Supreme Court Declares Electoral Bonds Scheme Unconstitutional: A Win for Voter Information Rights

In a landmark judgment, a five-judge Constitution bench comprising of Chief Justice of India (CJI) DY Chandrachud and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra of the Hon'ble Supreme Court of India has declared the Electoral Bonds Scheme unconstitutional, upholding the rights of voters to information and safeguarding the integrity of democratic elections. This decision brings to a close a heated debate surrounding the scheme, introduced in 2018 through the Finance Act, 2017.

In recent years, the issue of transparency in political funding has been a topic of heated debate in India. One significant development in this arena is the introduction of the Electoral Bonds Scheme, introduced in 2018, which was touted as a mechanism to clean up political funding by providing a layer of anonymity to donors. Ever since the announcement of the Electoral Bonds Scheme, it sparked considerable controversy among the legal fraternity as well as political circles of the country. This article explores the arguments against its constitutionality before the Hon'ble Supreme Court and how the challenge was dealt with.

While intended to promote transparency by eliminating anonymous cash donations, the Scheme faced criticism for its lack of accountability. Introduced through amendments to the RBI Act, Income Tax Act, and Representation of People Act, the scheme allowed for anonymous purchase of electoral bonds from designated banks, which could then be redeemed by political parties for funding. This lack of transparency in the Electoral Bonds Scheme was challenged before Supreme Court of India in the case of Association for Democratics Reforms and Anr. Vs. Union of India and Ors. i.e. W.P. (C) No. 880 of 2017, stating that the scheme undermines the very foundation of democracy, as it obscures the sources of political influence and potentially opens the door to corruption.

As noted earlier, central to the challenge against the Electoral Bonds Scheme was the assertion that it infringes upon the voter's right to information. By shielding the source of political funding from public scrutiny, the scheme deprives voters of crucial information needed to make informed decisions at the ballot box. This raises serious concerns about the integrity of the electoral process and the fairness of democratic elections.

Electoral Bonds Scheme Sample

Moreover, the submissions made on behalf of Mr. Kapil Sibal highlighted the disproportionate nature of the Electoral Bonds Scheme. The justifications provided for the scheme, such as eliminating black money and protecting donor privacy, are deemed insufficient to justify the lack of transparency and accountability. The argument further stressed the scheme's potential impact on the public function of political parties, highlighting the necessity for transparency in their funding sources. The matter was last heard in November 2023, when, after hearing all the stakeholders involved, judgment in the case was reserved.

Attorney General for India defended the Electoral Bond Scheme, arguing it:

• Supports political parties as crucial societal players.

• Promotes transparency by channeling funds through banks instead of unregulated means.

• Ensures anonymity for contributors, encouraging "clean money" donations.

• Protects individual privacy, as citizens don't have an absolute right to know party funding details.

• Leaves influence of corporate donations to legislators, not the courts.

Finally today, a five judge Constitution Bench of Hon'ble Supreme Court of India, in its judgment in Association for Democratics Reforms (Supra), held that Electoral Bonds and amendments to other acts mandating no disclosure of political contributions through electoral bonds scheme is patently unconstitutional. The Apex Court held that:

Political contributions give a seat at the table to contributors, i.e., it enhances access to legislators. This access also translates to influence over policymaking. There is also a legitimate possibility that financial contributions to a political party would lead to quid pro quo arrangement because of the close nexus between money and politics. The electoral bond scheme and the impugned provisions to the extent that they infringe upon the right to information of the voter by anonymizing contributions through electoral bonds are violative of Article 19(1)(a) of the Constitution of India.

Hon'ble Supreme Court has directed State Bank of India to stop selling of electoral bonds forthwith, and to submit details of electoral bonds bought by individuals / companies within three weeks. The Court also directed Election Commission of India to make public the said details submitted by SBI and Political Parties on its website.

The Hon'ble Supreme Court's verdict marks a significant milestone in ensuring transparency and accountability in Indian political funding. By striking down the Electoral Bonds Scheme and related amendments, the Court has:

• Upheld the voter's right to information, empowering citizens to make informed choices at the ballot box.

• Safeguarded the integrity of elections, preventing undue influence on the political process.

• Set a crucial precedent for future political funding reforms in India.
  

While the future trajectory of these reforms remains to be seen, the Supreme Court's judgment marks a clear victory for transparency and accountability in Indian democracy.