ELECTORAL BONDS SCHEME DECLARED UNCONSTITUTIONAL

Introduction

The Finance Bill, 2017 lead to the introduction of Electoral Bond Scheme. It is one of the schemes which is used as a mode to provide funding to the political parties in India.  However, this scheme has been declared unconstitutional by the Supreme Court on 15^th February 2024 in a unanimous decision as the said is violative of Article 19(1)(a) of the Constitution.

What was the Electoral Bond Scheme?

The State Bank of India was authorised to issue these Electoral Bonds. Electoral Bonds are in the nature of promissory note which does not carry the name of the buyer or the payee. It acts as an alternative to cash donations.

Features of the Scheme:

1. It can be purchased by a citizen of India or a person incorporated or established in India.
2. The Bonds are non-tradable.
3. They are issued on non-refundable basis.
4. The information which is furnished by the Purchaser shall be treated as confidential.
5. It provides for tax exemption to the buyer.
6. Every application for the scheme is considered as a fresh request.

Issue with the scheme

The scheme raises various issues such as:

1. It violates the right to information to the votes.
2. The amendment brought to section of Representation of People Act, 1951, IT Act 2000 and the Companies Act of 2013.
3. It promotes unfair elections in the country.

AMENDMENT TO BROUGHT TO VARIOUS SECTIONS BY THE FINANCE ACT 2017:

1. Section 29C of Representation to People Act[1]: The amendment states that the contributions received by the political party through the electoral bonds need not be disclosed.
2. Section 13A of the IT Act: The political parties are not required to maintain record of contributions which are received through electoral bond.
3. Section 182 of the Companies Act 2013: The disclosure of amount made to the political party by the corporate other than government company and a company which has been in existence for less than three financial years is not required in their profit and loss account to disclose the contribution. They can make any amount of contribution.

DECISION BY THE SUPREME COURT

The Supreme Court struck down the scheme as unconstitutional and the amendments brought by the Finance Act 2017 in Proviso to Section 29C of Representation to People Act, Proviso to Section 13A of the IT Act, Section 182 of the Companies Act 2013 as violative of Article 19(1)(a) of the Constitution.

1. The Supreme Court on Right to information: Article 19(1)(a) guarantees Right to information to citizens. It states that the right to information is not only limited to public information but also require for participatory democracy “A crucial aspect of the expansion of the right to information in the second phase is that right to information is not restricted to information about state affairs, that is, public information. It includes information which would be necessary to further participatory democracy in other forms and is not restricted to information about the functioning of public officials.”
2. The Supreme Court considered political party as a ‘political unit’ in democratic electoral process: “In summation, a ‘political party’ is a relevant political unit in the democratic electoral process in India for the following three reasons: a. Voters associate voting with political parties because of the centrality of symbols in the electoral process; b. The form of government where the executive is chosen from the legislature based on the political party or coalition of political parties which has secured the majority; and c. The prominence accorded to political parties by the Tenth Schedule of the Constitution.”
3. The funds received by the political party is essential information for an informed voter: It is because their exist influence of money on politics and government decisions because of the quid pro quo arrangements exist between the contributor and the political party. Moreover, the Indian legal regime does create any distinguishment between electoral funding and campaign funding. The contribution can be made throughout the election period and the funds can be used for other purposes also. If the donor identity not revealed then no quid pro arrangement can be made. “Information about political funding would enable a voter to assess if there is a correlation between policy making and financial contributions”. Therefore, based on this discussion the Court held that information about funding to a political party is essential to exercise their vote in an effective manner.
4. “The argument of the Union of India that the Electoral Bond Scheme protects the confidentiality of the contributor akin to the system of secret ballot is erroneous”. There is no constitutional hierarchy between the right to information and the right to informational privacy of political affiliation.

5. The amendments made by the Finance Act, 2017 were declared unconstitutional.

[1] Provided that nothing contained in this subsection shall apply to the contributions received by way of an electoral bond. Explanation – For the purposes of this subsection, “electoral bond” means a bond referred to in the Explanation to subsection (3) of section 31 of the Reserve Bank of India Act, 1934.

Author: Ishika Jain, fifth year law student at Institute Of Law, Nirma University.