Declaring ‘Electoral Bonds Scheme’ unconstitutional, SC says “Unlimited corporate contributions to political parties is arbitrary and violative of Article 14”

Today (February 15, 2024), the Supreme Court (SC) of India delivered a long-awaited judgment on a batch of petitions challenging the constitutionality of the electoral bond scheme that facilitates anonymous donations to political parties. The Constitution bench comprising Chief Justice of India DY Chandrachud, Justice JB Pardiwala, Justice BR Gavai, Justice Sanjiv Khanna, and Justice Manoj Misra struck down the Electoral bond scheme. The bench concluded, “The Electoral Bond Scheme, the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional.” It added, “the deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14.” While reaching the conclusion, the SC opined that “companies and individuals cannot be equated for the purpose of political contributions.” Concerning this, the bench issues certain directions which are as follows:

• “The issuing bank shall herewith stop the issuance of Electoral Bonds;
• SBI shall submit details of the Electoral Bonds purchased since the interim order of this Court dated 12 April 2019 till date to the ECI. The details shall include the date of purchase of each Electoral Bond, the name of the purchaser of the bond, and the denomination of the Electoral Bond purchased;
• SBI shall submit the details of political parties which have received contributions through Electoral Bonds since the interim order of this Court dated 12 April 2019 till date to the ECI. SBI must disclose details of each Electoral Bond encashed by political parties which shall include the date of encashment and the denomination of the Electoral Bond;
• SBI shall submit the above information to the ECI within three weeks from the date of this judgment, that is, by 6 March 2024;
• The ECI shall publish the information shared by the SBI on its official website within one week of the receipt of the information, that is, by 13 March 2024; and 
• Electoral Bonds that are within the validity period of fifteen days but which have not been encashed by the political party yet shall be returned by the political party or the purchaser depending on who is in possession of the bond to the issuing bank. The issuing bank, upon the return of the valid bond, shall refund the amount to the purchaser’s account.”

The lead judgment was authored by the CJI including concurring opinions of Justice Pardiwala, Justice Gavai, and Justice Misra whereas Justice Khanna gave a concurring opinion with different reasoning while reaching the same conclusions. Both the judgments gave answers to two main questions first, “Whether unlimited corporate funding to political parties, as envisaged by the amendment to Section 182(1) of the Companies Act infringes the principle of free and fair elections and violates Article 14 of the Constitution” and second “Whether the non-disclosure of information on voluntary contributions to political parties under the Electoral Bond Scheme and the amendments to Section 29C of the RPA, Section 182(3) of the Companies Act and Section 13A(b) of the IT Act is violative of the right to information of citizens under Article 19(1)(a) of the Constitution.” During the proceedings, the petitioners also challenged the introduction of the Finance Act as a Money Bill under Article 110 of the Constitution. The SC bench referred the issue of the scope of Article 110 to a Seven-judge bench. 

Earlier on October 16, the matter was referred to a five-judge bench by a three-judge bench. All the arguments were heard by the bench in three hearings, on October 31, 2023, November 01, 2023, and November 02, 2023. Further, the Constitution bench of the SC reserved the judgment after hearing it for three days on November 02, 2023.