The Right to Information via the Freedom of Speech and Expression in the Indian Constitution are fundamental rights that may not be expressively linked to the process of elections and the right of citizens to vote and choose their government. Yet, the Supreme Court treaded an unprecedented path by expanding their interpretative extent to strike down the controversial Electoral Bonds Scheme, which was inherently flawed and favoured the ruling dispensation. In doing so, the SC cleared a dark shadow cast over its own impartiality and credibility that came into question over several judgments in the past decade. On the other hand, the need for fresh ideas and thinking to create a robust and sustainable political funding system is vital for a vibrant democracy.
Images courtesy: Wikipedia, SC Observer, X
The verdict of the Supreme Court of India on 15 February 2024 striking down the Electoral Bonds Scheme is a landmark in many respects. The verdict drew the line for the Executive in ensuring that policies framed for governance align with the Constitution. However, the more significant message for the polity is that the verdict sought to reinforce the faith of the citizenry in the judiciary and restore its credibility as an unbiased institution.
By terming the Scheme as ‘unconstitutional’, the SC bench used its expansive interpretative powers to describe the Electoral Bonds as violative of both Article 19(1)(a) and Article 14 of the Indian Constitution. This is significant as both Article 19(1)(a), which guarantees freedom of speech and expression, and Article 14, which guarantees equality before the law, are broad frameworks that have not always been interpreted uniformly by either the courts or successive governments, which were often seen to be imposing conditionality to these rights.
Through this verdict, the five-judge Constitution bench headed by the Chief Justice of India (CJI) had imparted a notion of sacrosanctity for these critical constitutional provisions. It upheld the right of citizens to know the funding sources of political parties as critical to the functioning of the democracy and exercising of fundamental rights of the citizenry.
Right to information as red herring?
The right to information, which was ordained through the Right to Information (RTI) Act of 2005, was, after all, enshrined on the basis of Article 19(1)(a) of the Constitution. In the matter of Bennett Coleman & Co. vs Union of India (1973), the apex court had held that the right to information is a constitutional right as the right to free speech and expression under Article 19(1)(a) also constitutes the right to receive and collect information as well as the freedom and right to information.
In this context, it is relevant to mention the fact that political parties in India have not yet been placed under the purview of RTI and that their funding sources and other such information are covered through the provisions of the Representation of People Act, 1951, which was amended to implement the Electoral Bond Scheme.
By placing the citizens' right to know about ‘who is funding the parties’ as the core contention to declare the Electoral Bond Scheme as unconstitutional, the apex court has, in effect, provided muster to demands from various quarters to bring political parties under the preview of the RTI Act, though it is doubtful whether parties can be termed as ‘public authorities’.
Worthwhile to note in this context is the fact that the process of elections and the right to vote are covered in Articles 324-279 in Part XV of the Indian Constitution. The Supreme Court has itself noted the paradox that the right to vote in these Articles amounts to only ‘statutory’ and not a fundamental right. The rights of the legislature in framing rules and norms for the election process and the limited role of the courts have all been listed in this section.
It is probably keeping in view these limitations that the five-judge bench might have opted to elevate the centrality of Articles 19(1)(a) and Article 14 as the basis to strike down the Electoral Bond Scheme having reached a consensus among them on its detrimental effects to democracy. By that standard, the right to information and its expressive link with the freedom of speech and expression could be seen as the weakest link in the Scheme’s legality pronouncements, notwithstanding its other inherent structural flaws and built-in biases.
Thereby, that the Constitution bench sought to uphold these rights of the citizenry over many other glaring structural flaws in the Scheme is indicative of some signalling the five-judge bench sought to drive home:
Restoring the credibility of the judiciary
The verdict will have easily surprised anyone who closely followed the proceedings of this Constitutional bench hearing arguments on the Electoral Bond Scheme in October last year. During the intense arguments which lasted a few days, before the matter was referred to the five-judge bench, the bench led by the CJI was seen to be meek and defensive particularly when the government pleaders questioned the court’s ‘intrusion’ into legislative matters.
The government pleaders, including Attorney General R. Venkataramani and Solicitor General Tushar Mehta, were aggressive in their defence of the Scheme. A submission by the Attorney General went to the extent of stating that “citizens do not possess a general right to know the sources of electoral bonds.” Mehta, on the other hand, offered suitable amendments to rectify shortcomings besides also submitting an undertaking by the chief of the State Bank of India to claim that the Finance Ministry or other arms of the government do not have access to the donor database.
