ASSOCIATION FOR DEMOCRATICS REFORMS vs UNION OF INDIA, 2024
Case Title and Citation
The case is titled Association for Democratic Reforms & Anr. Versus Union of India & Ors.. It was heard along with connected Writ Petitions. The citation is 2024 INSC 113.
Factual Background
A batch of writ petitions was filed challenging the constitutional validity of the Electoral Bond Scheme (EBS), which introduced anonymous financial contributions to political parties. The challenge also encompassed several provisions of the Finance Act 2017. These amendments changed the existing regulatory regime by allowing the Central Government to authorize scheduled banks to issue electoral bonds; permitting political parties to receive donations anonymously through these bonds, thereby exempting them from statutory disclosure requirements; and removing the limit on corporate funding (previously capped at 7.5% of average net profits). As a result, unlimited corporate funding became permissible. The EBS defined the electoral bond as a bearer banking instrument that does not carry the name of the buyer. The scheme mandated that information about the buyer must be treated as confidential by the bank, to be disclosed only if demanded by a competent court or upon the registration of a criminal case. The Reserve Bank of India (RBI) and the Election Commission of India (ECI) had previously raised objections regarding the scheme’s potential to undermine the currency system, facilitate money laundering, and severely impact transparency in political funding.
Issue(s)
- Whether the non-disclosure of donor information under the Electoral Bond Scheme and related statutory amendments violates the right to information of citizens under Article 19(1)(a) of the Constitution.
- Whether permitting unlimited corporate funding to political parties, resulting from 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.
Decision of the Supreme Court
The Supreme Court held the Electoral Bond Scheme 2018 to be unconstitutional. The related statutory amendments providing for non-disclosure (proviso to Section 29C(1) of the RPA, Section 182(3) of the Companies Act, and Section 13A(b) of the IT Act) were declared unconstitutional. Furthermore, the deletion of the cap on corporate contributions (proviso to Section 182(1) of the Companies Act) was held to be arbitrary and violative of Article 14. The issuing bank (State Bank of India or SBI) was directed to stop the issuance of electoral bonds forthwith. SBI was ordered to submit complete details of all bonds purchased and encashed since April 12, 2019, to the ECI, and the ECI must publish this information on its official website.
Reason for the Decision
The judgment rested on two primary constitutional violations:
- Violation of Article 19(1)(a) (Right to Information): The Court held that the right to information of a voter is a fundamental right traceable to Article 19(1)(a). Information about the funding received by political parties is essential for a voter to exercise their choice effectively, particularly given the close association between money and politics. Financial contributions influence electoral outcomes and governmental policy decisions, raising the legitimate possibility of quid pro quo arrangements. The non-disclosure mandated by the scheme and the amendments violated this right. The scheme’s purported goal of donor privacy did not justify this infringement because:
- The anonymity provided by the scheme is only de jure, not de facto, as powerful political parties could still coerce or ascertain the contributor’s identity.
- The complete non-disclosure was not the least restrictive means to achieve the claimed purpose of curbing black money. Alternatives, such as the existing regime of contributions through cheques or the framework of Electoral Trusts, fulfil the objective in a real and substantial manner while imposing minimal restrictions on the right to information.
- Violation of Article 14 (Manifest Arbitrariness): The removal of the 7.5% cap on corporate donations was manifestly arbitrary.
- The amendment wrongly treated companies and individuals alike for political contributions, ignoring the vast difference in their ability to influence the electoral process. Corporate contributions are fundamentally different from individual expressions of support, as they are often purely business transactions intended to secure benefits.
- The amendment eliminated the distinction between profit-making and loss-making companies, allowing companies, regardless of profitability, to make unlimited donations. This was arbitrary because loss-making companies are more likely to make donations motivated by the prospect of securing quid pro quo benefits.
Conclusion
The Supreme Court concluded that the Electoral Bond Scheme and the amendments that ensured anonymity and permitted unlimited corporate funding were unconstitutional, as they fundamentally violated the citizens’ right to information (Article 19(1)(a)) and the principles of free and fair elections and political equality (Article 14). The scheme was therefore struck down, and specific directions were issued to the State Bank of India and the Election Commission of India to disclose all past and future contributions made through these instruments, ensuring transparency in the electoral process.
Case Materials
Day 1 of Arguments: 31 October 2023 (Argument Transcripts) | (Video Recording)
Day 2 of Arguments: 01 November 2023 (Argument Transcripts) | (Video Recording)
Day 3 of Arguments: 02 November 2023 (Argument Transcripts) | (Video Recording)
Link to Judgment (PDF)
