Supreme Court’s Judgment on Electoral Bonds Scheme (2024)

Introduction

The Electoral Bonds Scheme, introduced by the Government of India in 2018, was designed to facilitate donations to political parties while maintaining donor anonymity. The scheme quickly became a subject of intense debate, raising concerns about the potential for undisclosed and untraceable political funding. Critics argued that it could compromise the transparency and integrity of elections, while the government maintained that the scheme was a step toward cleaner political funding. This tension culminated in a series of legal challenges, leading to the Supreme Court’s landmark judgment in 2024, which declared the scheme unconstitutional. The judgment is a significant milestone in the ongoing discourse on electoral reforms and transparency in political funding in India.

Case Title: Association for Democratic Reforms & Others v. Union of India & Others (2024)

Facts

• The Electoral Bonds Scheme was introduced in 2018 by the Government of India as a means to facilitate donations to political parties while maintaining donor anonymity.
• The scheme allowed individuals, companies, and associations to purchase bonds from the State Bank of India and donate them to political parties, with the identity of the donor being known only to the bank.
• Several petitions were filed challenging the constitutionality of the scheme, primarily on the grounds that it violated the right to information and transparency in political funding.
• The petitioners, including the Association for Democratic Reforms (ADR), argued that the scheme enabled untraceable political donations, thereby compromising the integrity of elections and favoring the ruling party.

Issues

• Whether the Electoral Bonds Scheme violates the fundamental right to information under Article 19(1)(a) of the Constitution.
• Whether the scheme undermines transparency in political funding and facilitates corruption.
• Whether the amendments made to the Finance Act, 2017, and other related laws to accommodate the scheme were constitutionally valid.

Arguments from Both Sides

Petitioners

• Violation of Right to Information: The petitioners argued that the scheme deprived citizens of their right to know the sources of political funding, which is crucial for making informed electoral choices.
• Lack of Transparency: The anonymity provided by the scheme could lead to a lack of accountability and transparency, potentially allowing for corruption and quid pro quo arrangements between donors and political parties.
• Disproportionate Benefit to Ruling Party: The petitioners contended that the scheme disproportionately benefited the ruling party, as it was in a better position to receive large, anonymous donations, thereby skewing the level playing field in elections.

Respondents (Union of India)

• Privacy of Donors: The government argued that the scheme balanced transparency with the need to protect donor privacy, especially in a context where disclosing donor identities could lead to harassment.
• Cleaner Political Funding: The scheme was portrayed as a step towards cleaner political funding by reducing the role of cash donations and encouraging formal, banked transactions.
• Proportionality: The government maintained that the restrictions on disclosure were reasonable and proportionate, considering the need to safeguard donor privacy and prevent undue influence or intimidation.

Judgment

• The Supreme Court, in a unanimous decision delivered by a five-judge Constitution Bench on February 15, 2024, struck down the Electoral Bonds Scheme as unconstitutional.
• The Court declared that the scheme violated the right to information under Article 19(1)(a), emphasizing that transparency in political funding is essential for the integrity of the electoral process.
• The Court also invalidated the amendments made to the Finance Act, 2017, the Representation of the People Act, 1951, the Companies Act, 2013, and the Income Tax Act, 1961, which had facilitated the implementation of the scheme.

Court’s Reasoning

• Right to Information: The Court held that the Electoral Bonds Scheme deprived voters of their right to know about the sources of political funding, which is critical for making informed electoral choices. This, the Court observed, violated the fundamental right to information enshrined in Article 19(1)(a).
• Transparency and Accountability: The Court stressed the importance of transparency and accountability in the electoral process, noting that anonymous political donations could lead to a lack of public trust and potential misuse of power.
• Proportionality Test: The Court applied the proportionality test to assess whether the restrictions on donor disclosure were reasonable. It concluded that the scheme failed this test, as it disproportionately favored donor privacy over the public’s right to know.

 Impact

• The judgment has far-reaching implications for political financing in India. The Court’s decision restores the legal framework that existed before the 2017 amendments, requiring political parties to disclose donations exceeding ₹20,000.
• The ruling is expected to increase transparency in political funding and reduce the influence of undisclosed donations on the electoral process.
• The decision may also lead to further reforms in the regulation of political funding, with a focus on enhancing transparency and accountability.

Conclusion

The Supreme Court’s judgment on the Electoral Bonds Scheme marks a significant step towards ensuring transparency in political funding in India. By striking down the scheme, the Court reaffirmed the importance of the right to information in a democracy and underscored the need for transparency in the electoral process. This decision is likely to have a lasting impact on the regulation of political funding in India, fostering a more open and accountable system.

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