About the Author:
Asiya Rahman Puthuppurackal, a sophomore student pursuing BA LL.B at Government Law College, Thiruvananthapuram, is a member of the LJRF Centre for Constitutional Literacy.
“Political changes and reforms do not usually favor the general populace. They benefit those who are positioned to best organize and advocate for their policies”. – Joel Miller
Believe it or not, this statement holds true in the current electoral politics of the world’s largest, but not the best democracy. And there is no better exemplification than the 2018 Electoral Bonds Scheme for the same, which fortunately, on 15 February 2024, was struck down as unconstitutional by a 5-judge bench including Chief Justice of India D.Y. Chandrachud in Association for Democratic Reforms and Anr v Union of India and Ors.
The 2018 Scheme introduced by former Finance Minister Late Arun Jaitley in the 2017-18 Union Budget and notified on 2nd January 2018 by the Ministry of Finance, was meant “to cleanse the system of political funding”.
Interestingly, the decision was declared right before the Lok Sabha polls 2024, which clearly reinforces the prerogative of a conscious critical choice of the voters, followed by the futile attempt of the State Bank of India in its plea requesting to extend the deadline of disclosure of the electoral bonds data to June 30, 2024, i.e. after the Lok Sabha Elections. The Supreme Court had to reprimand the bank in order to get the data furnished by March 21, 2024.
The pertinent question to be asked is: What does this judgement mean to us and why should we know about the judgement? Well, the answer lies in the judgement itself.
ELECTORAL BOND – HOW THE MISNOMER WAS ENACTED
- What is an Electoral Bond? It is a money, bearer instrument which can be purchased by companies and individuals in India from authorised branches of the State Bank of India. The purpose is making donations to a political party. They are available in the denominations of 1,000, 10,000 , 1 Lakh, 10 Lakh, and 1 crore.
- Political Parties which have registered under The Representation of The People Act ,1951 and have secured more than 1% of votes in the previous elections to the Lok Sabha or any Legislative Assembly are the eligible recipients of these electoral bonds. They have to encash these bond amounts from a specific account created and verified by the Election Commission of India , within 15 days of its purchase, otherwise it will be deposited to the Prime Minister’s Relief Fund, which does not come under the purview of the Right to Information Act.
- When can the bonds be purchased? For a period of 10 days in the months of January, April, July and October.
- Courtesy: The Hindu
Key highlight: There is no mentioning of who the payer or the payee is, which leaves a question: WHO PAID WHO? Well, we would have never known if the matter did not come up before the Supreme Court in time which, in the verdict lifted this “veil of sophisticated vagueness“.
AMENDMENTS WHICH FACILITATED THE ILLEGAL:
Via The Finance Act 2017, these amendments, which were declared unconstitutional by the Court in the present verdict, were enacted in the following statutes, for legalising the complete anonymity of the political parties and their donors.
- Section 31(3) added in The Reserve Bank of India Act 1934 by Section 135: Empowered the Central Government to authorise any scheduled bank to issue electoral bonds. This clearly surpassed the sole monopoly of the RBI to issue bearer instruments.
- Proviso inserted in Section 29C (1) of The Representation of the People Act, 1951 by Section 137: Mandated the disclosure of funds exceeding Rs.20,000 which was amended to exempt political parties from disclosing unrestrained funds obtained through electoral bonds in their contribution reports.
- “Other than contribution by way of electoral bond” added after the words “such voluntary contribution” in Section 13A proviso (b) of the Income Tax Act, 1961 by Section 11: Exempts political parties from maintaining a record of contributions from electoral bonds.
- Section 182(3) of the Companies Act, 2013 was substituted and proviso under (1) omitted, via Section 154: Removed the limit of contributing 7.5% of net profit of the last 3 years for corporates to contribute unlimited funds via the electoral bonds; Emaciated disclosure of funds in particular to revealing only the total amount contributed, and not mentioning to which political party. This could possibly give an upper hand to companies to manoeuvre policies of the ruling party in their favour, given that there is a high chance of quid pro quo transactions between corporates and the incumbent government.
Note: Companies could make contributions without the consent or knowledge of shareholders or the Board of Directors which clearly put the latter in an unfair situation of not knowing how the company would act in political spheres.
The Finance Act, 2016 amended the Foreign Contribution Regulation Act, 2010, defining “foreign source”, allowing foreign companies with a majority share in Indian Companies to donate to political parties.
Let Maneka Gandhi V. Union of India remind that “Procedure established by Law” should be just, fair and reasonable.
NOT TO FORGET:
The Election Commission of India, one of the respondents, had filed an affidavit, expressing its opposition to the scheme on 25 March 2019, stating that the scheme is contrary to its goal of transparency.
- Courtesy: https://www.cartoonistsatish.com/
KEY LEGAL TAKEAWAYS:
Supreme Court’s exercise of Judicial Review- Limited?
The Court refuses to divest the amendments of the protection accorded under the doctrine of presumption of constitutionality, when the objectives, specially emphasising on disclosure apparently, even in the ordinary eyes, defeat democracy. It stated it cannot carve an exception to the principle that conferred democratic legitimacy to the legislature. ‘Democratic Legitimacy’ is essentially what these amendments contradict. The need to question the competency of the legislature while enacting such amendments definitely arises.
Right to Information Under Article 19(1)(a) underscored in the Judgement:
➔ Noting that only the ruling government had access to the details of corporates and funds for the political parties from the SBI; Voters did not have the right to information, neither did the opposition political parties, SC recognised that this right is not only limited to candidates in elections, given that a political party remains an inevitable element of Indian Democracy, which is reflected in the Anti-Defection Law, in the conduct of elections where symbols are allocated, but extends to political parties, which form the root of elections in India.
