In a historic judgement, the Supreme Court struck down as unconstitutional the electoral bonds scheme that allowed anonymous donations to political parties. A five-judge constitution bench unanimously quashed the high-value scheme, holding that it was violative of the right to information and thus contravened free speech and expression under Article 19(1)(a) of the constitution.
The February 15 judgement upheld the core principle of democracy – especially the voter’s right to information about who is funding political parties and their election campaigns. The court also directed that the sale of electoral bonds be stopped with immediate effect.
The court revoked amendments made to the Income Tax Act and the Representation of People Act which had made the donations anonymous. It found the amendments to the Companies Act, which removed the condition that companies could only donate up to 7.5% of their profit to political parties without disclosing the details of recipient parties in their profit and loss account, as “manifestly arbitrary”.
The court noted that “unlimited corporate contributions to political parties is arbitrary and violative of Article 14 [of the constitution],” which guarantees the right to equality before law. It added that this violates “free and fair elections” as it would enable companies to unduly influence the ruling parties by giving them huge contributions.
The verdict has made a logical connection between anonymous corporate donations and the probability of policies being made to suit the donors.
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The government had presented the electoral bond scheme as an “electoral reform”. The BJP defended it as an instrument to combat corruption, black money and to bring much-needed transparency to political funding. But it had done the exact opposite, as it allowed anonymous donors to contribute unlimited amounts to parties.
Spokespersons of the BJP still insist that electoral bonds were designed to promote transparency. The apex court rejected the contention that it was a way to curb black money in election finance, but this defence continues to be given even after the court has trashed this claim.
Also, this argument was made despite the fact that the Union government argued in the Supreme Court that citizens have no fundamental right to know the sources of the funding of political parties. The government counsel had ruled out providing any information to the public regarding corporate or individual donations to parties on grounds of safeguarding the privacy of donors.
While the public would not be informed of who was buying and who was donating, the government could track this from the government-owned State Bank of India (SBI), which has a list of all bonds sold and deposited (and which it now has to make public).
Ultimately, the Court did not accept the government’s stance, stating that “the right of a citizen to know how political parties are being funded must be balanced against the right of a person to maintain privacy of their political affiliations.”
Even before its introduction, the Election Commission of India (ECI) and the Reserve Bank of India (RBI) opposed the scheme. The ECI had said that it would have “a serious impact on the transparency of political finance/funding of political parties” (though it later altered its view) and the RBI said it would set a “bad precedent”. Several reports by right to information activists revealed the opaqueness in and problems with the scheme.
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The government went ahead with the scheme despite apprehensions regarding its constitutional validity. The official arguments marshalled to defend the electoral bonds scheme turned out to be erroneous.
The voter’s right to know has been placed above everything else as information is essential for democracy. The judgement notes that “the right to information of the voter includes the right to information of financial contributions to a political party because of the influence of money in electoral politics (through electoral outcomes) and governmental decisions (through a seat at the table and quid pro quo arrangements between the contributor and the political party).”
From the standpoint of democracy, it is important for the public to get information on political funding so as to exercise a watchdog role. The absence of this information violates the very principle of an ‘informed electorate’. The court underscored this when it stated that people have the right to know who makes contributions to which political parties as the latter functions in the public realm.
Indian elections are an expensive affair wholly funded by corporate donors, which establishes a close nexus between big capital and politics. Electoral bonds are the most significant institutional innovation to date to cement this nexus.
The BJP has been the biggest beneficiary of this secretive scheme. Till the end of the financial year 2022-2023, of the total of Rs 12,000 crore coming through this scheme since its inception, Rs 6,500 crore went to the BJP, which is nearly 55% of the entire amount. The Congress party was way behind, receiving around Rs 1,000 crore.
The mismatch between the BJP and its nearest rival exemplifies the unequal playing field created by electoral bonds.
Also read: Electoral Bonds Are Illegal Now. But Who Benefitted for the 6+ Years They Lasted?
Electoral bonds were pitched as an alternative to cash donations that would make political funding ‘cleaner’ by encouraging donors to channel funding for political parties via the SBI. The government’s counsel argued that “the [electoral bonds] scheme has been enacted in pursuance of a legitimate state interest – to shift from cash-driven, unregulated and unaccounted cash-based political donations to a regulated, digital and legal political donation framework.”
But direct and untraceable cash hasn’t vanished. In fact, the share of the income of national parties through unknown sources has seen an increase since 2018 despite electoral bonds.
This scheme was designed to give a pivotal advantage to the BJP. Basically, it was a way for the corporate sector to fund the BJP and a way to choke the funds for the opposition by shielding unlimited corporate donations to the BJP from public scrutiny while exposing all others to scrutiny by the government.
This double-edged policy has given the BJP a clear edge over its rivals. Coupled with the BJP’s willingness to use enforcement agencies to target the opposition, electoral bonds further tilt the playing field in its favour.
Several petitions challenged the constitutionality of electoral bonds in 2018 itself – when the scheme was notified – on the grounds that it distorts elections and creates an uneven playing field. Petitioners argued as early as 2019 that the scheme allowed “non-transparency in political funding” and legitimised electoral corruption at a “huge scale”.
But the Supreme Court Bench led by Chief Justice of India Ranjan Gogoi refused to grant an interim stay. Likewise, Chief Justice S.A. Bobde rejected a plea for the same relief.
It took the Supreme Court six years to conclude that the scheme was indeed unconstitutional. All the objections that are now accepted were articulated in those petitions, but the court refused to stay the scheme, saying that the debate around the scheme raised “weighty issues” that needed time for deliberation.
Also read | ‘Part of Secret Ballot’: How the Modi Govt Backed Electoral Bonds in the Supreme Court
This allowed the BJP to accumulate money and use these funds to transform itself into a dominant electoral machine. These illegal electoral bonds have already funded one full general election and many state elections. This includes the 2019 election, which was more expensive than the 2016 American election which brought Donald Trump to power.
Given that the apex court reserved its judgment in November, it allowed the BJP to collect two more tranches before the polls. The delay in resolving this vital constitutional matter has done immense damage to electoral democracy by giving a head start to the BJP over its rivals through this insidious scheme as we move towards the 2024 general elections.
The judgement closely examined the relationship between money and politics and noted in this context that “the primary way through which money directly influences politics is through its impact on electoral outcomes”.
Disparity in access to funds can create political inequality, which affects electoral democracy by tilting public policy towards the interests of the super-rich, ignoring the interests of the majority, particularly the poor and the vulnerable.
This structure of funding is sure to skew elections in favour of top corporates who are funding the BJP (not just its elections). As the court said in its judgement, such support can lead to ‘quid pro quo arrangements’ between parties and donors, which undermine electoral democracy and governance. It can lead to policy capture, where decisions over policies are directed away from the public interest towards particular interests.
This landmark judgment, one of the most significant in India’s recent political history, is a great victory for democracy and transparency, and for those who have been vocal critics of the ruling dispensation’s corporate connections. It establishes the primacy of people’s power over money power – ‘votes over notes’.
Coming just weeks before the general elections, it is a big setback for the ruling party, not the least because the court has asked the ECI to publish donor names and the details of political parties that have received the contributions. This will uncover the backdoor linkages between ruling parties and select corporates. These are well known. But this will give an official imprimatur to it.
Removing the veil on corporate donations can dent the ruling party’s moral authority as it calls into question its purported anti-corruption plank, which it has used systematically to delegitimise and discredit the opposition.
Zoya Hasan is Professor Emerita, Centre for Political Studies, Jawaharlal Nehru University.
