Published on: 16th January 2025
Authored by: Bibhash Das
University of Allahabad
Association for Democratic Reforms & Anr. V. Union of India & Ors.
1. FACTS
The implementation of the Electoral Bond Scheme, 2018, by the Indian government significantly altered the country’s political financing landscape. The initiative was made public when it was introduced as a component of the Finance Bill, 2017, by the Ministry of Finance. The program’s stated objective was to increase political finance transparency by channeling donations via the official banking system, hence decreasing the significance of cash transactions and the influence of black money in politics.
Under the scheme, any authorized bank may offer electoral bonds to any Indian individual, business, or group of individuals in agreement with the program. These bonds, available in denominations ranging from ₹1,000 to ₹1 crore, can be donated to any political party that has secured at least 1% of the votes in the previous general election. The political party can also encash these bonds through its verified account within 15 days of allocation. Importantly, the scheme allows donors to remain anonymous, as the names of those purchasing the bonds are not disclosed to the public, nor are they required to be disclosed by the political parties receiving the donations.
The petitioners, led by the Association for Democratic Reforms (ADR), challenged the scheme on the grounds that it compromises transparency and undermines the principles of free and fair elections. The challenge was grounded on the argument that the scheme facilitates anonymous donations, which could potentially lead to the unbounded influence of corporate entities and wealthy individuals over the political process. Additionally, the petitioners contended that the scheme violates the electorate’s right to information—a right essential for informed voting and protected under Article 19(1)(a) of the Constitution of India.
The challenge to the Electoral Bond Scheme brought to the fore several constitutional and legal issues, including the right to freedom of speech and expression, the right to information, and the principles of equality and non-arbitrariness under Article 14 of the Constitution. The case also raised questions about the role of money in politics, the influence of corporate donations, and the potential for corruption in the electoral process.
2. ISSUES RAISED
The petitioners raised several critical issues before the Supreme Court, which can be broadly categorized as follows:
- Constitutional Validity: The foremost issue was whether the Electoral Bond Scheme violates the constitutional provisions, particularly Article 19(1)(a), which guarantees the right to freedom of speech and expression. The petitioners argued that this right includes the right to know, which is pivotal for ensuring informed voting. They contended that by allowing anonymous donations, the scheme deprives voters and citizens of essential information about the sources of funding for political parties, thereby infringing on their right to make informed choices during elections.
- Transparency in Electoral Funding: Another significant issue was whether the scheme compromises transparency in political funding. The petitioners argued that the anonymity provided by the scheme allows for undisclosed and potentially undue influence on political parties, undermining the transparency vital for the integrity of the electoral process. They contended that the lack of transparency facilitated by the scheme could lead to the entry of black money into the political system, contrary to the stated objectives of the scheme.
- Right to Information: The petitioners contended that the scheme violates voters’ right to information, which is an integral part of the right to freedom of speech and expression. They argued that the scheme deprives voters of critical information about the sources of political funding, which is necessary for making informed decisions at the ballot box. The petitioners further argued that this lack of transparency undermines the democratic process by allowing for the unbounded influence of wealthy donors and corporate entities.
- Arbitrariness and Inequality: The petitioners also raised concerns about the potential arbitrariness and inequality created by the scheme. They argued that the scheme allows for unequal access to political influence, as wealthy individuals and corporate entities can make large donations through electoral bonds, while ordinary citizens have limited means to influence the political process. This, they contended, violates the principle of equality before the law, as enshrined in Article 14 of the Constitution.
- Potential for Corruption: A further issue raised by the petitioners was the potential for corruption and policy capture by corporate entities and wealthy individuals. They argued that the anonymity provided by the scheme could lead to quid pro quo arrangements between donors and political parties, where donations are made in exchange for favorable policies or decisions. This, they contended, could undermine the integrity of the political process and lead to a form of legalized corruption.
