In a landmark decision today, the Supreme Court declared the electoral bond scheme, designed for political party donations, as unconstitutional and arbitrary. The five-judge bench, led by Chief Justice DY Chandrachud, delivered a unanimous verdict, highlighting violations of citizens’ right to information and the constitutional right under Article 19 (1) A.

Unraveling the Unconstitutional Amendments

The court not only scrapped the electoral bond scheme but also deemed the amendment in Section 182 of the Company Act as unconstitutional. The controversial Section 182 allowed any Indian company to donate any amount to a political party. The court emphasized that such amendments violated civil rights and failed to differentiate between loss-making and profitable companies.

The decision shed light on the arbitrary nature of the amendment, stating that contributions from companies are perceived as business transactions, emphasizing that the impact on the political process is more severe than individual donations. The court annulled the amendment abolishing the fixed limit on company donations, which previously capped contributions at 7.5 percent of net profits. The State Bank of India, the issuer of electoral bonds, was also restrained from further issuances.

Transparency Mandate

To ensure transparency, the court directed the State Bank of India to submit complete details of electoral bonds purchased from April 12, 2019, to the Election Commission by March 6. Additionally, the Election Commission is mandated to publish the names of donors on its official website. website by March 31. The court’s decision sought to uphold the right of voters to be informed about political party donations, stressing that the previous amendments violated Article 19 (1) A of the Constitution.

Repercussions and Reversals

The court ordered the return of electoral bonds with a 15-day validity period, yet to be encashed, to the issuing bank. The amount would be credited back to the buyer’s account. This decision aimed to rectify the flaws in the electoral bond scheme and the amendments, emphasizing the need for accountability and transparency in political funding.

Background and Interim Measures

The electoral bond scheme was introduced on January 2, 2018, as an alternative to cash donations, with the objective of bringing transparency to political party funds. However, various parties, including the Association for Democratic Reforms (ADR), Communist Party of India-Marxist (CPI-M), and Dr Jaya Thakur, challenged the amendments that facilitated the scheme.

An interim order issued on April 12, 2019, mandated the submission of complete details of electoral bonds purchased to the Election Commission in a sealed cover. The lack of transparency, especially regarding the identity of bond buyers, had been a focal point of contention.

Government justification and opposition

The government had justified the electoral bond scheme as a means to ensure that only legitimate funds entered political donations through banks. The confidentiality of donor identities was argued as necessary to prevent vindictive actions by political parties. However, the petitioners contended that non-disclosure compromised transparency and facilitated donations through shell companies.

The Supreme Court’s decision marks a significant step towards restoring transparency and accountability in political funding. The cancellation of the electoral bond scheme and the deemed unconstitutionality of related amendments signal a commitment to upholding citizens’ right to information and fostering a more transparent democratic process.