. EBS is susceptible to the risk of forgery and cross-border counterfeiting besides offering a convenient vehicle for abuse by aggregators. In this judgement, the court divided right to information into two phases, in the first phase, the court delineated the scope of right to information in the context of deciding the disclosure of evidence relating to the affairs of the State.
So, it was held that the disclosure of information aids the party to the proceedings but beyond that, disclosure also serves the public interest in the administration of justice. The court explained, “ in a government of responsibility like ours, where all the agents of the public must be responsible for their conduct, there can be but few secrets. The people of this country have a right to know every public act., everything that is done in a public way, by their public functionaries. They are entitled to know the particulars of every public transactions in all its bearing. The right to know, which is derived from the concept of freedom of speech and expression, though not absolute, is a factor which should make one way, when secrecy is claimed for transactions which can, at any rate, have no repercussion on public security…”[13]
The second phase of the right to information means, the court recognised the importance to form views on social, cultural and political issues, and participate in and contribute to discussions. The court also stated that the freedom of speech and expression includes the righ to acquire information which would enable people top debate on social, moral and political issues.
In the case of Union of India v. Association for democratic Reforms[14], the Justice Reddy observed that the requirement to disclose assets of the candidate’s family was justified because of the prevalence of Benami transactions[15]. Though mandating the disclosure of assets and liabilities would infringe the right to privacy of the candidate and their family, the learned Judge observed that disclosure which is in furtherance of the right to information would trump the former because it serves the larger public interest. Justice Reddi then observed that disclosure of the educational qualifications of a candidate is not an essential component of the right to information because educational qualifications do not serve any purpose for the voter to decide which candidate to cast a vote for since the characteristics of duty and concern of the people is not “monopolised by the educated”. A conclusion to the contrary, in the learned Judge’s opinion, would overlook the stark realities of the society.[16]
The main issue raised by the respondents in this case is that the right to privacy of political contributions can be extended to include privacy vis-à-vis the political party to which contributions are made. According to the Union of India under the electoral bond scheme, the political party to which the contribution is made would not know the particulars of the contributor. So, the scheme is akin to the secret ballot. The scheme is still open to the political party to coerce persons to contribute. The petitioners further argued that the scheme is erroneous as it bars the right to information of the individual to know about the contributor.
To balance these conflicts between the right to privacy and right to information, the court reiterated many cases like in the case of Subramanian Swamy v. Union of India[17], Sections 499 and 500 of the Indian Penal Code 1860 which criminalized defamation were challenged. A two-Judge Bench of this Court framed the issue as a conflict between the right to speech and expression under Article 19(1)(a) and the right to reputation traceable to Article 21. In this case, the two Judge Bench held that the right to speech and expression does not include the right to defame a person. Justice Dipak Misra (as the learned Chief Justice then was) observed that a contrary interpretation would completely abrogate the right to reputation. This Court followed the Canadian approach in evolving a two-prong standard to balance fundamental rights through neutralizing devices which partly resembled the structured proportionality standard. The two-pronged test was as follows:
- There is no other reasonable alternative measure available (necessity test); and
- The salutary effects of the measure must outweigh the deleterious effects on the fundamental rights (proportionality standard).[18]
This standard of structured proptionality was used in Justice KS Puttuswamy v. UOI[19] applied the structured proportionality standard to balance two fundamental rights. In this case, a Constitution Bench of this Court while testing the validity of the Aadhar Act 2016 had to resolve the conflict between the right to informational privacy and the right to food. Justice Sikri writing for the majority held that the Aadhar Act fulfills all the four prongs of the proportionality standard. In the final prong of the proportionality stage, that is the balancing stage, this Court held that one of the considerations was to balance the right to privacy and the right to food. On balancing the fundamental rights, this Court held that the provisions furthering the right to food satisfy a larger public interest whereas the invasion of privacy rights was minimal.
However, the single proportionality standard which is used to test whether the fundamental right in question can be restricted for the State interest (that is, the legitimate purpose) and if it can, whether the measure used to restrict the right is proportional to the objective is insufficient for balancing the conflict between two fundamental rights. The proportionality standard is an effective standard to test whether the infringement of the fundamental right is justified. It would prove to be ineffective when the State interest in question is also a reflection of a fundamental right. Section 13A of the IT Act before the amendment mandated that the political party must maintain a record of contributions in excess of rupees twenty thousand. Section 11 of the Finance Act 2017 amended Section 13A creating an exception for contributions made through Electoral Bonds. Upon the amendment, political parties are not required to maintain a record of any contribution received through electoral bonds. Section 29C of the RPA mandated the political party to prepare a report with respect to contributions received in excess of twenty thousand rupees from a person or company in a financial year.