- Impact on Democracy: The petitioners also argued that the scheme has a broader impact on democracy, as it allows for the concentration of political power in the hands of a few wealthy donors and corporate entities. They contended that this concentration of power undermines the democratic process, as it reduces the influence of ordinary citizens and skews the political system in favor of those with financial resources.
3. CONTENTIONS
Petitioners’ Contentions: The petitioners, working with ADR, presented a convincing argument against the Electoral Bond Scheme, highlighting its potential effects on transparency, democracy, and constitutional rights.
- Violation of the Right to Information: The petitioners contended that the scheme violates voters’ right to information, which are essential components of their constitutionally protected freedom of speech and expression (Article 19(1)(a)). They said that free and informed voting is a necessary component of democracy and that by allowing anonymous donations, the scheme deprives voters of the information they need to make educated choices. The petitioners said that voters’ knowledge of the sources of political funding is essential to their capacity to hold political parties accountable and to maintain the integrity of the electoral process.
- Compromise on Transparency: The petitioners argued that the scheme jeopardizes transparency in political funding, which is critical to the functioning of a democratic society. They said that the anonymity of the program allows wealthy individuals and businesses to have unchecked power over politics. They said that by placing political parties in a position where they are more responsive to the interests of their contributors than to the interests of the public, this would weaken the democratic process.
- Facilitation of Black Money: The program’s stated objectives are contradicted, according to the petitioners, by encouraging the entry of dark money into the political system. They said that the anonymity of the plan facilitates the flow of unreported and illicit funds into the political system, increasing the likelihood of corruption. The petitioners further argued that by creating a separate political fundraising system that operates outside of public view, the scheme makes it difficult to identify the sources of funding used to influence elections.
- Inequality in Political Influence: The petitioners expressed concern about the scheme’s potential to create inequality, arguing that it provides wealthy people and corporate groups excessive control over the political process. They contended that this undermines the principle of equality before the law, as stated in Article 14 of the Constitution, and levels the playing field unfairly in politics. According to the petitioners, the proposal distorts the political system to benefit affluent persons, therefore lessening the influence of the average person.
- Potential for Corruption: The petitioners claimed that the scheme encourages corruption by allowing donors and political parties to get into quid pro quo arrangements. They said that because of the scheme’s anonymity, circumstances where payments are made in exchange for supported laws or decisions may be encouraged, endangering the integrity of the democratic process. The idea, according to the petitioners, creates a legally approved system of corruption that allows anybody to purchase and sell political influence without fear of repercussions from the state.
Respondents’ Contentions (Union of India): The Union of India defended the Electoral Bond Scheme, saying that it was implemented to encourage donations through banking channels and to address the problem of black money in political financing.
- Balancing Transparency and Privacy: The respondents claim that the plan strikes a balance between the need for political fundraising to be open and the right of contributions to privacy. They contended that the program’s anonymity was necessary to protect contributors from possible harassment and retaliation, particularly in a politically sensitive environment. As per the respondents, the initiative ensures that donations are made via banks and clean money channels, hence decreasing the significance of cash transactions and curbing the influence of dark money in politics.
- Promotion of Clean Money: The approach, in the opinion of the respondents, promotes openness by guaranteeing that donations are made with clean money and through financial channels. They said that by encouraging donations through authorized banking systems, which are subject to rules, the strategy lessens the likelihood that dark money will enter politics. The respondents claimed that sufficient safeguards are in place in the plan to ensure that donations aren’t used dishonestly or unlawfully.
- Protection of Donor Privacy: According to the comments, the anonymity of the scheme is crucial for protecting the privacy of contributors, since some may not want their political affiliations to be made known. Provisions of the Indian Evidence Act stipulate that evidence which is relevant and material to proceedings need not be disclosed to the party if the disclosure would violate public interest. They maintained that this promise is essential in a democracy where citizens are free to support political parties without fear of intimidation or retaliation. The responses continued by saying that by balancing the requirements of openness and the right to privacy, the strategy safeguards the interests of donors and the broader public.
