15 Feb 2024 7:57 AM GMT
In a landmark verdict today, the Supreme Court struck down the controversial electoral bonds scheme as unconstitutional, holding that the anonymity conferred by electoral bonds violates the right to information enshrined in Article 19(1)(a) of the Constitution.
This decision comes after a constitution bench, comprising Chief Justice DY Chandrachud and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra, heard a series of petitions challenging the scheme. Chief Justice Chandrachud, delivering the lead judgment, underscored the fundamental importance of transparency in political funding. Justice Khanna penned a separate opinion, concurring with the chief justice's view but applying a slightly different rationale. The court's ruling addressed concerns about the electoral bonds' potential to facilitate quid pro quo arrangements, highlighting the need for open governance and access to information for voters.
In addition to striking down the electoral bonds scheme, the court also made crucial observations regarding Section 182 of the Companies Act and the issue of political contributions by companies.
Section 182 of the Companies Act, 2013 allows Indian companies to make financial contributions to political parties under specific conditions. These conditions necessitated that such contributions be authorised by the company's Board of Directors, not be made in cash, and be transparently disclosed in the company's Profit and Loss (P&L) account. However, through the 2017 Finance Act, certain key changes were introduced which includes the removal of the previous cap on the amount that companies can donate to political parties, set at 7.5 percent of the average profits of the preceding three fiscal years. Additionally, requirement for companies to disclose the names of the political parties to which contributions were made in their P&L accounts was also eliminated.
In this highly-awaited judgment, the apex court observed -
The court found the amendment to Section 182, permitting unlimited political contributions by companies, to be manifestly arbitrary for several reasons. First, it noted the disproportionate influence wielded by companies in the electoral process compared to individuals, emphasising the potential for transactions made with the intent of securing benefits in return. Treating individuals and companies at par made the scheme manifestly arbitrary, the court held. Chief Justice Chandrachud explained –
Second, the court highlighted the failure of the amendment to distinguish between profit-making and loss-making companies, thereby overlooking the heightened risk of quid pro quo transactions by the latter.
Finally, 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, saying –
The challenge to the electoral bond scheme was brought to the court by Association for Democratic Reforms (ADR), the Communist Party of India (Marxist), Congress leader Jaya Thakur and others, arguing that the anonymity associated with electoral bonds undermines transparency in political funding and encroaches upon voters' right to information. They also contended that the scheme facilitates contributions through shell companies, raising concerns about accountability and integrity in electoral finance.
In defence of the scheme, the union government asserted its role in promoting the use of legitimate funds in political financing, ensuring transactions occur through regulated banking channels. Additionally, the government cited the need for donor anonymity to shield contributors from potential retribution by political entities.
After a three-day-long hearing, the constitution bench reserved its verdict in the matter last November. The court also notably ordered the Election Commission of India to furnish details of political party contributions via electoral bonds up to September 30.
Other reports about the judgment can be read here.
Case Details
Association for Democratic Reforms & Anr. v. Union of India & Ors. | Writ Petition (Civil) No. 880 of 2017