In a unanimous verdict that will have a significant impact on India’s democracy, a five-judge Constitution bench of the Supreme Court, on Thursday, February 15, struck down the electoral bonds scheme, deeming it unconstitutional. The bench headed by Chief Justice of India DY Chandrachud and comprising Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra, did not heed the Union government’s argument that citizens do not have the right to know the funding of political parties. It held that electoral bonds are violative of right to information and Article 19(1)(a), which is the right to freedom of speech and expression. The CJI said, “Information about funding of political parties is essential for electoral choices.” The court also struck down amendments made to the Information Technology Act, Companies Act and Representation of People Act as unconstitutional.
It further observed that electoral bonds were not the only way to curb black money and there were alternatives, and added infringement to the right to information is not justified by the purpose of curbing black money.
The court ordered the State Bank of India to immediately stop issuing electoral bonds. The SBI was also asked to submit the details of the political parties that received electoral bonds and all the particulars received to Election Commission of India (ECI) by March 6. The ECI has to then publish the details on its official website by March 13.
The bench had reserved judgement on November 2 after a three-day marathon hearing of a batch of public interest litigations (PIL) challenging the electoral bonds scheme. Petitions including those filed by the Association for Democratic Reforms (ADR), Communist Party of India (Marxist), and Dr Jaya Thakur from the Congress were filed before the apex court contending that the electoral bonds scheme violates the citizen's fundamental right to information and enables backdoor lobbying and quid pro quo.
Commodore Lokesh Batra, a 76-year-old war veteran turned transparency activist, filed several RTI petitions which resulted in a major expose on electoral bonds in 2019 and the HuffPost carried a six-part investigative report on how the Modi government brought untraceable funds into Indian politics despite objections from the RBI and the ECI. The data obtained by Commodore Batra through RTI has largely been quoted in the petitions challenging the electoral bond scheme in the Supreme Court.
Read: Meet Commodore Lokesh Batra, the former navy officer on a mission to expose electoral bonds
The case was referred to the five-judge bench by a three-judge bench on October 16.
Electoral bonds were introduced in 2017 through the Finance Act, which was passed as a money bill without the assent of the Rajya Sabha. The Finance Act amended the Reserve Bank of India Act, Companies Act, Income Tax Act, Representation of Peoples Act, and Foreign Contributions Regulation Act (FCRA), so as to introduce electoral bonds.
Electoral bonds are similar to promissory notes and. It allows donors – citizens and bodies incorporated in India – to buy these bonds from the State Bank of India (SBI) and donate anonymously to political parties. The bonds are available in multiple denominations ranging from Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore and are issued specifically for contribution to political parties. These bonds will not have the donor’s name and neither are political parties required to disclose the source of these bonds. The value of the bonds will be calculated as income by voluntary contributions for a political party for exemption from income tax.
The petitioners had argued that electoral bonds are opaque and against fundamental principles of the Indian Constitution. They had further said that the scheme does not block the black channel of money flow, but creates an alternate anonymous white channel.
The petitioners had also contended that electoral bonds defeat the people's right to be informed and argued that it violates the level playing field between political parties; and between political parties and independent candidates.
Read: Petitioners to SC: 'Electoral bonds are anonymous white channels of black money'
The Union government had contended that citizens do not have the right to know the funding of a political party. It had also argued that the scheme did not violate any existing rights of a person.
The Union government had held that the scheme was not opaque but has “confidentiality by design”, and that it was the first step towards fighting black money. The other steps, according to the government, are the digitisation drive, followed by de-registration of shell companies. The court, however, observed that the scheme provided “selective anonymity” and that an attempt to bring black money into the official channel has created an “informational hole" as to who is donating to whom.
Read: Electoral bonds: SC says scheme puts Opposition parties at a disadvantage
While concluding the hearing on November 2, 2023, the bench came down upon the Election Commission of India (ECI) for not maintaining an up-to-date data log of electoral bonds received by various political parties. It directed the ECI to submit the details of the contributions received by all political parties through electoral bonds till September 30 to the Court in a sealed cover within two weeks.
Read: Electoral bonds: SC asks ECI to submit details of funding received by parties