Supreme Court judgment on electoral bonds scheme: The court raised issues ranging from donor privacy to the scope of the right to information.
The court raised several issues in its verdict. What is the scheme, who challenged it and what issues did the court raise in its judgment? We explain.
What is the electoral bonds scheme?
The electoral bonds scheme allows corporations and individuals to anonymously donate money to political parties by purchasing electoral bonds from the State Bank of India (SBI). Notably, the SBI has sole access to the details of those who purchased electoral bonds. According to the scheme, the proceeds from any bonds, which are not encashed within 15 days of being issued, are to be deposited in the Prime Minister Relief Fund.
It was first mentioned in a Union Budget speech in 2017 by then Finance Minister Arun Jaitley. The scheme was pushed as a solution to the issue of opacity in political parties’ funding. “Political parties continue to receive most of their funds through anonymous donations which are shown in cash. An effort, therefore, requires to be made to cleanse the system of political funding in India,” Jaitley said.
Petitions were filed by the Communist Party of India (Marxist), and NGOs Common Cause and ADR.
Advocate Prashant Bhushan, representing Common Cause and ADR, argued that citizens have a right to information about the parties and candidates seeking their votes. Bhushan pointed out that there are roughly 23 lakh registered companies in India. Figuring out how much each company had donated using this method would not be possible for an ordinary citizen, Bhushan argued.
Bhushan added that the scheme would distinctly favour the ruling government of the time, as the guarantee of anonymity would allow the government to provide concessions in the form of licenses, leases, policy changes and government contracts.
Senior Advocate Kapil Sibal drew the court’s attention to how the scheme could result in companies failing their duties towards their shareholders. Allowing companies to “funnel money” to political parties without any oversight from shareholders denies the owners of said company the ability to decide how their company should act in the political sphere.
What has the SC said in its verdict?
The court raised several issues:
*Issue 1: Does the electoral bond scheme violate the Right to Information under Article 19(1)(a)?
The court held that information on the funding of political parties is essential for voting.
Economic inequality contributes to political inequality due to the deep association between money and politics. Money enhances access to legislators and raises the legitimate possibility of quid pro quo or mutually beneficial arrangements such as favourable policy changes.
Therefore, the scheme violates the right to information under Article 19(1)(a), which guarantees the freedom of speech and expression.
*Issue 2: Is curbing the circulation of black money in electoral financing a legitimate reason to restrict the right to information (RTI)?
The court held that the RTI can only be restricted based on Article 19(2), which speaks of the reasonable restrictions to freedom of speech and expression. It does not include curbing black money as a restriction, the court said. Even assuming curbing black money is a legitimate purpose, it is not proportional to the restrictions posed by this scheme.
Further, it said this scheme is not the only means to curb black money in electoral financing. Other options are less restrictive and fulfil this purpose.
For the scheme to be considered legitimate, the government scheme would have to essentially satisfy three aspects. This was based on the court’s proportionality test, laid down in its 2017 verdict in the KS Puttaswamy case over the right to privacy.
First, the existence of a law. The electoral bond key was brought through the Finance Act which introduced the series of amendments in the Income Tax Act and the Representation of People’s Act.
Second, the law must demonstrate a legitimate state interest, which has nexus to the object sought to be achieved by the Parliament. The government argued that the objectives range from curbing black money to protecting the privacy of the donors.
The third and most crucial, is whether the encroachment on fundamental rights is proportional to the objection sought to be achieved. Here, the CJI said that the state did not adopt the least restrictive method. As an example of the least restrictive methods, he cited the ₹20,000 cap on anonymous donations.
Therefore, an infringement of the right to information is not proportionally justified to curb black money in electoral financing.
*Issue 3: Whether the infringement of RTI is justified for the protection of donor privacy
The court considered whether the right to donor privacy includes information about a citizen’s political affiliation. If yes, is a financial contribution to a political party an aspect of political information?
In the Puttaswamy judgment, the court said that the right to informational privacy includes political affiliation. Forming political beliefs is the first stage of political expression, and political expression cannot be expressed freely without the privacy of political affiliation. Information can be used by the state to suppress dissent and discriminate by denying employment.
Lack of privacy of political affiliation would disproportionately affect those whose political views do not match the views of the mainstream. Not awarding privacy in this matter could be catastrophic, as it could be used to disenfranchise voters through voter surveillance – by identifying voting patterns based on the information collected. For instance, data on books, and newspapers purchased by a voter could indicate their ideological leaning.
The court said that financial contributions to political parties are usually made for two reasons. One is support for a political party. Second, as a quid pro quo. Huge contributions made by corporations should not be allowed to conceal the reason for financial contributions made by other sections of the population.
The right to informational privacy extends to contributions to political parties and is a facet of political affiliation, the court said. To not grant the umbrella of privacy to political contributions only because a portion of the contributions (corporate donors) is made for other reasons would be impermissible.
The right to privacy of political affiliation does not extend to those contributions, which may be made to influence policies. It only extends to contributions made as a genuine form of political support.
*Issue 4: Whether unlimited political contributions by companies are unconstitutional
The court said this cannot be permitted. The ability of companies to influence the political process through contributions is much higher compared to individuals.
Contributions made by companies are purely business transactions made with the intent of securing benefits in return, it said.