ADR's petition challenging Finance Act, 2017; Electoral Bonds and Removal of company's limit to donate: W.P (C) 880/2017 Supreme Court

This petition challenges the Finance Act, 2017 which was enacted as a money bill which introduced the electoral bond scheme for the purpose of electoral funding. The Act has also removed the previous limit of 7.5% of the company’s average three-year net profit for political donations. A company is no longer required to name the political parties to which such contributions are made. The donors’ name is also not revealed to the public. These amendments will result in opaqueness, heighten the odds of conflict of interest and also drastically increase black money and corruption. It will also lead to the creation of shell companies and rise of benami transactions to channelize the undocumented money into the political and electoral process in India.

Current Status of the matter:

On 5th March, 2019 ADR and Common Cause filed the first application for stay against the sale/purchase of electoral bonds for Lok Sabha 2019 elections. In the stay application ADR had contended that enormous amounts of corporate funding would be received by political parties during the general elections and this would play a critical role in the elections. In response to ADR’s application, the Supreme Court in its interim order dated 12th April, 2019 directed all political parties to submit details of donations received via Electoral Bonds to the Election Commission of India in a sealed cover on or before 30th May 2019. 

On 29th November 2019, ADR and Common Cause filed a second application for stay against the sale/purchase of Electoral bonds to bring on record certain vital documents which have surfaced recently and have a strong bearing on the instant case.

On 26^th October, 2020 ADR and Common Cause filed a third application for an urgent listing of the petition before the Supreme Court of India. The application for an urgent hearing was filed because;

• ADR's petition was last heard by the Supreme Court on 20-01-2020 and hasn't been listed since then, i.e., for the last 9 months, even though very significant questions concerning democratic functioning of the country are raised in the instant matter which requires urgent adjudication. 
• Right before the Bihar Legislative Assembly Elections, the State Bank of India, in the XIV Phase of sale, issued Electoral Bonds through its 29 Authorized branches w.e.f. 19.10.2020 to 28.10.2020.
• Whereas the Electoral Bond Scheme dated 02-01-2018 clearly stipulates sale of electoral bonds in January, April, July and October months of each year; however, the window was not opened in April and July, but was opened in October'20, right before the Bihar Legislative Elections, 2020.

On 9th March, 2021, ADR and Common Cause filed a fourth application for stay on any further purchase of Electoral Bonds before the upcoming state elections in West Bengal, Tamil Nadu, Kerala, Puducherry and Assam as it would further increase the illegal, illicit and anonymous political funding.

On 15th November, 2022, ADR and Common Cause filed an additional affidavit in the Supreme Court against amendment dated 07-11-2022 to the Electoral Bond Scheme, 2018 that allowed an additional period of 15 days for sale of EBs which shall be specified by the Central Government in the year of General Elections to the Legislative Assembly of States and Union territories with Legislature. The affidavit submitted that the amendment has been done by the government to ensure that more and more donations can be made in a completely opaque manner before state elections as well.

On 1st December, 2022, ADR and Common Cause filed a supplementary affidavit in the Supreme Court against the amendment dated 07-11-2022 to the Electoral Bond Scheme, 2018 that was made by the government while the Model Code of Conduct (MCC) period was in force owing to the 2022 Assembly elections in the States of Himachal Pradesh and Gujarat. The supplementary affidavit was also filed to bring on record some deeply shocking revelations made from RTI responses from the Ministry of Finance. In addition the supplementary affidavit also revealed that the subordinate officials from the Ministry of Finance, Department of Economic Affairs and Ministry of Law and Justice had warned the senior officials of the Finance Ministry against the amendment.

On 16 October 2023, ADR and Common Cause approached the Court during mentioning, to hear the case prior to the 2024 General Elections.  A Bench led by Chief Justice D.Y. Chandrachud, with Justices J.B. Pardiwala, and Manoj Misra referred, noting the “importance of the issue” referred the case to a five-judge Constitution Bench.

On 31 October 2023,  a five-judge Constitution Bench led by CJI Chandrachud, with Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala, and Manoj Misra heard arguments over three consecutive days i.e, 31st October, 1st & 2nd November. ADR and Common Cause argued that the electoral bonds scheme increased unaccounted and unlimited political funding through electoral bonds and corporates, black money circulation, creation of shell companies, foreign funding, benami transactions and corruption. It was argued that voters have inherent right to information about political parties’ source of funding.The Union Government on the other hand contended that the scheme was designed to guarantee confidentiality and the right to privacy of the donors.

On 2 November 2023, the Constitution Bench reserved judgement.

On 15th February 2024, A five-judge Constitution Bench of the Supreme Court of India comprising Justices Chief Justice DY Chandrachud, and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra in a petition filed by Association for Democratic Reforms (ADR) has given a landmark judgment holding the anonymous, unregulated and unlimited funding through electoral bonds and companies as unconstitutional. The court relied on the fact that such a system of political funding which is completely anonymous, unchecked and unlimited goes against the basic principles of citizen’s Right to know under Article 19(1)(a) of the Constitution and free and fair election and therefore the amendments brought through the Finance Act,2017 and passed as Money bill to Section 29C of RP Act,1951, Sections 181 & 183(3) of the Companies Act,2013,  Section 13A(b) of the Income Tax Act,1961 were struck down as being violative of the Constitution. The court observed the principle that the citizens have a duty to hold the government of the day accountable for their actions and inactions, and they can effectively fulfil this duty only if the government is open and not clothed in secrecy.