Association for Democratic Reforms v. Union of India
Supreme Court of India, 15 February 2024, 5 judges, 2024 INSC 113
The Court struck down the Electoral Bond Scheme 2018 and the Finance Act 2017 amendments allowing anonymous political donations as violating the voter's right to information under Article 19(1)(a), and held unlimited corporate contributions manifestly arbitrary under Article 14.
Facts
The Finance Act 2017 amended the RBI Act (Section 31(3)) to let the Central Government authorise a scheduled bank to issue electoral bonds, and amended Section 29C of the Representation of the People Act 1951, Section 13A of the Income Tax Act 1961 and Section 182 of the Companies Act 2013. On 2 January 2018 the Electoral Bond Scheme was notified: bearer bonds, issued by SBI and not carrying the buyer's name, which eligible political parties could encash, with buyer information kept confidential. Political parties no longer had to report or record contributions received through bonds, companies had to disclose only the total amount contributed, and the cap on corporate contributions was removed. The petitioners challenged the Scheme and these amendments under Article 32. By an interim order of April 2019 political parties were directed to give the ECI, in sealed cover, particulars of donations received through bonds.
Questions before the Court
- Whether non-disclosure of 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 violates the right to information of citizens under Article 19(1)(a).
- Whether permitting unlimited corporate funding to political parties by amending Section 182(1) of the Companies Act violates the principle of free and fair elections and Article 14.
What the Court held
- Information about funding of a political party is essential for a voter to exercise the freedom to vote effectively. The Scheme and the impugned provisions, to the extent they anonymise contributions through electoral bonds, infringe the voter's right to information under Article 19(1)(a). The Scheme gives contributors anonymity against the public, not against the political party.
- Curbing black money is not traceable to any ground in Article 19(2). Even assuming it is a legitimate purpose, the Scheme fails the least restrictive means test, since other alternatives such as electoral trusts and other electronic transfers serve the purpose with less impact on the right to information.
- Donor privacy: informational privacy extends to political contributions that show political affiliation, and there is no constitutional hierarchy between it and the right to information. Applying a double proportionality standard, Clause 7(4) of the Scheme is not the least restrictive means to balance the two rights, as Section 29C disclosure above twenty thousand rupees is a better alternative.
- Accordingly the amendments to Section 13A(b) of the IT Act and Section 29C(1) of the RPA are unconstitutional, and since anonymity is intrinsic to the Scheme, the Electoral Bond Scheme 2018 is also struck down. The amendment to Section 182(3) of the Companies Act, requiring only the total contribution to be disclosed, also violates Article 19(1)(a).
- Plenary legislation can be tested for manifest arbitrariness. Deleting the proviso to Section 182(1) of the Companies Act is manifestly arbitrary and violates Article 14, because it treats companies and individuals alike, permits unregulated corporate influence contrary to free and fair elections, and treats profit-making and loss-making companies alike.
- Directions: the issuing bank was to stop issuing bonds; SBI was to give the ECI details of bonds purchased and encashed since 12 April 2019 by 6 March 2024; the ECI was to publish them by 13 March 2024; unencashed bonds within validity were to be returned and refunded.
Why it matters
The judgment holds that the voter's right to information under Article 19(1)(a) extends to information about the funding of political parties, not only of candidates. It lays down a double proportionality standard for balancing two conflicting fundamental rights, confirms that plenary legislation can be struck down as manifestly arbitrary while distinguishing it from subordinate legislation, and struck down the Electoral Bond Scheme with directions for disclosure of bond data.
In the Court's words
Copied from the official judgment; each passage links to its page.
“In view of the above discussion, we are of the opinion that the information about funding to a political party is essential for a voter to exercise their freedom to vote in an effective manner. The Electoral Bond Scheme and the impugned provisions to the extent that they infringe upon the right to information of the voter by anonymizing contributions through electoral bonds are violative of Article 19(1)(a).”
“Based on the above discussion, we conclude that Electoral Bond Scheme does not fulfill the least restrictive means test. The Electoral Bond Scheme is not the only means for curbing black money in Electoral Finance. There are other alternatives which substantially fulfill the purpose and impact the right to information minimally when compared to the impact of electoral bonds on the right to information.”
