2024 Supreme(SC) 129

SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, CJI., SANJIV KHANNA, B.R. GAVAI, J.B. PARDIWALA, MANOJ MISRA, JJ.
Association for Democratic Reforms and Another – Petitioners
Versus
Union of India and Others – Respondents
Writ Petition (C) No. 880 of 2017, Writ Petition (C) No. 59 of 2018, Writ Petition (C) Nos. 975, 1132 of 2022
Decided On : 15-02-2024

IMPORTANT POINTS
(1) Constitutional validity of Electoral Bond Scheme – Companies and individuals cannot be equated for the purpose of political contributions – Companies and individuals cannot be equated for the purpose of political contributions – Electoral Bond Scheme, proviso to Section 29C(1) of Representation of People Act, 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of Companies Act (as amended by Section 154 of Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional – Deletion of proviso to Section 182(1) of Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14 – Issuing bank shall herewith stop issuance of Electoral Bonds – SBI shall submit details of Electoral Bonds purchased since interim order of this Court dated 12 April 2019 till date to ECI – Details shall include date of purchase of each Electoral Bond, name of purchaser of bond and denomination of Electoral Bond purchased.
(2) Issuance of fresh Bonds is prohibited – In case Bonds issued (within validity period) are with donor/purchaser, donor/purchaser may return them to authorised bank for refund of amount – In case Bonds (within validity period) are with donee/political party, donee/political party will return Bonds to issuing bank, which will then refund the amount to donor/purchaser – On failure, amount will be credited to Prime Ministers Relief Fund.

Headnote:

Per Dr. Dhananjaya Y. Chandrachud, CJI [For himself and on behalf of B.R. Gavai, J.B. Pardiwala] and Manoj Misra, JJ.]

(A) Constitution of India – Article 32 – Constitutional validity of Electoral Bond Scheme which introduced anonymous financial contributions to political parties – Integrity of election process is pivotal for sustaining democratic form of Government – Ability of a company to influence electoral process through political contributions is much higher when compared to that of an individual – Companies and individuals cannot be equated for the purpose of political contributions – Companies and individuals cannot be equated for the purpose of political contributions – Electoral Bond Scheme, proviso to Section 29C(1) of Representation of People Act, 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of Companies Act (as amended by Section 154 of Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional – Deletion of proviso to Section 182(1) of Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14 – Issuing bank shall herewith stop issuance of Electoral Bonds – SBI shall submit details of Electoral Bonds purchased since interim order of this Court dated 12 April 2019 till date to ECI – Details shall include date of purchase of each Electoral Bond, name of purchaser of bond and denomination of Electoral Bond purchased – Electoral Bonds which are within the validity period of fifteen days but that which have not been encashed by political party yet shall be returned by political party or purchaser depending on who is in possession of bond to issuing bank – Issuing bank, upon return of valid bond, shall refund amount to purchaser’s account. (Paras 203, 204, 212, 213, 216 and 219)

(B) Constitution of India – Article 32 – [Reserve Bank of India Act, 1934 – Section 31] – Scope of Judicial Review – Courts must adopt a less stringent form of judicial review while adjudicating challenges to legislation and executive action which relate to economic policy as compared to laws relating to civil rights such as freedom of speech or freedom of religion – While deciding on a constitutional challenge, Court does not rely on ipse dixit of Government, that a legislation is an economic legislation – Courts before classifying policy underlying a legislation as economic policy must undertake an analysis of true nature of law – Amendment to Section 31 of RBI Act can be classified as a financial provision to the extent that it seeks to introduce a new form of a bearer banking instrument – However, any resemblance to an economic policy ends there – Policy underlying the legislation must not violate freedoms and rights which are entrenched in Part III of Constitution and other constitutional provisions. (Paras 40, 41 and 44)

(C) Representation of People Act, 1951 – Section 77 read with Rule 90 of Conduct of Election Rules 1961 – Association of politics and money – Law does not bar electoral financing by public – Both corporates and individuals are permitted to contribute to political parties – Legal regime has not prescribed a cap on financial contributions which can be received by a political party or a candidate contesting elections – However, Section 77 of RPA read with Rule 90 of Conduct of Election Rules 1961 prescribes a cap on the total expenditure which can be incurred by a candidate or their agent in connection with Parliamentary and Assembly elections between the date on which they are nominated and date of declaration of the result – Maximum limit for expenditure in a Parliamentary constituency is between Rupees seventy five lakhs to ninety five lakhs depending on the size of State and Union Territory – Maximum limit of election expenses in an Assembly constituency varies between rupees twenty eight lakhs and forty lakhs depending on size of the State – There is an underlying dichotomy in legal regime – Law does not regulate contributions to candidates – It only regulates contributions to political parties – However, expenditure by candidates and not political party is regulated – Challenge to statutory amendments and Electoral Bond Scheme cannot be adjudicated in isolation without a reference to actual impact of money on electoral politics. (Paras 46 and 55)

(D) Constitution of India – Article 19(1)(a) – Right to information – It is role of citizens to hold State accountable for its actions and inactions and they must possess information about State action for them to accomplish this role effectively – Right to information is not restricted to information about state affairs – It includes information which would be necessary to further participatory democracy in other forms and is not restricted to information about functioning of public officials – Right to information has an instrumental exegesis which recognizes value of right in facilitating realization of democratic goals – But beyond that, right to information has an intrinsic constitutional value; one that recognizes that it is not just a means to an end but an end in itself – Information which furthers democratic participation must be provided to citizens – Voters have right to information which would enable them to cast their votes rationally and intelligently because voting is one of foremost forms of democratic participation – Voters have right to disclosure of information which is essential for choosing candidate for whom vote should be cast. (Paras 60, 65 and 77)

