NEWS – Supreme Court struck down Electoral Bond scheme and several amendments that the government made in key laws to facilitate corporate donations to political parties

BACKGROUND

• Electoral bonds scheme allows corporations and individuals to anonymously donate money to political parties by purchasing electoral bonds from the State Bank of India
• Started in 2018
• 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
• First mentioned in a Union Budget speech in 2017
• Scheme was pushed as a solution to the issue of opacity in political parties’ funding

WHAT HAS THE SC SAID IN ITS VERDICT?

*Issue 1: Does the electoral bond scheme violate the Right to Information under Article 19(1)(a)?

• Yes
• 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

*Issue 2: Is curbing the circulation of black money in electoral financing a legitimate reason to restrict the right to information (RTI)?

• Article 19(2) does not include curbing black money as a restriction – assuming curbing black money is a legitimate purpose is not proportional to the restrictions posed by this scheme
• Other options to curb black money in electoral financing are less restrictive and fulfil this purpose
• Aspects a legitimate government scheme must satisfy based on proportionality test, laid down in its 2017 verdict in the KS Puttaswamy case
  • 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

• In the Puttaswamyjudgment, 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
• Lack of privacy of political affiliation would disproportionately affect those whose political views do not match the views of the mainstream
• 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

*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