Electoral Bonds: Writ Petitions Summary

Background and Issue

Several petitions challenged the Electoral Bonds Scheme (EBS) before the Supreme Court. Two key petitioners include the Communist Party of India-Marxist(CPI-M), and the Association for Democratic Reforms (ADR).

The petitions argued that the amendments to the Reserve Bank of India Act, 1934, the Representation of the People Act, 1951, the Income Tax Act, 1961, and the Companies Act, 2013 enabling the Electoral Bonds Scheme have opened the floodgates to unlimited corporate donations to Indian political parties. They also allow foreign companies to donate to Indian political parties threatening India’s autonomy and democracy: This will lead to lobbying and cajoling of the politicians into formulating and pushing policies in the companies’ interest.

The following table analyses the relevant provisions made by the Central Government related to political funding with the passage of the Finance Act, 2016 and the Finance Act, 2017, and the grounds on which they were challenged.

The grounds of the challenge are two-fold. The petitioners claim that the amendments violate several fundamental rights and suffer from procedural infirmities.

Grounds

Violation of Fundamental Rights

The petitioners contend that the amendments are unreasonable and irrational and violate Article 14 of the Constitution of India, 1950. Article 14 guarantees the fundamental right to equality. Equality has been interpreted to include the requirement of reasonableness and rationality: any law which does not meet this standard would violate equality under Article 14 [E.P. Royappa v State of Tamil Nadu, 1974].

Next, they contend that the amendments violate the citizen’s fundamental right to information under Article 19 (1) (a). Even though this right is not explicitly guaranteed, the Supreme Court in Secretary, Ministry of Information and Broadcasting v. Cricket Association of Bengal [1995]  read the right to information under the fundamental right to freedom of speech expression: for a person to exercise their right to speech and expression effectively, information on an issue is crucial. Moreover, the impugned amendments do not fall under prescribed restrictions to free speech and expression under Article 19 (2).

The intent of the EBS – to prevent corruption and use of black money in politics- bears no connection to the expected outcome, the petitioners assert. On the contrary, EBS would lead to more corruption. The disclosure of contribution is a bedrock of every western democracy including USA, UK, France and Canada. A principle upheld by the Indian Supreme Court in Union of India v Association for Democratic Reforms (2002). Additionally, it is crucial to maintain the integrity of elections as it is fundamental to democracy. While reiterating this, the Supreme Court noted that the Election Commission could seek information about expenditure from candidates and political parties.

Serious Procedural Lapses

The petitioners argue that the impugned amendments have been erroneously passed as Money Bill under Article 110 of the Constitution of India, 1950. By bypassing the Rajya Sabha, the Government violated the doctrine of separation of power and the basic structure of the Constitution.

Citing the Supreme Court’s decision in Raja Ram Pal v Hon’ble Speaker, Lok Sabha(2007), they argued that passing the contended amendments as Money Bill was not merely a procedural irregularity but amounted to substantive illegality or unconstitutionality. Pre-emptively the petitioners argue that the Supreme Court could judicially review the constitutionality of the impugned amendments In Special Reference No. 1 of 1964.

The petitions have similar prayers i.e., declaring the following provisions as unconstitutional, illegal and void-

1. 1. Section 135 of the Finance Act 2017 and the corresponding amendment carried out in Section 31 of the Reserve Bank of India Act, 1934
   2. Section 137 of the Finance Act, 2017, and the corresponding amendment carried out in Section 29C of the Representation of the People Act, 1951
   3. Section 11 of the Finance Act, 2017 and the corresponding amendment carried out in Section 13A, the Income Tax Act, 1961
   4. Section 154 of the Finance Act, 2017 and the corresponding amendment carried out in Section 182 of the Companies Act, 2013

Additionally, the following are distinct prayers of the petitioners:

ADR

• • Declare Section 236 of Finance Act, 2016 and the corresponding amendment carried out in Section 2(1)(j)(vi) of the Foreign Regulations Contribution Act, 2010 as being unconstitutional, illegal and void.
  • Direct the political parties to not take donations in cash

CPI-M

• • Declare the notification dated 02.01.2018 regarding EBS issued by the Department of Economic Affairs under the ministry of finance, as being unconstitutional, illegal and void.