Such argumentations apart, the bench and petitioners had raised enough questions: how the anonymity of donations are going to fulfil the claimed purpose of transparency behind the Scheme, the inherent advantage gained by the ruling party in obtaining the bulk of donations, the question of whether the amendment to Section 182(3) of the Companies Act had enabled loss-making companies to use the Scheme to influence the ruling party and whether there were quid-pro-quos involved, whether the fear of monitoring by the government has affected the ability of other parties to raise enough funds through the Bonds, the arbitrary manner in which the Scheme was promulgated through the Finance Bill, and so on.
Despite such intense deliberations, there were neither any indications nor any resolute belief in any quarters that the five-judge bench was destined to uproot the Electoral Bond Scheme running for over six years, and that too in the affirmative manner it did last week.
The absence of such beliefs is rooted in the way the Indian judiciary, particularly the higher and the apex courts, has functioned in the bygone decade, embodied by the collective reluctance to make the executive accountable for their diversions and indiscretions. In the words of one analyst, “We see the Supreme Court timid, tentative, fragmented and vulnerable; wary of hurting the central executive which has grown mighty in strength.”
It is notable that in the post-2014 political environment in the country, the SC and prominent High Courts failed to sustain the kind of ‘judicial activism’ in vogue since the 1990s and the kind of effort put in to make the government accountable before the 2014 general elections. Starting with confrontations over the collegium appointments soon after the Narendra Modi government took charge to the rebellion by a handful of Supreme Court judges who held a press conference against the then CJI, Justice Dipak Mishra, in January 2018, it was since evident that the ability of the Indian judiciary to dispense justice free of bias and political influence will be under great stress. It could be recalled that some opposition parties had then moved an impeachment motion against Justice Mishra alleging his palpable bias in favour of the ruling party and its government.
The years since the 2014 change in government have thrown up several cases and instances where the credibility and impartial character of the Indian court, including the apex court, remained under a cloud. If matters ranging from the Sahara-Birla papers, Justice Lodha’s death, Bhima-Koregaon violence, Rafale, and Aadhaar as a money bill were some instances when the SC had refused to ruffle the feathers of the Modi government in its first tenure, the trend continued with greater traction in the second tenure.
The questionable verdict on the Ram Mandir, which literally upheld the bringing down of the disputed structure; the refusal to entertain pleas over the alleged mismanagement during the Covid pandemic, including shortage of oxygen and nationwide vaccination through emergency use authorization without enough field trials or a legal framework; allowing the PM Cares to exist as a non-State entity even while engaging in public expenditure; approving the Delhi High Court verdict on Agnipath policy without evaluating its demerits; the alleged pro-government intervention by then CJI on the controversial farm laws, the upholding of abrogation of Article 370 allegedly overlooking legality and history; the invocation of special powers for the Enforcement Directorate (ED) in ways that transcend the authority of other policing agencies; ratifying the decision of Election Commission to decide ownership of split parties based on legislature strength; refusal to decisively intervene in cases of numerous appointments without following established rules and guidelines, among others, were seemingly illustrative of how far the Indian judiciary had treaded in the path of succumbing to political might of the ruling dispensation.
It is in this backdrop that the judgement on Electoral Bonds attains a landmark character, and, invariably, signals the judiciary’s resolve to safeguard elements of democracy even if necessitates an expansion of its interpretative powers.
A problematic scheme
The Electoral Bond Scheme was announced in the 2017-18 budget and subsequently promulgated through the Finance Bill on 21 March 2017. The promulgation involved amendments to Section 29c(1) of the Representation of the People Act, 1951 (as amended by Section 137 of the Finance Act 2017); Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017); and Section 13A(b) (of the Income Tax Act) (as amended by Section 11 of the Finance Act 2017).
A unique theory of ‘transparency’: True, the declared intention of the Electoral Bond Scheme was noble. In his budget speech of 1 February 2017, then Finance Minister, Arun Jaitley, claimed the need to “cleanse the system of political funding in India,” while limiting “case donations to Rs 2000 from one entity,” and electoral bonds for donations above that. He further elaborated on 7 January 2018:
“India is the largest democracy in the world. However, despite strengthening various institutions for the last seven decades, India has not been able to evolve a transparent political funding system. Elections and political parties are a fundamental feature of Parliamentary democracy. Elections cost money. The round-the-year functioning of the political parties involves a large expenditure.”
Claiming that the Scheme “envisages total clean money and substantial transparency coming into the system of political funding,” Jaitley, however, had ruled out public disclosure of the donor’s identity as “the system of political funding through cash and black money will return.” Donations made online or through cheques remain an ideal method of donating to parties, he claimed while pitching electoral bonds as an ideal “alternative to cash donations… as part of efforts to bring transparency to political funding.”
