W.P.(C) 880/2017 tagged with W.P.(C) 333/2015 and SLP (C) No. 18190/2014
Introduction of Electoral Bonds Challenged
Common Cause and the Association for Democratic Reforms (ADR) have challenged the introduction of the Electoral Bonds, as part of the Finance Act 2017, which have, arguably, made electoral funding of political parties more opaque and legitimised corruption to an unprecedented scale. A PIL filed in the Supreme Court alleges that the bonds make the electoral funding unlimited for big corporates and open the doors for foreign lobbyists.
The PIL seeks directions from the Supreme Court to strike down the amendments made through Finance Act, 2017 and Finance Act, 2016. It is alleged that such wide-ranging amendments in The Representation of Peoples Act, 1951, The Reserve Bank of India Act, 1934, The Income Tax Act, 1961 and The Companies Act, were brought in illegally as a “Money Bill”, in order to bypass the Rajya Sabha. Hence, it has been urged that suitable directions be given so that the practice of by-passing the Rajya Sabha for important Bills by classifying them as money bills be stopped. This matter is likely to be taken up on October 3, 2017.
The Finance Act, 2017 has introduced a system of electoral bonds to be issued by any scheduled bank for the purpose of electoral funding. The earlier restriction that political donations would not exceed 7.5 per cent of the donating company’s average three-year net profit has been done away with. This may result in even loss-making companies making donations of any amount to political parties out of their capital or reserves. Also, a company is no longer required to disclose the name of the parties to whom such contributions are made.
The Finance Act, 2016 has allowed foreign companies with subsidiaries in India to fund political parties in India, effectively, exposing the Indian politics and democracy to corporate lobbyists who may want to further their agenda. According to the petitioners, these Amendments pose a serious danger to the autonomy of the country and are bound to adversely affect electoral transparency, encourage corrupt practices in politics and make the unholy nexus between politics and corporate houses more opaque and treacherous and is bound to be misused by dubious interest groups and corporate lobbyists.
The matter was heard by the Court on 3 October 2017 and was tagged with W.P. (C) No. 333/2015 and SLP (C) No. 18190/2014.
On March 12, 2019, the bench had decided to hear the matter when the Counsel for petitioners told the bench that it opens flood gates for violating norms fixed by the Election Commission and related government notifications.
On March 26, 2019, the bench comprising Chief Justice Ranjan Gogoi, Justice Deepak Gupta and Justice Sanjiv Khanna, told that the matter would be heard by an appropriate bench on April 2.
On March 27, the Election Commission filed an affidavit before the Supreme Court, which indicated that the introduction of electoral bonds will have a serious impact on the transparency of political funding.
On April 2, 2019, the Court will hear the petitions challenging the validity of the Electoral Bonds Scheme, 2018, notified by the Central Government on January 2, 2018.
On April 3, 2019, a fresh affidavit has been filed by Centre before the Supreme Court, which said that electoral bonds were a positive step in the right direction to ensure accountability and transparency.
On April 5, 2019, the Supreme Court refused to grant an interim stay on the operation of electoral bonds scheme.
On April 10, 2019, the AG said:
"Electoral bonds are meant to eradicate black money in political funding...as we have no State funding of elections. Political parties get funds from supporters, affluent persons, etc. The funders all want their political party to come to power. But if their party does not, then there could be repurcurssions....so secrecy is required."
Contrary to centre's stand, the Election Commission of India has an opposite view:
"We are not against electoral bonds. We are only opposed to the anonymity associated with it."
On April 11, 2019, the AG said:
“...Voters have a right to know what? Voters dont need to know where money of political parties comes from. Also, there is the Right to Privacy..."
Justice Sanjiv Khanna observed:
“KYC which you have mentioned is only about identity of the purchaser. It is not a certificate of genuineness of the money – whether it is black or white.”
The Court heard brief rejoinder submissions by the petitioners before reserving its order.
