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2024 (2) TMI 812 - SC - Indian LawsUnlimited corporate funding to political parties - Infringement of principle of free and fair elections - violation of Article 14 of the Constitution - non-disclosure of information on voluntary contributions to political parties. Challenging the constitutional validity of the Electoral Bond Scheme Electoral Bond Scheme or Scheme which introduced anonymous financial contributions to political parties -Challenge to the provisions of the Finance Act 2017 which, among other things, amended the provisions of the Reserve Bank of India Act 1934, Section 135 of the Finance Act 2017, the Representation of the People Act 1951, Section 137 of the Finance Act 2017, the Income Tax Act 1961, Section 11 of the Finance Act 2017, and the Companies Act 2013, Section 154 of the Finance Act 2017. 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? 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 are violative of the right to information of citizens under Article 19(1)(a) of the Constitution? HELD THAT - It is held in the present case as follows - a. 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; and b. 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. The following directions are issued a. The issuing bank shall herewith stop the issuance of Electoral Bonds; b. 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; c. 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; d. SBI shall submit the above information to the ECI within three weeks from the date of this judgment, that is, by 6 March 2024; e. 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 f. Electoral Bonds which are within the validity period of fifteen days but that 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.
Issues Involved:
1. Unlimited Corporate Funding to Political Parties. 2. Non-Disclosure of Information on Voluntary Contributions to Political Parties. 3. The Scope of Judicial Review. 4. The Close Association of Politics and Money. 5. The Right to Information of the Voter and its Infringement. 6. Validity of the Electoral Bond Scheme and Related Provisions. 7. Challenge to Unlimited Corporate Funding. Summary: Unlimited Corporate Funding to Political Parties The petitioners challenged the amendment to Section 182(1) of the Companies Act, which permits unlimited corporate funding to political parties, arguing it infringes the principle of free and fair elections and violates Article 14 of the Constitution. The Court held that unlimited corporate funding allows certain entities to wield undue influence over the political process, violating the principle of free and fair elections and political equality. The amendment was deemed manifestly arbitrary for treating corporate and individual contributions alike and not distinguishing between profit-making and loss-making companies. Non-Disclosure of Information on Voluntary Contributions to Political Parties The petitioners argued that the non-disclosure of information on contributions received through electoral bonds violates the right to information of citizens under Article 19(1)(a) of the Constitution. The Court held that the right to information includes the right to know about financial contributions to political parties, as it is essential for the effective exercise of the choice of voting. The Court found that the Electoral Bond Scheme and related amendments infringe the right to information by anonymizing contributions, which is not justified by the purpose of curbing black money or protecting donor privacy. The Scope of Judicial Review The Court rejected the Union of India's argument that the amendments relate to economic policy and should be subject to judicial restraint. It held that the amendments pertain to the electoral process and not economic policy, necessitating a stringent form of judicial review. The presumption of constitutionality is rebutted when a prima facie case of violation of a fundamental right is established, shifting the onus to the State to justify the infringement. The Close Association of Politics and Money The Court recognized the influence of money on electoral politics, noting that financial contributions can impact electoral outcomes and governmental decisions. The legal regime does not distinguish between campaign funding and electoral funding, allowing financial contributions to influence policy-making. The Court emphasized that transparency in political funding is crucial to prevent quid pro quo arrangements and ensure free and fair elections. The Right to Information of the Voter and its Infringement The Court held that the right to information of voters extends to information about political parties, as political parties play a central role in the electoral process. The Court found that information about political funding is essential for voters to exercise their choice effectively. The Electoral Bond Scheme's anonymity provision was deemed to infringe this right without sufficient justification, as it fails the proportionality test. Validity of the Electoral Bond Scheme and Related Provisions The Court struck down the Electoral Bond Scheme, the proviso to Section 29C(1) of the Representation of the People Act, Section 182(3) of the Companies Act, and Section 13A(b) of the Income Tax Act as violative of Article 19(1)(a) and unconstitutional. The Court directed the disclosure of information on contributions received by political parties under the Electoral Bond Scheme. Challenge to Unlimited Corporate Funding The Court found that the deletion of the cap on corporate funding by the Finance Act 2017 was manifestly arbitrary and violated Article 14. The amendment was held to permit unregulated influence of companies in the political process, undermining free and fair elections. Conclusion and Directions 1. The Electoral Bond Scheme and related amendments were declared unconstitutional. 2. Unlimited corporate funding was deemed arbitrary and violative of Article 14. 3. The Election Commission of India (ECI) was directed to publish information on contributions received through electoral bonds. 4. The issuance of new electoral bonds was prohibited. 5. Existing bonds within the validity period were to be returned for refunds. This summary preserves the legal terminology and significant phrases from the original text while providing a comprehensive issue-wise breakdown of the judgment.
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