Supreme Court Strikes Down Electoral Bonds Scheme As Unconstitutional, Asks SBI To Stop Issuing EBs

Chambers of Ishaan Garg

Ch. No. 217, Western Wing, District & Sessions Court, Tis Hazari, New Delhi, Delhi 110054

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The Supreme Court on Thursday (February 15) delivered its highly-anticipated judgment in the electoral bonds case, holding that anonymous electoral bonds are violative of the right to information under Article 19(1)(a) of the Constitution. Accordingly, the scheme has been struck down as unconstitutional.

A constitution bench comprising Chief Justice DY Chandrachud, and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra heard a batch of cases challenging the controversial electoral bonds scheme over a period of three days, before reserving the verdict in November. This judgment was delivered on Thursday morning.

While the court arrived at an unanimous decision, with Chief Justice DY Chandrachud delivering the lead judgment, Justice Khanna has penned a concurring opinion with a slightly different reasoning. Both judgments answered two key questions, namely, first, whether the non-disclosure of information on voluntary contributions to political parties according to the electoral bond scheme and the amendments to Section 29C of Representation of the People Act, Section 183(3) of the Companies Act, Section 13A(b) of the Income Tax Act are violative of the right to information under Article 19(1)(a) of the Constitution, and second, whether unlimited corporate funding to political parties as envisaged by the amendment to Section 182(1) of the Companies Act violates the principles of free and fair elections.

"Information about funding of political parties is essential for the effective exercise of the choice of voting," Chief Justice Chandrachud stressed right at the outset, emphasising the importance of open governance. Authoring an opinion on behalf of himself and Justices Gavai, Pardiwala, and Misra, the chief justice crucially held that the electoral bonds scheme violated Article 19(1)(a) of the Constitution -

"At a primary level, 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 voter by anonymising contributions through electoral bonds are violative of Article 19(1)(a)."

The court held that the restrictive means test of the doctrine of proportionality is not satisfied and that there are other means other than electoral bonds to achieve the purpose of curbing black money, even assuming it to be a legitimate objective. The infringement to the right to information is not justified, the Court held. Acknowledging the right of informational privacy extends to financial contributions which is a facet of political affiliation, Chief Justice Chandrachud revealed that a double proportionality standard was applied to balance the conflicting rights to information and to informational privacy. Rejecting the Union's argument that Clause 7(4)(c) of the scheme balances the two rights, the court said that the provision tilts the balance in favour of the right to informational privacy because the suitability prong of the proportionality standard is only partly fulfilled. Chief Justice Chandrachud accordingly held that the union government has failed to establish that the measure adopted in clause 7(4)(1) of the electoral scheme is the least restrictive measure.

Accordingly, the amendments to the Income Tax Act, the Representation of Peoples Act, the Companies Act have been held to be unconstitutional.

Case Title: Association for Democratic Reforms & Anr. v. Union of India & Ors. | Writ Petition (Civil) No. 880 of 2017 (2024 SC)