The Supreme Court has recently declared the Electoral Bonds Scheme as unconstitutional. This scheme, which allowed for donor anonymity, has long been criticized by transparency activists. Electoral bonds have been an important means of funding political parties since 2018. However, the court found that the scheme violated citizens’ right to information about the sources of party finances. As a result, the court has directed the disclosure of all details of contributors, recipient parties, and denominations.
An electoral bond is a bearer banking instrument that does not carry the name of the buyer or payee. Any citizen or company could purchase these bonds and donate them to a political party. These bonds are available in various denominations. The State Bank of India was authorized to issue and encash these bonds. The scheme allowed funds to be transferred to political parties through legitimate banking channels, preventing unregulated contributions through cash. It aimed to curb the role of black money in election funding. Donor anonymity was seen as beneficial, as it ensured that contributors would not fear retribution or coercion from parties they did not donate to.
However, the court ruled that citizens have a right to information that is essential for them to exercise their freedom to vote effectively. Information about funding to a political party is deemed essential for voters to make an informed choice. The court determined that the Electoral Bond Scheme violated the citizens’ freedom of expression. The scheme anonymized contributions through bonds, restricting voters’ right to information. The court applied a proportionality test and stated that alternative methods, such as electronic transfer and donations to an Electoral Trust, were available. The court found that the scheme was not the least restrictive means to balance the right to informational privacy and the right to information on political contributions.
Furthermore, the court ruled that changes to the Companies Act, which allowed both profit-making and loss-making companies to make political contributions, violated the voters’ right to information. Previously, only a percentage of the net profit could be donated. The court felt that the harm in the form of quid pro quo was much higher in the case of loss-making companies, rendering the amendment manifestly arbitrary.
This landmark ruling has significant implications for the funding of political parties in India. It promotes transparency and accountability in the political system. It ensures that citizens have access to information about party finances, allowing them to make informed choices when exercising their right to vote.
