Supreme Court Unanimously Strikes Down Electoral Bonds Scheme, Holds It Unconstitutional

The Supreme Court has unanimously struck down the electoral bonds scheme as unconstitutional.

The electoral bonds scheme and relevant amendments to the Representation of the People Act and the Income Tax Act mandating non-disclosure of particulars on political contributions through electoral bonds is unconstitutional, the top court ruled

The electoral bonds scheme is violative of the right to information and the right to freedom of speech and expression provided under Article 19(1)(a), a five-judge constitution bench headed by Chief Justice Chandrachud ruled.

Information about funding of political parties is essential for voters to effectively exercise their right to vote, Chief Justice Chandrachud said, reading the judgment.

At a primary level, political contributions grants access to legislators which results in an apprehension that it could lead to a quid pro quo arrangement between the donor and the legislators. Financial support to political parties can lead to quid pro quo arrangement, the top court said.

The court observed that the amendment to section 182 of the Companies Act which treats companies and individuals alike for the purposes of political donations is manifestly arbitrary, as a company exercises a much wider influence on the political process than an individual.

Contributions by companies are purely business transactions, the court held.

The Supreme Court observed that the amendment does not recognise the harm of allowing loss-making companies to contribute due to quid pro quo. As a result, this amendment has also been struck down.

The verdict came on a batch of petitions challenging the validity of the electoral bonds scheme.

The court said the State Bank of India should stop issuing electoral bonds and prepare up-to-date data and details of political parties that have received these bonds. The Election Commission of India should publish the info shared by SBI on its website by March 13, it said.

Bonds not encashed by political parties shall be returned to the purchasers, the court ruled.

The electoral bonds scheme was introduced by the government in 2017 and was subsequently notified in 2018.

As per the scheme, any person who is a citizen of India or incorporated can purchase these bonds and donate them in favour of any registered political party that has secured at least 1% of the votes polled in the last election to the Lok Sabha or the state legislative assembly.

These bonds are sold in denominations of Rs 1000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, from authorised branches of State Bank of India. Further, these bonds assure complete anonymity of the donor.

This scheme was challenged before the top court in a batch of petitions filed by Congress leader Jaya Thakur, Communist Party of India (Marxist), Spandan Biswal, and NGO Association for Democratic Reforms (ADR).

In 2019, the apex court had declined to stay the electoral bonds scheme and made it clear that it will accord an in-depth hearing on the pleas as the centre and the election commission had raised "weighty issues" that had "tremendous bearing on the sanctity of the electoral process in the country."

Thereafter, the pleas were accorded an in-depth hearing last year and were reserved for judgment.

At the time, the court had also directed the Election Commission of India to produce before it in a sealed cover the "up to date" data of funds received by political parties through electoral bonds till Sept. 30, 2023.