Introduction

• The Supreme Court delivered a groundbreaking unanimous judgment, deeming the electoral bonds scheme “unconstitutional and manifestly arbitrary.”
• Led by Chief Justice of India (CJI) DY Chandrachud, a five-judge Constitution Bench unanimously struck down the scheme, citing infringement on voters’ right to information and disproportionate restrictions.

Key Reasons for Striking Down Electoral Bonds Scheme

[A] Violation of Right to Information (RTI)

• Petitioners argued that the scheme violates Right to Information under Article 19(1)(a) of the Constitution, emphasizing voters’ right to information regarding political party funding.
• Despite the government’s stance that citizens lack a “right to know” about political contributions, the court upheld voters’ right to such information, citing the inherent connection between money and politics.
• The court highlighted the “deep association” between money and politics, stressing the need for transparency to prevent quid pro quo arrangements.

[B] Disproportionate Restrictions:

• The scheme’s anonymity for donors, aimed at curbing black money, was deemed disproportionate to its goal.
• Advocates highlighted potential loopholes allowing for cash donations, undermining its efficacy in combating black money.
• The court emphasized the availability of alternative, less restrictive measures to achieve the scheme’s objectives, such as Section 29C of the Representation of People Act, 1951.

[C] Privacy vs. Public Interest:

• While the government argued for donor anonymity to protect privacy rights, advocates stressed the importance of public scrutiny in political funding.
• The court clarified that donor privacy extends only to genuine forms of public support, rejecting absolute anonymity facilitated by the scheme.

[D] Unlimited Corporate Contributions:

• Advocates underscored the adverse impact of unlimited corporate contributions on free and fair elections.
• The court reinstated the cap on political contributions from companies, citing the need to prevent undue corporate influence in politics.
• It noted concerns that unlimited contributions could incentivize quid pro quo arrangements, especially by loss-making companies.

Impact on Key Legal Amendments

• Representation of the People Act, 1951: The court struck down amendments exempting political parties from disclosing donations above Rs. 20,000, reinforcing the balance between voters’ right to information and donor privacy. (Section 29C)
• Companies Act, 2013: Amendments allowing unlimited corporate contributions were overturned, restoring the cap on political donations by companies and preserving electoral integrity. (Section 182)
• Income-tax Act, 1961: Exemptions for political parties to maintain records of donations received via electoral bonds were annulled, safeguarding voters’ right to information. (Section 13A)

Application of Proportionality Test

[A] Definition:

• The proportionality test assesses the balance between competing fundamental rights or interests and the measures taken by the state to achieve its objectives.
• It involves four criteria: legality, necessity, proportionality in the strict sense, and balancing of interests.

[B] Government’s Arguments:

• The government defended the scheme, citing legitimate aims such as tackling black money and protecting donor anonymity.
• Solicitor General Tushar Mehta argued that the right to information does not extend to information not in the state’s possession.

[C] Court’s Analysis:

• Applying the proportionality test, the court scrutinized the balance between competing fundamental rights, emphasizing the necessity of the “least restrictive” methods.
• It underscored the importance of less intrusive alternatives, such as the electoral trusts scheme, in achieving the scheme’s objectives.

Why is this a Landmark case?

• Burden of Proof: The court held that the state must demonstrate that its measures are the “least restrictive” and that no other “equally effective” methods exist to achieve its objectives.
• Balancing Competing Rights: Unlike previous approaches prioritizing public interest over individual rights, the court’s focus is on balancing competing fundamental rights.
• Structured Proportionality Test: The verdict applies a structured proportionality test, requiring the state to demonstrate that its actions restricting fundamental rights are proportional to its objectives.
• Application of Legal Precedents: While the right-to-privacy ruling laid down the law, subsequent cases like Aadhaar (2018) and Demonetization (2023) applied the structured proportionality test. The electoral bonds verdict represents a significant departure in this regard.

Conclusion

• The Supreme Court’s verdict reaffirms its commitment to upholding constitutional principles and safeguarding democratic processes.
• By striking down the electoral bonds scheme and reinstating key legal provisions, the court emphasizes the primacy of transparency and accountability in electoral financing.