SBI to stop issuance of electoral bonds, poll panel to release data: Key observations from major Supreme Court ruling

In a major ruling, the Supreme Court on Thursday struck down the electoral bonds scheme as “unconstitutional.” Five judges of the Supreme Court said the plan violated the constitutional right to information and freedom of speech and expression. The court asked issuing bank SBI to stop issuing electoral bonds and provide details of all donations under the scheme to the Election Commission of India.

A five-judge Constitution bench headed by Chief Justice DY Chandrachud also asked the poll body to release data on the rule by March 13, 2024.

The court issued two separate but unanimous rulings on defenses challenging the plan.

What did the Supreme Court say?

Announcing the judgement, the CJI said, “The petition raises the following questions – whether the amendment violates the right to information under Article 19(1)(a) and whether unlimited corporate funding violates free and fair elections the rules.”

On infringement of the right to know

“The court held that citizens have the right to hold their government accountable. The key to expanding the right to information is that it goes beyond state matters to include information necessary for participatory democracy.”

He pointed out that political parties are relevant units in the electoral process; Information about party funding sources critical for electoral choices.

“Political contributors have access to opportunities… opportunities that lead to policy development… because of the link between money and voting…” he observed.

The Supreme Court held that anonymous electoral bonds violated the right to information and Article 19(1)(a).

“Financial support for political parties can lead to quid pro quo arrangements. Electoral bonds scheme is not the only plan to curb black money. There are other options. Violation of the right to information does not serve the purpose of curbing black money. Financial contributions to political parties are made to both political parties – in support of one party or the contributions may be made in a quid pro quo manner,” the CJI said.

The judge further noted that not all political donations are intended to change public policy.

“Students, daily wagers, etc. also contribute. Not giving political donations the privacy umbrella just because some donations are for other purposes is not impermissible… Information privacy also applies to political donations… Political affiliation privacy rights are not extends to donations made for the purpose of influencing public policy and applies only to donations below the threshold,” the judgment said.

On corporate funding and its impact on free and fair elections

The court observed, The union is unable to establish that the measures adopted in section 7(4)(1) of the electoral plan are the least restrictive measures.

“Amendment to Section 29C of Income Tax Act and Representation of the People Act declared ultra viresThe electoral bonds scheme must be scrapped as unconstitutional,” the CJI said.

call Amendment to the Companies Act (allowing blanket corporate political funding) “unconstitutional”the CJI said this violated the citizens’ right to information and involved possible quid pro quo.

“Amendment to Section 182 of Companies Act rendered futile given we find electoral bonds scheme unconstitutional. Corporations have a greater influence on the political process than individual contributions. Corporate donations are purely business transactions. The 182nd Amendment to the Companies Act is clearly arbitrary in its treatment of companies and individuals,” he added.

The court also noted that before the amendment to the Companies Act, loss-making companies could not contribute capital.

“The amendment fails to recognize the dangers of allowing loss-making companies to contribute capital as a quid pro quo. The amendment to Section 182 of the Companies Act is clearly arbitrary as it does not distinguish between loss-making companies and profit-making companies.”

SC asks SBI to stop issuance of electoral bonds

The Supreme Court asked the issuing bank – State Bank of India – to immediately stop issuing electoral bonds.

“The State Bank of India should submit to the Election Commission of India details of political parties that have received donations through electoral bonds since the interim order of April 12, 2019. SBI must disclose details of every electoral bond cashed by political partieswhich should include the redemption date and the denomination of the electoral bond…ECI shall publish these details on its website by March 13, 2024”, the CJI said.

SC tells parties to return unpledged bonds

The court further added that electoral bonds which are within the validity period of 15 days but have not been encashed by the political parties shall be refunded by the political parties to the purchasers. The issuing bank shall refund the amount to the buyer.

Justice Sanjiv Khanna, while delivering the verdict, said: “I agree with the CJI’s verdict. I also applied the principle of proportionality, but slightly differently. But the conclusion is the same.”

About the Electoral Bond Scheme

The scheme, notified by the government on January 2, 2018, was promoted as an alternative to cash donations to political parties as part of efforts to increase transparency in political funding.

Under the provisions of the scheme, any Indian citizen or entity registered or established in the country can purchase electoral bonds. Individuals can purchase electoral bonds alone or jointly with other individuals.