On April 12, 2019, the SC declined to pass a stay order against the issuance of electoral bonds, saying it would examine in detail the changes made in law and at this point, interim orders might effect the balance in the favour of or against specific political parties. The bench consisting Chief Justice Ranjan Gogoi, accompanied by Justice Deepak Gupta and Justice Sanjiv Khanna observed the transparency and anonymity in donations through electoral bond, raises weighty issues which are vital to fairness of electoral process but the question could not be determined on the basis of a short hearing.
The bench has directed all the political parties to submit to the Election Commission, details of the bank account/s receiving donations and total donations they would receive till May 15, 2019 through Electoral Bonds; including the identity of donors, payment details, etc. by May 30, 2019, in sealed covers.
The bench has also directed the Finance Ministry to modify its recent notification and reduce the window of purchase of Electoral Bonds in April-May, during which elections take place. The said notification specifies the sale of Electoral Bonds for 10 days each in March, April, May and July and an additional period of 30 days during the Lok Sabha elections.
On April 15, 2019, the Registry was directed by the bench consisting the Chief Justice, Justice Deepak Gupta and Justice Sanjiv Khann to supply copies of the counter affidavit(s) filed by the respondents in Writ Petition (C) No. 333/2015 to Dr. Madhuker Sharma, the Intervenor, who must appear in person, within two weeks.
On December 4, 2019, after mentioning by the Petitioner's Counsel, it was directed to list the matter in the month of January, 2020 before the appropriate Bench. Notice has been issued in Writ Petition (C) No. 408/2019 and tag along with Writ Petition (C) No. 333/2015 and other connected matters.
On January 20, 2020, the bench has granted two weeks’ time to the respondent/s to file counter affidavit(s) and directed to list the matter thereafter.
On March 18, 2021, the bench consisting the Chief Justice and Justices Bopanna & Ramasubramanian ordered IA Nos. 36653 of 2021 and 183625 of 2019 in WP(C) 880 of 2017 to be listed on Wednesday i.e. March 24, 2021.
On March 24, 2021, IA No. 45810 of 2019 in WP(C) 59/2018 is ordered to be listed along with WP(C) 333/2015 in due course. In IA Nos. 183625 of 2019 and 36653 of 2021, hearing was concluded and orders were reserved.
On March 26, 2021, the Chief Justice, Justice Bopanna & Justice Ramasubramanian dismissed IA Nos. 183625 of 2019 and 36653 of 2021, referring to the interim order dated April 12, 2019 and highlighted that since 2018 when the bonds were introduced, there has not been any impediment and with the safeguards already provided by the Court, it did not see any justification for the grant of stay on electoral bonds at this stage. The judgment said:
25. The financial statements of companies registered under the Companies Act, 2013 which are filed with the Registrar of Companies, are accessible online on the website of the Ministry of Corporate Affairs for anyone. They can also be obtained in physical form from the Registrar of Companies upon payment of prescribed fee. Since the Scheme mandates political parties to file audited statement of accounts and also since the Companies Act requires financial statements of registered companies to be filed with the Registrar of Companies, the purchase as well as encashment of the bonds, happening only through banking channels, is always reflected in documents that eventually come to the public domain. All that is required is a little more effort to cull out such information from both sides (purchaser of bond and political party) and do some “match the following”. Therefore, it is not as though the operations under the Scheme are behind iron curtains incapable of being pierced.
26. One of the contentions of the petitioners is that though the first purchase may be through banking channels for a consideration paid in white money, someone may repurchase the bonds from the first buyer by using black money and hand it over to a political party. But this contention arises out of ignorance of the Scheme. Under Clause 14 of the Scheme, the bonds are not tradable. Moreover, the first buyer will not stand to gain anything out of such sale except losing white money for the black.
27. The apprehension that foreign corporate houses may buy the bonds and attempt to influence the electoral process in the country, is also misconceived. Under Clause 3 of the Scheme, the Bonds may be purchased only by a person, who is a citizen of India or incorporated or established in India.
During the hearing on October 14, 2022, the Court had asked the government whether the electoral bonds’ system revealed the source of money pumped in to fund political parties even as the Centre had repeatedly maintained that the scheme was “absolutely transparent”. “The methodology of receiving money is absolutely transparent… It is impossible to get any black or unaccounted money in… To say that this (electoral bonds scheme) affects democracy may not hold water. We will take Your Lordships through this step-by-step,” Solicitor General Tushar Mehta had replied for the government on that day. The petitioners had argued that the scheme affected the very idea of free and fair elections and an opaque way of funding political parties, where the identity of who is funding whom destroyed the very concept of Article 324.