- No Violation of the Right to Information: According to the respondents, electoral bonds do not violate people’s right to transparency, even though political parties are still required to disclose the total amount of donations received. According to them, transparency is not completely gone even if the proposal permits donors to stay anonymous because political parties are still obligated to submit reports. The comments went on to state that the right to know is not unconditional and may be suitably restricted in order to protect contributors’ privacy.
- No Arbitrary or Discriminatory Impact: The respondents argued that the scheme is not arbitrary nor discriminatory because it benefits all contributions and political parties equally. They maintained that the proposal does not create unequal access to political power because everyone has the same opportunity to give money and purchase electoral bonds. The respondents also said that the program levels the playing field for political parties by ensuring that they all have equal access to funding.
4. RATIONALE
The Supreme Court upheld the validity of the Electoral Bond Scheme in its decision, but it did so with a number of remarks and recommendations that demonstrate the Court’s comprehension of the complex issues at stake.
- Balancing Transparency and Privacy: The Court acknowledged that political finance transparency must be weighed against donors’ right to privacy. It recognized that in a democracy, safeguarding donor privacy is equally important to preserving the integrity of the voting process as transparency. The Court observed that by requiring donations to go via banking and clean money channels, the program addressed the issue of black money in political financing. The Court did, however, also note that the anonymity of the plan may be exploited, and as a result, it requested further oversight and control over the program’s implementation.
- Right to Information and Donor Privacy: Regarding the right to information, the Court determined that while it is essential to the freedom of speech and expression, this right is not unconditional and can be appropriately restricted. According to the Court, the Electoral Bond Scheme strikes a balance between voters’ right to know and donors’ right to privacy. The Court concluded that the scheme complies with constitutional norms due to its reasonable transparency rules, which force political parties to disclose the total amount of donations made through electoral bonds. The Court did, however, also emphasize the necessity of more transparency and responsibility in the scheme’s implementation.
- Equality and Non-Arbitrariness: In terms of equality and non-arbitrariness, the Court found that the program does not provide any unequal access to political power because it is available to all donors and political parties. The Court pointed out that the scheme levels the playing field for political parties by ensuring that they all have equal access to funding. The Court did, however, recognize the petitioners’ concerns that the arrangement unfairly benefited corporate entities and the rich. In order to ensure that the principles of equality and non-arbitrariness are maintained, the Court ordered that the plan be continually examined and modified.
- Potential for Corruption and Policy Capture: The Court addressed the petitioners’ concerns over the possibility that wealthy individuals and corporations will influence policy and participate in corruption. The scheme has safeguards to prevent donations from being misused or corrupted, the Court observed, even if it also preserves donor anonymity. The Court emphasized the need for strict execution of these protections and ordered additional inspection by regulatory organizations to ensure that the program is not utilized for unethical goals. The Court also stressed how important it is to monitor the plan and regularly review it in order to address any new issues.
- Impact on Democracy: The Court recognized the broader impacts on democracy and the political system of the Electoral Bond Scheme. It acknowledged the petitioners’ concerns about a few influential donors and businesses controlling all the political power. However, the Court did decide that the current version of the proposal does not violate either the Constitution or democratic values. The Court emphasized the need for ongoing review and amendment to address any shortcomings in the law and advised vigilance to ensure that the program is not misused to undermine the democratic process.
5. DEFECTS OF LAW
The Electoral Bond Scheme was upheld as lawful by the court, but it also identified several potential weak points in the Act and areas where the petitioners’ concerns might not be fully addressed:
- Anonymity and Lack of Transparency: The court agreed with the administration’s argument that anonymity is necessary to protect donors’ privacy. However, this very anonymity might be seen as a legal problem because it could allow for undetected and unrestrained influence on political parties. The lack of openness in the plan might undermine public trust in the democratic system and compromise the integrity of the electoral process. Since the Court’s decision does not resolve the tension between the need for donor privacy protection and transparency, it raises questions about whether the current legal system is sufficient to handle these difficulties.
