Case: Association For Democratics Reforms vs Union Of India

2024, SC

BENCH- Justice D.Y. Chandrachud CJI, Justice Sanjiv Khanna, Justice B.R. Gavai, Justice J.B. Pardiwala, Justice Manoj Misra J

Introduction:

On 15 February 2024, the Supreme Court of India, in a landmark judgment delivered by a five-judge Constitution Bench led by Chief Justice D.Y. Chandrachud, struck down the Union Government's 2018 Electoral Bonds (EB) Scheme. The Court unanimously held that the Scheme violated the voters’ right to information guaranteed under Article 19(1)(a) of the Constitution, ruling that transparency in political funding is essential for ensuring free and fair elections.

Facts of the Case:

The Electoral Bonds Scheme, introduced in 2018, allowed anonymous donations to political parties, primarily from corporations. This scheme exempted political parties from disclosing the names of donors and provided anonymity in transactions. The petitioners—Association for Democratic Reforms (ADR), Common Cause, and the Communist Party of India (Marxist)—challenged the scheme, arguing that it encouraged non-transparency in political funding and contributed to electoral corruption on a large scale. The Court was tasked with evaluating the constitutionality of the Scheme and whether it violated the voters' right to information.

Issues:

The key issues raised in this case were:

1. Whether the scheme’s facilitation of unlimited corporate funding to political parties infringed on the principle of free and fair elections.

2. Whether the anonymity embedded in the Electoral Bonds Scheme violated the voters’ right to information.

3. Whether the Court had jurisdiction to hear this case, considering it involved economic policy matters.

4. Whether the Electoral Bonds Scheme was justified as a tool to curb black money.

5. Whether the scheme violated the privacy rights of donors while impacting the electorate’s ability to make informed voting decisions.

Observations:

• The Court observed that the Electoral Bonds Scheme severely undermined transparency in political funding, thus impeding the voters’ right to information. The judgment reiterated that, as established in earlier cases like Union of India v. Association for Democratic Reforms (2002), voters have a right to information about political parties, which enables them to make an informed decision at the polls. The Court also noted that the anonymity granted by the Scheme created a disparity in political influence, with corporate donors holding disproportionate power over political decision-making.

• The Court rejected the Union Government’s arguments defending the confidentiality and the economic policy nature of the scheme, stating that the Electoral Bonds Scheme was not an economic policy but a measure directly affecting the electoral process. It further criticized the justification of curbing black money, ruling that the Scheme failed the proportionality test as it did not effectively address this goal without infringing on voters’ rights.

• In regard to corporate funding, the Court found that allowing unlimited corporate donations violated the principle of “one person, one vote” by disproportionately empowering corporations to influence elections. The judgment also addressed the privacy concerns, emphasizing that while donor privacy is important, it should not override the public’s right to information about political funding.

• 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 electoral bond 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.

Implication:

1. Transparency in Political Funding: It emphasized that transparency in political funding is crucial for the health of a democracy, and that voters must have access to information to make informed decisions.

2. Corporate Influence on Politics: The ruling limited the scope for corporate influence on elections, reinforcing the idea that elections should reflect the will of individual voters, not corporate interests.

3. Amendments to Legislation: The Court declared the amendments to the Representation of the People Act (RoPA), the Income Tax Act, and the Companies Act as unconstitutional, leading to the invalidation of provisions that allowed anonymous donations and unlimited corporate funding.

4. Directions for Action: The Court directed the State Bank of India to stop issuing Electoral Bonds and submit detailed reports of bonds purchased and redeemed since 2019 to the Election Commission, which will then publish the information.