On November 22, 2022 a new petition challenging the government notification allowing the sale of electoral bonds for an additional 15 days in Assembly election years was tagged with our case. This petition filed by Dr Jaya Thakur sought the quashing of the November 7, 2022 notification issued by the Finance Ministry amending the electoral bonds scheme. “An additional period of 15 days shall be specified by the central government in the year of general elections to the legislative assembly of states and Union territories with the legislature,” the gazette notification had said. Earlier, a 30-day extra period for sale was allowed only in Lok Sabha election year.
On December 15, 2022 the matter was taken up by the SC, which agreed to examine the plea to refer the matter to a Constitution Bench. The petitioner’s advocate, Mr Prashant Bhushan, requested the Court for an urgent hearing, saying the question of reference to a Constitution Bench could be heard and decided quickly at an early date. Justice Gavai heading the bench said that the case had been pending since 2015, to which Mr Bhushan responded that the petitioners had made several requests for early hearing. The bench listed the case for January 31, 2023.
On March 21, 2023, the Court granted three weeks’ time to the Union of India to file its counter affidavit. It also appointed two lawyers from both the petitioner as well as respondents’ side to act as nodal counsel for ensuring a smooth hearing of the PILs, and directed them to prepare a common compilation containing the written submissions, copies of judgments and any other material that the parties seek to rely upon at the time of the hearing. However, the matter could not be taken up on April 11, 2023 as dictated by the SC and is likely to be taken up on April 25, 2023.
The petition was heard for three consecutive days from Oct 31, 2023 to Nov 2nd, 2023 by the Chief Justice D.Y. Chandrachud and Justices Mr Sanjiv Khanna, Mr B.R. Gavai, Mr J.B. Pardiwala, Mr Manoj Misra.
Upon hearing the arguments of the counsels of all the parties, the court reserved the judgement. Reminding of the hon'ble court's interim direction issued on April 12, 2019, the Election Commission has been directed to produce up-to-date data until September 30, 2023. The deadline of the exercise is given latest by Nov 19, 2023. The data shall be handed over to the Registrar (Judicial) of the court.
On February 15, 2024, in a unanimous judgment, a five judge bench comprising Chief Justice DY Chandrachud, and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra held that the Electoral Bond Scheme of 2018 is violative of Article 19(1)(a) of the Constitution and hence, unconstitutional.
The bench further held that the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of the Companies Act (as amended by Section 154 of the 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.
It was further held by the Court that the deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14.
The Court directed that disclosure of information on contributions received by political parties under the Electoral Bond Scheme to give logical and complete effect to our ruling. On April 12, 2019, the Court issued an interim order directing that the information of donations received and donations which will be received must be submitted by political parties to the ECI in a sealed cover. The Court remarked that in view of the said interim direction, the ECI must have collected particulars of contributions made to political parties through Electoral Bonds.
The following issues were before the Court:
- Whether unlimited corporate funding to political parties, as envisaged by the amendment to Section 182(1) of the Companies Act infringes the principles of free and fair elections and violates Article 14 of the Constitution; and
- Whether the non-disclosure of information on voluntary contributions to political parties under the Electoral Bond Scheme and the amendments to Section 29C of Representation of the People Act, Section 182(3) of the Companies Act, Section 13A(b) of the Income Tax Act are violative of the right to information of citizens under Article 19(1)(a) of the Constitution.
The Court held:
“…..we are of the opinion that the information about funding to a political party is essential for a voter to exercise their freedom to vote in an effective manner. The Electoral Bond Scheme and the impugned provisions to the extent that they infringe upon the right to information of the voter by anonymizing contributions through electoral bonds are violative of Article 19(1)(a).”
The bench further noted that Electoral Bond Scheme does not fulfill the least restrictive means test. The Electoral Bond Scheme is not the only means for curbing black money in Electoral Finance. There are other alternatives which substantially fulfill the purpose and impact the right to information minimally when compared to the impact of electoral bonds on the right to information.
