Electoral Bonds case verdict: What parties argued before Supreme Court

Electoral Bonds case verdict: What parties argued before Supreme Court

Subject: Polity

Section: Elections

Context:

• Prioritizing voters’ right to information regarding political parties’ sources of funding, the Supreme Court Thursday (February 15) struck down the Electoral Bonds Scheme (EBS).

More on news:

• This scheme was challenged shortly after it was announced in January 2018, by a number of parties, including the Communist Party of India (Marxist), Common Cause and the Association for Democratic Reforms (ADR). 
• The case was heard by a 5-judge constitution bench of the Supreme Court led by the Chief Justice of India for three days from October 31 to November 2 last year.
• The court also struck down the amendments made to key laws on electoral finance which were introduced in the lead up to the introduction of EBS.

Amendments made through Finance Act 2017:

• On 31 March 2017, the Finance Act, 2017 amended the Representation of the People Act, 1951 (RoPA), the Reserve Bank of India Act, 1934, the Income Tax Act, 1961, and the Companies Act, 2013. 
• Section 11 of the Finance Act, 2017 amended Section 13A of the Income Tax Act exempting political parties from keeping a detailed record of contributions received through electoral bonds.
• Section 135 amended Section 31 of the RBI Act , which permitted the Union government to “authorize any scheduled bank to issue electoral bonds[s].”
• Section 137 introduced a provision to Section 29C of RoPA, exempting political parties from publishing contributions received through electoral bonds in “Contribution Reports.”
• These reports disclose contributions received by parties “in excess of twenty thousand rupees” from companies and individuals.
• Section 154 amended Section 182 of the Companies Act, 2013 which removed the upper limit on how much a company could donate to a political party.
• Previously companies could only donate up to 7.5 percent of three years of the company’s net profits.

EBS violates voters’ right to information

• The petitioners, the Communist Party of India (Marxist), Common Cause and the Association for Democratic Reforms, argued that the scheme violates the right to information under Article 19(1)(a) of the Constitution. 
• Advocate Prashant Bhushan in particular argued that voters have a right to information concerning the public and the government, which includes financial contributions to political parties.
• Attorney General R Venkataramani had responded by saying that citizens do not have a “right to know” with regards to the funding of political parties. 
• It highlighted the “deep association” between money and politics, and how economic inequality contributes to political inequality by increasing the possibility of quid pro quo arrangements for those with the ability to contribute larger amounts to political parties.

Unlimited political contributions by companies is unconstitutional:

• Advocates Prashant Bhushan and Shadan Farasat also drew the court’s attention to the rights of shareholders, who have a right to know how company resources are being utilized. This right is violated by preventing the disclosure of information to shareholders.
• Senior Advocate Kapil Sibal also drew attention to the amendment (via the Finance Act, 2017) to Section 182 of the Companies Act, 2013. 
• This amendment removed the cap on the amount of money a company is permitted to contribute to a political party (set at 7.5% of its average net profits from the preceding three years).
• It was argued that removing this cap would allow unlimited contributions, even by loss-making companies.
• The court, however, drew a stark distinction between contributions made by companies and those made by individuals.
• It stated that contributions from companies were purely business transactions made with the intent of securing benefits in return. 
• The court also highlighted the fact that companies have a greater ability to influence politics through contributions, stating “permitting unlimited corporate contributions authorizes unrestrained influence of companies in the electoral process”. 
• The court held that this  would violate the right to free and fair elections.
• The court also picked up on Sibal’s argument and explained that, without the cap, loss-making companies would be incentivised to make contributions in the hopes of making a quid-pro-quo arrangements with the government.
• As a result, the court struck down the amendment to Section 182 of the Companies Act and reinstated the cap on political contributions from companies.

The central government’s justification:

• Solicitor General Tushar Mehta argued that the focus of the scheme is not to ensure “anonymity”, but to ensure “confidentiality”. 
• Referring to the apex court’s decision in 2019 to recognise the right to privacy as a fundamental right, he argued that donors have a right to privacy unless the information is a source of genuine public interest, in which case people can approach the court.
• The Solicitor General also gave the court a detailed explanation of the ways in which Parliament, the government and the Election Commission had attempted to halt the circulation of black money in politics over the years.
• The electoral bonds scheme  was introduced after “experimenting” with a wide variety of schemes, amendments and policies. 

About The scheme:

• Electoral Bond used to be a mode of funding to political parties in India. 
• The scheme of Electoral Bond was introduced in The Finance Bill, 2017 during Union Budget 2017-18. 
• The electoral bonds scheme allows corporations and individuals to anonymously donate money to political parties by purchasing electoral bonds from the State Bank of India (SBI).
• An electoral bond is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India.
• The bonds are similar to bank notes that are payable to the bearer on demand and are free of interest.
• An individual or party will be allowed to purchase these bonds digitally or through cheque.
• The SBI has sole access to the details of those who purchased electoral bonds. 
• According to the scheme, the proceeds from any bonds, which are not encashed within 15 days of being issued, are to be deposited in the Prime Minister Relief Fund.