Supreme Court Holds Electoral Bond Scheme As Unconstitutional; Unlimited Political Contribution By Companies Violative Of Article 14
A five-judge Constitution Bench of the Supreme Court in a batch of pleas challenging the validity of the electoral bond scheme for political funding of parties has unanimously concluded that:
-the Electoral Bond Scheme, the proviso to Section 29C (1) of the Representation of the People Act, 1951 as amended by Section 137 of the Finance Act, 2017 Section 182(3) of the Companies Act as amended by Section 154 of the Finance Act 2017 and Section 13A (B) as amended by Section 11 of the Finance Act 2017 are violative of Article 19(1) a of the Constitution of India and unconstitutional.
-the deletion of proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14.
In the judgment, there are two opinions of the court, one by CJI himself and Justice Gavai, Justice Pardiwala and Justice Misra and another authored by Justice Khanna. However, both arrive at the same conclusion with slight variance in reasoning.
-The issuing bank shall herewith stop issuance of electoral bonds;
-State Bank of India shall submit details of bonds purchased since the interim order of this court dated April 12, 2019 till date to the Election Commission of India (ECI). The details shall include the date of each electoral bond, the name of the purchaser of the bond and the denomination of the electoral bond purchased.
-State Bank of India shall submit the details of the political parties which has received contributions through electoral bonds since the interim order of this court.
-SBI must disclose details of each electoral bond encashed by political parties, which shall include the date of encashment and the denomination of the electoral bond.
-SBI shall submit the above information to the ECI within 3 weeks from the date of this judgment i.e. March 6, 2024.
-the ECI shall publish the information on its website within one week of receipt of information i.e. March 13, 2024.
-Electoral bonds which are within the validity period of fifteen days but which have not been encashed by political parties yet shall be returned by the political parties to the purchaser, depending on who is in possession of the bond, to the issuing bank. The issuing bank upon the return of the valid bond shall refund the amount to the purchaser's account.
The bench further held that the unlimited contribution by companies is unconstitutional and is manifestly arbitrary as "companies has a much greater influence on political parties than individuals. As individuals have a degree of support or affiliation to a polical association. However, purely business transactions made with the intent to secure benefits in return".
The scheme, which was notified by the government on January 2, 2018, was pitched as an alternative to cash donations made to political parties as part of efforts to bring in transparency in political funding.
According to the provisions of the scheme, electoral bonds may be purchased by any citizen of India or entity incorporated or established in India. An individual can buy electoral bonds, either singly or jointly with other individuals.
On October 16, the Apex Court said, "In view of the importance of the issue raised, and with regard to Article 145(4) (relating to rules for regulating procedure of SC) of the Constitution of India, the matter be placed before a bench of at least five judges...".
On October 10, the Court took note of the submissions of lawyer Prashant Bhushan, appearing for NGO Association for Democratic Reforms (ADR), that the matter needed adjudication before the electoral bond scheme opens for the 2024 general elections.
Anonymous funding through electoral bonds encourages corruption and violates the citizens' right to have a corruption-free nation, Bhushan had said. "This promotes corruption as the source of funding is anonymous. It is violative of Article 21 and the 'non-decision' in the case is compounding the problem", he had submitted.
One of the PIL petitioners had claimed in March that Rs 12,000 crore so far has been paid to political parties through electoral bonds and two-thirds of the amount has gone to one major political party. The Court had on March 21 said that it will consider whether the pleas can be referred to a constitution bench for an "authoritative pronouncement".
ADR, which filed the first PIL in 2017 on the issue of alleged corruption and subversion of democracy through illicit and foreign funding of political parties and lack of transparency in the bank accounts of all political parties, had moved an interim application seeking that the sale of electoral bonds not be reopened.
On January 20, 2020, the Apex Court had refused to grant interim stay on the 2018 Electoral Bonds Scheme and sought responses of the Centre and the Election Commission to an interim application by the NGO seeking a stay on the scheme.
Cause Title: Association For Democratics Reforms And Anr. v. Union Of India And Ors.