Is Electoral Bond Scheme Unconstitutional? What Supreme Court Has To Say

On February 15, a five-judge bench of the Supreme Court declared the electoral bonds scheme unconstitutional. The scheme allowed individuals and corporations to donate money to political parties anonymously by purchasing electoral bonds from the State Bank of India (SBI). The SBI had sole access to the details of those who purchased electoral bonds, and any unencashed bonds were to be deposited in the Prime Minister Relief Fund.

The scheme was introduced in 2017 by then Finance Minister Arun Jaitley as a solution to the issue of opacity in political parties’ funding. However, it was challenged in court by the Communist Party of India (Marxist), and NGOs Common Cause and ADR.

The court raised several issues in its verdict. Firstly, it held that the electoral bond scheme violated the Right to Information under Article 19(1)(a) as information on the funding of political parties is essential for voting. The court explained that economic inequality contributes to political inequality due to the deep association between money and politics, and that money enhances access to legislators, raising the legitimate possibility of quid pro quo or mutually beneficial arrangements such as favourable policy changes.

Secondly, the court rejected curbing the circulation of black money in electoral financing as a legitimate reason to restrict the right to information (RTI). The court held that the RTI can only be restricted based on Article 19(2), which speaks of the reasonable restrictions to freedom of speech and expression.

It does not include curbing black money as a restriction. Even assuming curbing black money is a legitimate purpose, it is not proportional to the restrictions posed by this scheme.

Thirdly, the court applied a proportionality test based on its 2017 verdict in the KS Puttaswamy case over the right to privacy, and concluded that the encroachment on fundamental rights is not proportional to the objection sought to be achieved.

The court said that the government did not adopt the least restrictive method and cited the ₹20,000 cap on anonymous donations as an example of the least restrictive methods.

Therefore, the court held that the infringement of the right to information is not proportionally justified to curb black money in electoral financing.