- Limited Disclosure Requirements: The policy only requires political parties to report the total amount of contributions made via electoral bonds; individual donors’ names are kept private. This restricted disclosure does not provide voters with complete information about political finance sources that they need to make informed voting selections. The Court’s decision does not sufficiently examine the implications of this limited disclosure for the right to information and the integrity of the electoral process. The lack of thorough disclosure requirements may also make it more difficult for the regulatory bodies to effectively oversee and carry out the plan.
- Potential for Black Money and Corruption: Although the program tries to prevent black money, undeclared money might still make its way into the political system due to its obscurity. It’s feasible that electoral bonds will be purchased with illicit money, and that money will then be used—perhaps without any oversight—to influence politics. Given that the Court’s decision does not completely address the manner in which the program may be utilized for corrupt purposes, this raises concerns about the efficacy of the restrictions that are in place. The decision calls for ongoing investigation and adjustment in response to the grave worries over the tendency of wealthy individuals and corporate entities to engage in policy capture and corruption.
- Inequality in Political Influence: A disproportionate number of wealthy individuals and corporate entities, who can afford to make large donations through electoral bonds, would benefit from the arrangement. It is unclear if ordinary individuals have the same access to political power as affluent financiers, which calls into question the fairness of the democratic process. The Court’s decision does not fully examine the implications of this imbalance for democratic and constitutional norms. The verdict requires ongoing monitoring and assessment to ensure that the plan does not contravene the principles of equality and non-arbitrariness. One of the main concerns about the plan is that it can lead to unequal opportunities in the political arena.
- Judicial Review and Oversight: The decision leaves leeway for interpretation about a number of the plan’s components, particularly with regard to how to maintain the right ratio of openness to privacy. These ambiguous standards might lead to inconsistent application and enforcement of the legislation, which would undermine its effectiveness. The Court’s decision calls for more oversight and monitoring of the scheme’s implementation, but it provides no clear guidelines for how this oversight is to be implemented. The verdict expresses worry about the likelihood of unequal judicial scrutiny and program monitoring, and hence calls for further examination and modification to address these issues.
6. INFERENCE
The Supreme Court’s decision on the Electoral Bond Scheme serves as a reminder of how challenging it is to strike a balance between transparency, privacy rights, and the need to restrict the use of black money in elections. The Court upheld the constitutional validity of the scheme while also acknowledging the necessity for further safeguards and oversight to address the issues raised by the petitioners.
- Broader Implications for Democracy and the Political Process:
The decision highlights the tension between the rights to privacy and transparency in relation to political financing. By upholding the government’s argument that donor privacy needs to be preserved through anonymity, the Court has established a precedent that might have a significant impact on the transparency of political financing. The decision states that while transparency is important, it is not absolute and must be balanced against other competing interests, such as the right to privacy. This complex balancing act will have a significant influence on the future of political financing in India, particularly with regard to how privacy and transparency are actually handled.
- Potential for Future Challenges and Reforms:
The decision also leaves open the possibility of future challenges to the scheme, particularly if it is found to have been misused for unethical purposes. The Court’s emphasis on the need for ongoing evaluation and reform creates the possibility that more scrutiny and revisions to the scheme may eventually be made. The decision requires more oversight and management of the scheme’s operations, which may lead to additional safeguards and modifications to rectify the shortcomings identified in the case.
- Need for Vigilance and Public Accountability:
The Electoral Bond Scheme remains a controversial means of funding Indian politics even though it has been upheld. The decision calls for vigilance to prevent the system from being exploited to disrupt the democratic process, as well as more research and modification to address the shortcomings and challenges brought up in the case. Future election financing in India will depend on how these issues are overcome and whether the scheme can be effectively implemented in a way that balances transparency, privacy, and the need to combat black money.
Encouraging the public, civil society, and judiciary to hold the government and political parties accountable will be crucial in ensuring that the scheme does not contravene the fundamental principles of democracy and the Constitution.
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