(E) Election Symbols (Reservation and Allotment) Order, 1968 – Allotment of election symbol – Symbols other than those reserved for recognised political parties shall be available for allotment to independent candidates and candidates set up by political parties which are not recognised political parties in terms of Symbols Order – Candidates set up by a registered but unrecognised political party may also be allotted a common symbol if they fulfil certain conditions laid down in Symbols Order – Symbols Order creates a demarcation between candidates set up by political parties and candidates contesting individually – Purpose of allotting symbols to political parties is to aid voters in identifying and remembering political party – Law recognises inextricable link between a political party and candidate though vote is cast for a candidate. (Paras 83, 84 and 86)

(F) Constitution of India – Article 19(1)(a) – Political Funding – Influence of money over electoral politics is not limited to its impact over electoral outcomes – It also spills over to governmental decisions – Legal regime in India does not distinguish between campaign funding and electoral funding – Money which is donated to political parties is not used by political party only for the purposes of electoral campaign – Party donations are also used to build offices for political party and pay party workers – Similarly, window for contributions is not open for a limited period only prior to elections – Money can be contributed to political parties throughout the year and contributed money can be spent by the political party for reasons other than just election campaigning – It is in light of nexus between economic inequality and political inequality, and legal regime in India regulating party financing that essentiality of information on political financing for an informed voter must be analyzed – An economically affluent person has a higher ability to make financial contributions to political parties and there is a legitimate possibility that financial contribution to a political party would lead to quid pro quo arrangements because of close nexus between money and politics – Quid pro quo arrangements could be in form of introducing a policy change, or granting a license to contributor – Financial contributions could be made even after a political party or coalition of parties form Government – Possibility of a quid pro quo arrangement in such situations is even higher – Information about political funding would enable a voter to assess if there is a correlation between policy making and financial contributions – Information about funding to a political party is essential for a voter to exercise their freedom to vote in an effective manner – Electoral Bond Scheme and impugned provisions to the extent that they infringe upon right to information of voter by anonymizing contributions through electoral bonds are violative of Article 19(1)(a). (Paras 99, 100 and 104)

(G) Statute Law – Standard of “manifest arbitrariness” – A Statute can be challenged on the ground it is manifestly arbitrary – Courts while testing validity of a law on the ground of manifest arbitrariness have to determine if statute is capricious, irrational and without adequate determining principle, or something which is excessive and disproportionate – It is not the constitutional role of this Court to second guess intention of legislature in enacting a particular statute – Legislature represents democratic will of the people and courts will always presume that legislature is supposed to know and will be aware of needs of people – Supreme Court must be mindful of falling into an error of equating a plenary legislation with a subordinate legislation – Manifest arbitrariness of a subordinate legislation has to be primarily tested vis-à-vis its conformity with parent statute. (Paras 194, 196 and 198)

Per Sanjiv Khanna, J. [Separate Assenting View]

(A) Constitution of India – Article 32 – Constitutional validity of Electoral Bond Scheme which introduced anonymous financial contributions to political parties – Scheme is unconstitutional and is accordingly struck down – Proviso to Section 29C(1) of Representation of the People Act, Section 182(3) of Companies Act, 2013, and Section 13A(b) of the Income Tax Act, 1961, as amended by Finance Act, 2017, are unconstitutional, and are struck down – Deletion of proviso to Section 182(1) to Companies Act of 2013, thereby permitting unlimited contributions to political parties is unconstitutional, and is struck down – Sub-section (3) to Section 31 of the RBI Act, 1934 and Explanation thereto introduced by Finance Act, 2017 are unconstitutional, and are struck down – ECI directed to disclose full particular details of donor and amount donated to particular political party through Bonds – Issuance of fresh Bonds is prohibited – In case Bonds issued (within validity period) are with donor/purchaser, donor/purchaser may return them to authorised bank for refund of amount – In case Bonds (within validity period) are with donee/political party, donee/political party will return Bonds to issuing bank, which will then refund the amount to donor/purchaser – On failure, amount will be credited to Prime Ministers Relief Fund. (Paras 78 and 79)

(B) Constitution of India – Articles 21 and 19(1)(a) – Right to privacy – Fundamental rights are not absolute, legislations/policies restricting rights may be enacted in accordance with scheme of Constitution – Provisions of fundamental rights in Part III of Constitution are not independent silos and have to be read together as complementary rights – Thread of reasonableness applies to all such restrictions – Right to privacy operates in personal realm, but as the person moves into communal relations and activities such as business and social interaction, scope of personal space shrinks contextually – Great underlying principle of Constitution is that rights of individuals in a democratic set-up is sufficiently secured by ensuring each a share in political power – This right gets affected when a few make large political donations to secure selective access to those in power – When money is exchanged as quid pro quo then line between persuasion and corruption gets blurred. (Paras 56, 59 and 60)

Facts of the case:

Petitioners have instituted proceedings under Article 32 of Constitution challenging constitutional validity of the Electoral Bond Scheme which introduced anonymous financial contributions to political parties. Petitioners have also challenged provisions of Finance Act 2017 which, among other things, amended the provisions of Reserve Bank of India Act, 1934, Representation of People Act,1951, Income Tax Act, 1961 and Companies Act, 2013.

Findings of Court:

Electoral Bonds which are within validity period of fifteen days but that which have not been encashed by political party yet shall be returned by political party or purchaser depending on who is in possession of bond to issuing bank. Issuing bank, upon return of valid bond, shall refund amount to the purchaser’s account.

Result : Writ Petitions allowed with directions and observations.