With regard to the first issue, it was observed as follows:
“The ability of a company to influence the electoral process through political contributions is much higher when compared to that of an individual. A company has a much graver influence on the political process, both in terms of the quantum of money contributed to political parties and the purpose of making such contributions. Contributions made by individuals have a degree of support or affiliation to a political association. However, contributions made by companies are purely business transactions, made with the intent of securing benefits in return.”
Thus, the Court held that the amendment to Section 182 the Companies Act is manifestly arbitrary for (a) treating political contributions by companies and individuals alike; (b) permitting the unregulated influence of companies in the governance and political process violating the principle of free and fair elections; and (c) treating contributions made by profit-making and loss-making companies to political parties alike.
The Court issued the following directions:
a) The issuing bank shall herewith stop the issuance of Electoral Bonds;
b) The State Bank of India (SBI) shall submit the details of Electoral Bonds purchased since the interim order of the Court dated April 12, 2019 till date to the Election Commission of India (ECI). The details shall include the date of purchase of each Electoral Bond, the name of the purchaser of the bond, and the denomination of the Electoral Bond purchased;
c) SBI shall submit the details of political parties that have received contributions through Electoral Bonds since the interim order of this Court dated April 12, 2019 till date to the ECI. SBI must disclose details of each Electoral Bond encashed by political parties which shall include the date of encashment and the denomination of Electoral Bond.
d) SBI shall submit the above information to the ECI within three weeks from the date of this judgment, that is, by March 6, 2024;
e) The ECI shall publish the information received from the SBI on its official website within one week of the receipt of the information, that is, by 13 March 2024; and
f) Electoral Bonds that are within the validity period of 15 days but that have not been encashed by the political party yet shall be returned by the political party or the purchaser depending on who is in possession of the bond to the issuing bank. The issuing bank, upon the return of the valid bond, shall refund the amount to the purchaser’s account.
Writ petitions are disposed of in terms of the above judgment.
On 4 March 2024, the State Bank of India filed an application in the Supreme Court seeking an extension of time till June 30, 2024, to furnish information regarding electoral bonds to the Election Commission of India (ECI).
As per the judgment on the Electoral Bonds Case delivered by a Constitution Bench of the Supreme Court on February 15, the SBI is required to furnish the information to ECI by March 6.
In the extension application, the SBI stated that between the period April 12, 2019, to February 15, 2024, twenty-two thousand two hundred and seventeen (22,217) electoral bonds were issued for making donations to various parties. The redeemed bonds were deposited to the Mumbai Main Branch by the Authorised Branches at the end of each phase in sealed envelopes. The SBI stated that since two different information silos existed, it has to decode, compile and compare forty-four thousand four hundred thirty-four (44,434) information sets.
The SBI stated that the timeline of three weeks fixed by the Supreme Court would not be sufficient for the entire process to be completed.
In response to the application filed by the SBI, Common Cause and ADR filed a contempt petition against SBI which was heard on 11 March, 2024. The constitutional bench of the Supreme Court of India further dismissed the application filed by the SBI for the extension.
Download :
Petition challenging the introduction of Electoral Bonds WP(C) 880/2017
Order_Oct 3, 2017
Order_Apr 15, 2019
Order_Dec 4, 2019
Order_Jan 20, 2020
Order_Mar 18, 2021
Order_Mar 24, 2021
Order_Mar 24, 2021 - Judgment Reserved
Order_Mar 26, 2021
Order_Mar 26, 2021 - Judgment
WP (c) 880 of 2017 Order_22-Nov-2022
WP(c) 333 of 2015 Order_15-Dec-2022
WP (c) 880 of 2017 Order_21-Mar-2023
WP (C) 880 of 2017 Order_10-Oct-2023
WP (c) 880 of 2017 Order_16-Oct-2023
WP (c) 880 of 2017 Order_31-Oct-2023
WP(C) 880 of 2017 Order_02-Nov-2023
Judgment_15.02.2024
Order_Mar 11, 2024 SBI Extension Plea