This theory of ‘transparency’ without public disclosure eventually failed the legal test as the notion of transparency was restricted to donor details available only to the nodal bank issuing Electoral Bonds, which was the State Bank of India (SBI). Critics have consistently argued that the government was privy to this information, notwithstanding staunch claims to the contrary, and that with its record of alleged misuse of agencies like the ED, potential high-net donors to the opposition parties will be deterred by fear of targeting.
That transparency did not involve public disclosure provided the handle for the apex court to strike down the scheme as transparency in a free and vibrant democracy cannot come with conditionalities.
Gates opened for unchecked corporate funds: A key part of the Electoral Bond scheme was the amendment to Section 182(3) of the Companies Act, which, supposedly, removed an existing cap of 7.5 per cent of the average profits of a company in the preceding three years that could be donated to a political party. The removal of this cap, evidently, opened the gates for unlimited funding by corporate groups, which, as per the Scheme, will be free from public disclosure.
The SC bench emphatically pointed out this amendment as arbitrary and underlined the fact that the “ability of a company to influence the electoral process through political contributions is much higher when compared to that of an individual,” and “both in terms of the quantum of money contributed to political parties and the purpose of making such contributions.” The Bench also opined: “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. The amendment to Section 182 is manifestly arbitrary for treating political contributions by companies and individuals alike”.
Impressing upon the fact that a natural quid-pro-quo could be expected in corporate funding, the apex court also flagged the prospect of loss-making companies making such contributions, which, naturally should be inferred for some expectant benefit. The Bench noted thus on the amendment:
“Companies before the amendment to Section 182 could only contribute a certain percentage of the net aggregate profits. The provision classified between loss-making companies and profit-making companies for political contribution and for good reason… the underlying principle of this distinction was that it is more plausible that law-making companies will contribute to political parties with a quid pro and not for the purpose of income tax benefits. The provision as amended by the Finance Act of 2017 does not recognise that the harm of contributions by loss-making companies in the form of quid pro quo is much higher. Thus, the amendment…is manifestly arbitrary for not making a distinction between profit-making and loss-making companies for the purposes of political contribution.”
In this context, it is worthwhile to note that the submissions of the ruling party before the Election Commission, in recent years, do not reveal any contributions from some of the powerful corporate groups in the country, particularly the ones with which the Modi government was alleged to be closely associated with.
The petitioners challenging the Scheme, which included the NGOs Common Cause and Association of Democratic Reforms, the CPI(M) and Jaya Thakur, had pointed out that the amendments to the Companies Act would lead to “private corporate interests taking precedence over the needs and rights of the people of the State in policy considerations.” A report in a national daily also points out the fact that five big metros in the country –Mumbai, Kolkata, Hyderabad, New Delhi, and Chennai – had accounted for nearly 90 per cent of the Electoral Bonds whereas Bangalore, known to be IT hub, accounts for only two per cent of the bonds sold.
EC had raised concern on these amendments: In a letter dated 26 May 2017 titled “Amendments in the Finance Act 2017,” months after the 2017-18 budget announcing the Electoral Bonds Scheme, the EC wrote to the Secretary of the Legislative Department in the Ministry of Law and Justice, Government of India, expressing concern over the amendments in the Income Tax Act, the Representation of the People Act and the Companies Act, 2013, introduced by the Finance Act 2017, and cautions that they will “have serious impact on the Transparency aspect of political finance/funding of political parties.” Some of the key points that the letter flags are as follows:
Appealing to reconsider these amendments in order to facilitate Transparent Reporting of Contributions, the letter concludes with the Election Commission expressing its apprehension that the amendments will lead to “increased use of black money for political funding through shell companies,” and that the Commission is of the view that the earlier provision that only profitable companies with a proven track record could provide donations to political parties may be reintroduced.
Need credible political funding ideas
That these profound objections by the Election Commission were overlooked by the Modi Government belies the claimed noble intentions and wishful thinking that went behind the Scheme. Considering that the ruling party has mopped up the highest collections through this scheme even as the finances of opposition parties were subjected to high scrutiny, it is now fiat accompli that the Scheme failed to provide a credible template for transparent political funding.
In fact, Arun Jaitley, in his pronouncements on the Scheme, had also referred to the Electoral Trust plan floated by former Finance Minister, Pranab Mukherjee. That neither of these schemes was able to establish a sustainable and robust political funding process underlines a grave systemic issue about this vibrant democracy. That a clean political financing system evades a functional democracy is a poor reflection on not just the political parties and executive, but the polity as well.
