Electoral Bonds Constitution Bench | Judgement Pronouncement

Constitutionality of the Electoral Bond Scheme

Judges: D.Y. Chandrachud CJI, Sanjiv Khanna CJI, B.R. Gavai J, J.B. Pardiwala J, Manoj Misra J

Gauri Kashyap | 15th Feb 2024

Today, a five-judge Constitution Bench of the Supreme Court held that the Union’s 2018 Electoral Bonds scheme was unconstitutional. The Bench had reserved judgement in the case in November 2023. The case raised issues of transparency in elections and political funding and its effect on free and fair elections in India. 

Background

On 2 January 2018, the Ministry of Finance issued a notification that introduced the Electoral Bond Scheme, 2018. Under this Scheme, certain branches of the State Bank of India (SBI) were authorised to sell electoral bonds in denominations of ₹ 1,000, ₹10,000, ₹1,00,000, ₹10,00,000, and ₹ 1,00,00,000 for 10 days in January, April, July, and October each year.

Most importantly, the bonds allowed the identity of the purchaser to remain anonymous to everyone, except the SBI, who must record the buyer’s Know Your Customer (KYC) details. 

Political parties which secured more than one percent votes “in the last general election to the House of the People or a Legislative Assembly” are eligible to accept donations through electoral bonds.

Association for Democratic Reforms (ADR) and Common Cause— and the Communist Party of India (Marxist) filed petitions in the Supreme Court arguing that the scheme allowed “non-transparency in political funding” and legitimised electoral corruption at a “huge scale.”

Chief Justice D.Y. Chandrachud stated that the Bench had arrived at a unanimous judgement with two opinions. One was authored by him on behalf of Justices B.R. Gavai, J.B. Pardiwala, and Manoj Misra and the second opinion was authored by Justice Sanjiv Khanna.

CJI Chandrachud stated that the Electoral Bonds scheme is violative of 19(1)(a) to the extent that it infringes upon the right to information of the voter. He added that the Electoral Bonds scheme is not the only method that can be adopted to curb black money. There are other means. Thus the infringement of the Right to information is not justified for curbing black black money in the Indian economy.

The Chief then stated that the right to informational privacy extends to financial contribution to political parties, which is a facet of political affiliation. Not all political contributions are made to affect policy. He held that the Union has been unable to justify the blanket non-disclosure of source of funding. He added that there are lesser restrictive measures to ensure that the right to information and the right to privacy are balanced. Deletion of the mandate of disclosure of the particulars of contribution violates the voters’ right to information, stated CJI Chandrachud. Unlimited political contributions by companies was declared manifestly arbitrary for the following reasons:

  1. They are pure business transactions to make profits
  2. Loss making companies should not be allowed to donate to secure quid pro quo arrangements;
  3. Violates “1 person 1 vote” principle

The Bench made the following directions:

  1. The issuance of Electoral Bonds shall be stopped.
  2. SBI shall submit details of the EBs purchased since the interim order of the court dated 12 April 2019 to date to the Election Commission of India. The details shall include the date of purchase of each Bond, the name of the purchase and the denomination of the EB purchased.SBI shall submit the above information to the ECI within 3 weeks from the date of this judgement that is by 6th march 2024. ECI shall publish the information shared by the SBI on its official website withing one week of the receipt of the information that is 13th march 2024.
  3. Electoral bonds which are within the validity period of 15 days but have not been encashed by political parties yet shall be returned by the party to the purchaser depending on who is in possession of the bond to the issuing bank. This shall refunded to the purchasers account.

Justice Khanna stated that he agreed with the conclusions and directions in CJI Chandrachud’s opinion. He stated that he arrived at a similar conclusion after applying the principle of proportionality with a “slight variation.”

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