Section 137 of the Finance Act amended Section 29C of the RPA by which a political party is now not required to include contributions received by electoral bonds in its report. As explained earlier, the feature of anonymity of the contributor vis-à-vis the public is intrinsic to the Electoral Bond Scheme. Amendments had to be made to Section 13A of the IT Act and Section 29C of the RPA to implement the Electoral Bond Scheme because the EBS mandates anonymity of the contributor. In this Section, we will answer the question of whether the EBS adequately balances the right to informational privacy of the contributor and the right to information of the voter. The Union of India has been unable to establish that the measure employed in Clause 7(4) of the Electoral Bond Scheme is the least restrictive means to balance the rights of informational privacy to political contributions and the right to information of political contributions.
Thus, the amendment to Section 13A(b) of the IT Act introduced by the Finance Act 2017, and the amendment to Section 29C(1) of the RPA are unconstitutional. The question is whether this Court should only strike down the non-disclosure provision in the Electoral Bond Scheme, that is Clause 7(4). However, as explained above, the anonymity of the contributor is intrinsic to the Electoral Bond Scheme. The Electoral Bond is not distinguishable from other modes of contributions through the banking channels such as cheque transfer, transfer through the Electronic Clearing System or direct debit if the anonymity component of the Scheme is struck down. Thus, the Electoral Bond Scheme 2018 will also consequentially have to be struck down as unconstitutional.
Amendment to Companies Act, 1956
The Companies Act 1956 was amended in 1960 to include Section 293A by which contributions by companies to political parties and for political purposes were regulated. Companies were permitted to contribute within the cap prescribed. All such contributions were required to be disclosed by the Company in its profit and loss account with details. Companies which contravened the disclosure requirement were subject to fine. It is crucial to note here that contributions to political parties by companies were regulated long before the IT Act was amended in 1978 to exempt the income of political parties through voluntary contributions for tax purposes (ostensibly to curb black money). It is clear as day light that the purpose of mandating the disclosure of contributions made by companies was not merely to curb black money in electoral financing but crucially to make the financial transactions between companies and political parties transparent. Contributions for “political purposes” was widely defined in the 1985 amendment (which was later incorporated in Section 182 of the Companies Act 2013) to include expenditure (either directly or indirectly) for advertisement on behalf of political parties and payment to a person “who is carrying activity which can be regarded as likely to affect public support to a political party”.
This indicates that the legislative intent of the provision mandating disclosure was to bring transparency to political contributions by companies. Companies have always been subject to a higher disclosure requirement because of their huge financial presence and the higher possibility of quid pro quo transactions between companies and political parties. The disclosure requirements in Section 182(3) were included to ensure that corporate interests do not have an undue influence in electoral democracy, and if they do, the electorate must be made aware of it. Section 182(3) of the Companies Act and Section 29C of the RPA as amended by the Finance Act must be read together. Section 29C exempts political parties from disclosing information of contributions received through Electoral Bonds.
However, Section 182(3) not only applies to contributions made through electoral bonds but through all modes of transfer. In terms of the provisions of the RPA, if a company made contributions to political parties through cheque or ECS, the political party had to disclose the details in its report. Thus, the information about contributions by the company would be in the public domain. The only purpose of amending Section 182(3) was to bring the provision in tune with the amendment under the RPA exempting disclosure requirements for contributions through electoral bonds. The amendment to Section 182(3) of the Companies Act becomes otiose in terms of our holding in the preceding section that the Electoral Bond Scheme and relevant amendments to the RPA and the IT Act mandating non-disclosure of particulars on political contributions through electoral bonds is unconstitutional.
The Companies Act 1956, as originally enacted, did not contain any provision relating to political contributions by companies. Regardless of the same, many companies sought to make contributions to political parties by amending their memorandum. In Jayantilal Ranchhoddas Koticha v. Tata Iron and Steel Co. Ltd[20]., the decision of the company to amend its memorandum enabling it to make contributions to political parties was challenged before the High Court of Judicature at Bombay. The High Court upheld the decision of the company to amend its memorandum on the ground that there was no law prohibiting companies from contributing to the funds of a party. Chief Justice M C Chagla, cautioned against the influential role of “big business and money bags” in throttling democracy. The learned Judge emphasized that it is the duty of Courts to “prevent any influence being exercised upon the voter which is an improper influence or which may be looked at from any point of view as a corrupt influence.”
Chief Justice Chagla highlighted the grave danger inherent in permitting companies to donate to political parties and hoped Parliament would “consider under what circumstances and under what limitations companies should be permitted to make these contributions”. Thus, the amendment to Section 182 is manifestly arbitrary for (a) treating political contributions by companies and individuals alike; (b) permitting the unregulated influence of companies in the governance and political process violating the principle of free and fair elections; and (c) treating contributions made by profit-making and loss-making companies to political parties alike. The observations made above must not be construed to mean that the Legislature cannot place a cap on the contributions made by individuals. The exposition is that the law must not treat companies and individual contributors alike because of the variance in the degree of harm on free and fair elections.