“Thus, the amendment to Section 13A(b) of the IT Act introduced by the Finance Act 2017, and the amendment to Section 29C(1) of the RPA are unconstitutional. The question is whether this Court should only strike down the non-disclosure provision in the Electoral Bond Scheme, that is Clause 7(4). However, as explained above, the anonymity of the contributor is intrinsic to the Electoral Bond Scheme. The Electoral Bond is not distinguishable from other modes of contributions through the banking channels such as cheque transfer, transfer through the Electronic Clearing System or direct debit if the anonymity component of the Scheme is struck down. Thus, the Electoral Bond Scheme 2018 will also consequentially have to be struck down as unconstitutional.”
“Unlimited contribution by companies to political parties is antithetical to free and fair elections because it allows certain persons/companies to wield their clout and resources to influence policy making. The purpose of Section 182 is to curb corruption in electoral financing. For instance, the purpose of banning a Government company from contributing is to prevent such companies from entering into the political fray by making contributions to political parties. The amendment to Section 182 by permitting unlimited corporate contributions (including by shell companies) authorizes unrestrained influence of companies on the electoral process. This is violative of the principle of free and fair elections and political equality captured in the value of “one person one vote”.”
Provisions interpreted
- Article 19(1)(a), Constitution
- Article 14, Constitution
- Section 182, Companies Act, 2013 (as amended by Section 154, Finance Act 2017)
- Section 29C, Representation of the People Act, 1951 (as amended by Section 137, Finance Act 2017)
- Section 13A, Income Tax Act, 1961 (as amended by Section 11, Finance Act 2017)
- Section 31(3), Reserve Bank of India Act, 1934 (held unconstitutional only in the separate opinion of Sanjiv Khanna, J.)
- Electoral Bond Scheme 2018
Related judgments
- Follows Shayara Bano v. Union of India (2017)“We concur with Shayara Bano (supra) that a legislative action can also be tested for being manifestly arbitrary.” (page 140)
Case and bench
- Parties
- Association for Democratic Reforms v. Union of India
- Case
- Writ Petition (C) No. 880 of 2017 with Writ Petition (C) No. 59 of 2018, Writ Petition (C) No. 975 of 2022 and Writ Petition (C) No. 1132 of 2022
- Decided
- 15 February 2024
- Bench
- Dr Dhananjaya Y Chandrachud, CJI, Sanjiv Khanna, B R Gavai, J B Pardiwala, Manoj Misra
- Opinions
- Unanimous in result. Opinion by Dr Dhananjaya Y Chandrachud, CJI for himself, B R Gavai, J B Pardiwala and Manoj Misra, JJ.; Sanjiv Khanna, J. wrote a separate opinion agreeing with the findings and conclusions but reaching them by different reasoning, including on the application of proportionality.
Questions on this case
4 questions in live Law Maker papers mention this case. A few from free papers:
Question 1, Landmark Judgments Practice Set 1
With reference to Association for Democratic Reforms v. Union of India (judgment of 15 February 2024) on electoral bonds, consider the following statements: 1. The Electoral Bond Scheme was held to violate the voter's right to information under Article 19(1)(a). 2. The deletion of the proviso to Section 182(1) of the Companies Act, which allowed unlimited corporate contributions to political parties, was held arbitrary and violative of Article 14. 3. The issuing bank was allowed to continue issuing electoral bonds until Parliament enacted a replacement scheme. Which of the statements given above is/are correct?
- A. 1 only
- B. 2 and 3 only
- C. 1 and 2 only
- D. 1, 2 and 3
Show the answer
C. 1 and 2 only
The Constitution Bench held the Electoral Bond Scheme and the connected amendments violative of Article 19(1)(a) and unconstitutional, and held the deletion of the proviso to Section 182(1) of the Companies Act arbitrary and violative of Article 14. Its first direction was that the issuing bank shall stop the issuance of electoral bonds forthwith, so statement 3 is wrong.
Question 2, Legal Maxims & Jurisprudence Practice Set 1
What did the Supreme Court decide in Association for Democratic Reforms v. Union of India (2024), the electoral bonds case?
- A. Banned electoral bonds entirely
- B. Permitted usage with some regulations
- C. Referred the case back to the Election Commission
- D. Deferred the judgment for legislative review
Show the answer
A. Banned electoral bonds entirely
In Association for Democratic Reforms v. Union of India (15 February 2024) the Constitution Bench struck down the Electoral Bond Scheme, 2018 and the related amendments as violating voters' right to information under Article 19(1)(a), and directed disclosure of bond details.