➔ The right is necessary to enforce political equality in India, where it is ‘One Person, One Vote’, and it is quintessential to separate socio-economic inequalities from the exercise of the Right to vote and ensure there is no unlimited external influence in democratic decision making via money power.
Why consider two fundamental rights?
➔ The Apex Court applied two proportionality tests, the second taking into account two fundamental rights: Donor’s Right to Privacy and Right to Information of Voters.
➔ But RPA 1971 clearly states that only details of funds above Rs. 20,000 have to be disclosed, recognizing a reasonable degree of privacy. The provision necessitates disclosure to curb the influence of money power while recognizing the freedom to express political views which shape the electoral outcome.
➔ So the actual question is not informational privacy, but unrestrained donations, and donor privacy, whether that amounts to privacy itself, or is it secrecy?
Violative of Article 14 and ‘Manifest Arbitrariness’
Referring to Shayara Bano V. Union of India, E.P. Royappa V. State of Tamilnadu, and a series of other landmark judgements, which laid down the fundamental principles and test to prove ‘Arbitrariness’, Article 14 was invoked, noting that loss-making and shell companies which exist on paper, but are dysfunctional in real life, could contribute unlimited funds and create political clout by employing backdoor lobbying, wielding policies in their favour, thus affecting the electoral process. Clearly, it violates the democratic values of our Constitution, because this further exacerbates the existing socio-economic and political inequalities. Yes, not everyone is equal, but that doesn’t imply, an entity gets to further deteriorate the inequality scenario by pulling the strings of the ruling government.
Note: In a Public Interest Litigation filed by Common Cause months after the verdict, seeking investigation into the instances of apparent quid-pro-quo transactions, one of the petitioner’s contentions included: Megha Engineering and Infrastructures, Ltd (MEIL), which is the second-highest donor of electoral bonds, made a donation worth ₹584 crore to the ruling political party and bagged key projects including a crude oil project worth ₹5,400 crore in Mongolia (the Mongol Refinery Project being a government-to-government initiative) in September, 2023.
- Courtesy: The Print
PROSPECTIVE JUDGEMENT – A LITTLE LATE?
The Respondent Counsel stated that the impugned amendments and the Electoral Bond Scheme constituted “Economic Policy”, against which the Court conceded with the Petitioners. The title of the scheme itself is obviously related to the Electoral Process, as well as the provisions and in an election, the ruling government cannot oust the presence of the opposition political parties because the participation of all parties is what constitutes a representative democratic election, not to forget that India follows the First Past the Post System. Hence, the provisions are not limited to the ruling government’s “policies”.
The advent of this judgement is definitely a ray of hope to many and a critical juncture in the electoral politics of India, but perhaps a keen disappointment that comes with the delight, is that the judgement couldn’t stall these unconstitutional mechanisms before their execution. In other words, if it was pronounced earlier, the quantum of impact and progress would’ve definitely differed and turned out less-complex. It is pertinent to note that the petitioners had repeatedly approached the court in the previous years on the same matter. The judgement, not having met its purpose on practical application, is lingering as a deep concern.
RETROSPECTIVE EFFECT CONSIDERED?
It is not absolutely fixated in India that the law itself is only of prospective nature. The Doctrine of Prospective Overruling is what renders the applicability of the ratio of a judgement specifically as a future precedent and not affecting retroactively. But it can only be invoked in cases which necessitate the interpretation of the Constitution to accord justice, even when the Court has the discretion to modify the aspects accordingly. Even otherwise, this judgement is an authoritative precedent for future cases.
The crucial question lies in the existence of the transactions via the scheme between 2018 and 2024. How is their existence interpreted in the eyes of law? Should they be revoked? Should the bonds redeemed be refunded by the political parties? Whether the unconstitutional amendments have a retrospective effect?
Article 13(2) of the Constitution serves as a dilemma here, which states that the State shall not make any law which takes away or abridges the rights conferred by this Part (Part III) and any law made in contravention of this clause shall, to the extent of the contravention, be void.
Deep Chand v. The State of Uttar Pradesh (1959) is an important precedent to be considered, because in this case, the Constitution Bench after discussing the merits of Article 13(2), affirmed that a plain reading of the clause indicates that the prohibition goes to the root of the matter and limits the State’s power to make law; The law made in spite of the prohibition is a still born law. Hence such laws are void-ab-initio, that is, unenforceable or nullified since the beginning of its enactment, giving a retrospective effect.
In Joseph Shine v. Union of India, it was reiterated that legislations which are manifestly arbitrary are violative of Article 14 of the Constitution. Ultimately, it rests on the clarification of the Apex Court in the present case.
IT’S NOT THE END, BUT A NEW BEGINNING:
The Government raised the defence of using a bank channel to curb black money, but if that’s the case, why pursue it without transparency? Does that not defeat the very purpose of curbing corruption?
The Electoral Bond Scheme perhaps is a paradox, defeating its very own purpose and not fulfilling its stipulated objectives.
Reverting to the question in the beginning, we should know about this judgement because we deserve to be informed citizens, in a participating representative democracy. This scheme, like any other law, is a reflection of law and policy making and the intentions of its makers. ‘Actions speak louder than words’ indispensably echoes in electoral politics. We should and can rightfully exercise our choice of being informed and critically evaluating the governance accordingly. After all, Democracy is for the people, by the people, and of the people.
To listen and learn more about the judgement, do watch these videos by LJRF on Youtube!
Electoral Bond Judgement – Analysis – Part I by Dr. Lawwellman P.
Electoral Bond Judgement – Analysis – Part II by Dr. Safi Mohan.
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