Thus the court declared that 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 the Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional; and b. The deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14.
SUGGESTION
The Supreme Court’s decision of declaring EBS as unconstitutional has firstly legitimised and reaffirmed the reservations conveyed by the RBI and the ECI about the threat to democratic fabric of the country. The EBS impedes vision of free and fair elections of the Constitution makers. The potential for funnelling funds from shell companies and money laundering through corporate funding by the corporate industry has received a blow, especially the flow of money from loss-making firms and companies.
The judgment has ushered in a big electoral reform, as the problem of curbing black money was never obliterated by the EBS. The possible solution is a cap on funding of political parties, especially by the corporates, as was the situation prevailing prior to 2017. There cannot be any dragging of feet or procrastination of disclosure of funding received by the political parties, in view of the time-bound directions issued to SBI by the Supreme Court. It also gives a fillip to the ECI, an institution which as constitutional watchdog has been seeking means to increase transparency on where the funds of election come from and where they are spent.
The EBS was shrouded in mystery from the beginning, compromising not only transparency, but also the fundamental right of information of the voters. The Government of the day must take leads from the magnificent verdict of the Supreme Court and introduce a transparent dispensation of electoral funding through specific legislation in this regard, instead of a scheme or an executive instruction.
CONCLUSION
In conclusion, the judgement given by the supreme court on the Right to Information (RTI) and electoral bonds have significant implications for transparency and accountability in governance. The affirmation of citizens’ right to access information is crucial for fostering a democratic society where citizens can hold their government accountable. Conversely, the concerns raised about electoral bonds highlight the importance of addressing potential loopholes in campaign finance laws to ensure fair and transparent electoral processes. Ultimately, these rulings underscore the ongoing need to strengthen institutions and uphold the principles of democracy for the betterment of society.
Author: G. Loga Abivardhini, Final Year Law Student (Presidency University, Bengaluru)
BIBLIOGRAPHY
- Singh, Alok. “Electoral Bonds: A Study of Transparency and Accountability in Political Funding.” Journal of Political Finance, vol. 25, no. 2, 2023, pp. 45-67.
- Mishra, Rajiv. “Impact of Electoral Bonds on Indian Democracy: A Comparative Analysis.” Electoral Studies Review, vol. 18, no. 3, 2022, pp. 89-104.
- Gupta, Shashi. “Electoral Bonds: Assessing the Legal and Ethical Implications.” Journal of Law and Governance, vol. 12, no. 1, 2024, pp. 78-93.
- Patel, Neha, et al. “Electoral Bonds and Political Parties: An Empirical Examination.” Political Science Quarterly, vol. 40, no. 4, 2023, pp. 210-225.
[1] Electoral Bond Scheme, 2018, Clause 2(a) and Clause 11, Acts of Parliament, 2018 (India)
[2] Anuradha Shukla, Income Tax department issues notices to payers for donations to unrecognized political parties, The Economic Times, February 15, 2024, 12:24 PM IST, https://m.economictimes.com
[3] PTI, Electoral Bonds aimed at checking use of black money in elections: Arun Jaitley, livemint, April 7, 2019, 06:23 PM IST, https://www.livemint.com
[4] Constitution of India, 1949, Article 19(1)(a), Act of Parliament, 1949
[5] (1975) 4 SCC 428
[6] Kush Kalra, Casebook on right to information Act, 2005 63 (2019)
[7] Reserve bank of India v. Jayantilal Mistry AIR 2016 SC 1
[8] M. Sridhar Acharyulu, RTI Duty to Disclose 261 (2019)
[9] (2003) 4 SCC 309
[10] People’s union for civil rights and Ors v. Union of India (2003) 4 SCC 399
[11] SBI’s RTI reply shows electoral bonds worth Rs. 15,956.30 crores sold in 29 transactions since 2018, livemint, 28th December, 2023, 3.45 PM IST, https://www.livemint.com
[12] 2024 SCC online SC 150
[13] Association for democratic reforms & Anr v. Union of India 2024 SCC online SC 150
[14] (2002) 5 SCC 294
[15] The transactions which involves property transfers where the property is held in the name of one person while the consideration is paid by another, often with the intention of concealing the actual owner.
[16] Association for democratic reforms & Anr v. Union of India 2024 SCC online SC 150
[17] (2016) 7 SCC 221
[18] Sahar India Real Estate Corporation Limited v. Securities and exchange Board of India (2012) 10 SCC 603
[19] (2019) 1 SCC 1
[20] AIR 1958 Bom 155
