Judgments

THE SUPREME COURT  JUNKS ELECTORAL BONDS

The Supreme Court in its landmark judgment Association of Democratic Reforms Vs. Union of India (Writ Petition (C) 880 of 2017 ) has held that Electoral Bond Scheme is violative of Article 19 (1) (a) of the Constitution. The supreme Court has also held that permitting unlimited contributions to political parties is arbitrary and violative of Article 14 of the Constitution.

FACTS OF THE CASE

Parliament vide Finance Act, 2017 brought about various changes in framework of contribution to political parties by companies. Parliament amended Section 182 of the Companies Act, 2013 which dealt with corporate funding of elections. It omitted cap of 7.5% on corporate funding to political parties. Section 182 (3) was also amended to require only disclosure of total amount contributed to a political party rather than contribution made by each political party.  The Finance Act also amended Reserve Bank of India Act, 1934 by including Article 31 (3) which permitted State Bank of India to issue electoral bonds. The Finance Act also amended Section 13 A of the of Income Tax Act to the effect that Political Parties were not required to maintain record of contribution if such contribution was received through electoral bonds.

Ministry of Finance notified Electoral Bond Scheme in under Section 31 (3) of the RBI Act in 2018. Electoral Bonds could have been purchased by a citizen of India or persons incorporated or established in India. Electoral Bonds could have been encashed by only a Political Party. The bonds were issued in denomination of Rs. 1000/-, 10,000/-, 1,00,000/-, 10,00,000/-  and 1,00,00,000/-. Bonds were valid for 15 days. These bonds were not tradable.

Association of Democratic Reforms challenged these amendments before the Supreme Court under Article 32 of the Constitution of India.

FINDINGS OF THE SUPREME COURT

The Supreme Court held that the challenge to the Electoral Bond Scheme is within the scope of judicial review. The argument that the scheme is an economic policy was rejected and it was held that it was mainly concerned with electoral process. The Court also held that once it is prima facie proved that any policy has violated Fundamental Rights under Part III of the Constitution, onus shifts to the State to prove that the violation of fundamental rights are justified.

The Supreme Court noted the influence of money on electoral politics.  The Court observed that challenge to electoral bond scheme can not be adjudicated in isolation without a reference to actual impact of money on electoral politics.

The Supreme Court noted that Political Party is a relevant political unit in the democratic set up in India. The Court held that information about funding of political parties is essential for exercising freedom to vote in an effective manner. The Electoral Bond Scheme is in violation of Article 19 (1) (a) of the Constitution.

The Supreme Court held that such violation is not justified as Electoral Bond Scheme does not fulfil least restrictive means test. There are other alternatives which impact the right to information minimally. The Supreme Court held that Union of India has failed to establish that Electoral Bond Scheme is the least restrictive means to balance the rights of informational privacy to political contributions and the right to information of political contributions.

The Court further held that treatment of individuals and companies and treatment of profit making and loss making companies and permitting unregulated influence of companies in governance and political processes are arbitrary and in violation of Article 14.

The Supreme Court declared Electoral Bond Scheme and amendments done to Representation of People Act, Companies Act and Income Tax Act unconstitutional. The Supreme Court also inter alia directed SBI to stop issuance of electoral bonds.

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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Mukesh Kumar Suman

Mukesh Kumar Suman

Mukesh Kumar Suman is an advocate based at Delhi. He has rich experience in civil, criminal, commercial, arbitration and corporate insolvency matters. He regularly appears before District Courts, NCLT, NCLAT, High Court and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

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