The Week
Fali S. Nariman

Nariman said the SC felt the bonds violated the principle of free and fair elections

Eminent jurist Fali S. Nariman breathed his last on February 21, 2024. In his last article in a news publication, Nariman explains the Supreme Court’s verdict on the Electoral Bonds Scheme. He shared his views with THE WEEK on February 15, the day the court gave its verdict. 

Law is not often associated with literature. And neither is the appreciation or criticism of the verdict of a court. However, at times they need to be!

The court held that information about funding to a political party was essential for a voter to exercise his freedom to vote in a lawful and effective manner.

Like in the case of the unanimous judgment of February 15 of a Constitution bench of five judges of the Supreme Court comprising Chief Justice of India Justice D.Y. Chandrachud, Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala and Manoj Misra on the constitutional validity of the Electoral Bonds Scheme. I have had the benefit of going through the concurring judgments of the court, one by the chief justice on behalf of himself and three of his colleagues and the other by Justice Khanna. Without being too laudatory, permit me to say something in the language of Shakespeare.

“A Daniel come to judgment! Yea, a Daniel.

O wise young judge, how I do honour thee!”

Electoral bonds are monetary instruments that individuals, citizens and corporate groups can buy from a bank and donate to a political party of its choice―which the political party is then free to redeem for money. And, in the aggregate, this is big money. The electoral bonds case was initiated in 2017 by a public spirited organisation, the Association for Democratic Reforms, and it was followed by several other petitioners, including individuals and political parties. But the case had little to do with politics. What was challenged was the legitimacy and constitutionality of the amendments made for the Electoral Bonds Scheme by the Finance Act of 2017 (along with the Finance Act of 2016).

The two judgments of the court when first dealing with the challenge to the non-disclosure of information on electoral financing held that information about funding to a political party was essential for a voter to exercise his freedom to vote in a lawful and effective manner. The court concluded that the Electoral Bonds Scheme as framed does not fulfil the test of “the least restrictive means” since the scheme “is not the only means for curbing black money in electoral finance. There are other alternatives which substantially fulfil the purpose and impact the right to information minimally when compared to the impact of electoral bonds on the right to information.”

In a leading judgment delivered in 2017 (Justice K.S. Puttaswamy v Union of India), a bench of nine judges of the Supreme Court held that the Constitution guaranteed the right to privacy as essential protection for the exercise and development of freedoms protected by the Constitution from direct or indirect influence by both state and non-state actors and that in the context of exercising electoral franchise, “the lack of privacy of political affiliation” would be catastrophic. That informational privacy to political affiliation is absolutely necessary to protect the freedom of political affiliation and also necessary to protect the exercise of electoral franchise.

The finding of the court is that it is “unable to see how the disclosure of information about contributors to the political party to which the contribution is made would infringe political expression” (this is in the context of the secrecy involved in the making of political contributions).

The court held that the Union of India has been unable to establish that the measures employed in the Electoral Bonds Scheme are the “least restrictive means” to balance the right to informational privacy to political contributions and the right to information about political contributions―the Electoral Bonds Scheme has, therefore, been struck down as unconstitutional and invalid.

The second ground on which the court struck down the scheme is what is now known as “manifest arbitrariness”―an essential facet of Article 14 of the Constitution. This, in my view, is a very important part of the judgment and is one aspect of provisions of a statute being challenged on the ground of violation of Article 14 of the Constitution.

The court held that the removal of contribution restrictions (as to how much an individual or corporation can contribute) is “manifestly arbitrary” and, therefore, violates Article 14 of the Constitution. Since the Electoral Bonds Scheme envisaged limitless financial contributions and consequential quid pro quo arrangements with the parties who make such contributions (it was conceded on behalf of the Union of India that corporate donations are made to receive favours through such quid pro quo arrangements), this would violate the principle of free and fair elections.

The court also noted that in 1985, Parliament had prescribed the condition that only companies which had been in existence for more than three years could contribute and prevented loss-making companies and shell companies from making financial contributions to political parties, but this was taken away by the amendment introduced in 2017: “there being no justification for removing the cap on contributions”. After the amendment of 2017, companies, similar to individuals, could make unlimited contributions and such contributions could be made by both profit-making as well as loss-making companies to political parties. The court held that it offended the doctrine of “manifest arbitrariness”.

Thus the court held that the Electoral Bonds Scheme comprehensively contained several provisions which were not only violative of Article 19(1)(a) of the Constitution (the Article which guarantees the freedom of speech and expression and also a free press), but also permitted unlimited corporate contributions to political parties, violating Article 14 of the Constitution.

In the wholly concurring judgment of Justice Khanna, he observed that the figures of party-wise donations received through the bonds show highly disproportionate party-wise donations in favour of the party in power at the Centre for a continuous period (2018-19 to 2022-23). And he concluded, “It is clear from the available data that majority of contribution through bonds has gone to political parties which are ruling parties in the Centre and the states.” He also held that the Electoral Bonds Scheme fails to meet the balancing prong of the proportionality test―the balancing prong being the voter’s right to know versus the anonymity in political party funding.

The principal judgment of the chief justice and the concurring judgment of Justice Khanna establish that since parliamentary democracy enables citizens to express their will through their elected representatives, “the integrity of the electoral process is a necessary concomitant to the maintenance of the democratic form of government”.

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