Association for Democratic Reforms & Anr v Union of India & Ors

1. Case Citation and Information 

Case Name: Association for Democratic Reforms & Anr v Union of India & Ors Citation: (2024) 5 SCC 1; 2024 INSC 113 

Court: Hon’ble Constitution Bench of the Supreme Court of India 

Date of Decision: 15 th February 2024 

Bench: 5 Judge Bench – Dr. D.Y. Chandrachud, C.J.I., Sanjiv Khanna, B.R. Gavai, J.B.  Pardiwala and Manoj Misra, JJ. 

2. Introduction 

The Supreme Court judgement in the Association for Democratic Reforms v. Union of India  popularly referred to as the ‘Electoral Bonds Case’, is one of the most momentous rulings in  the annals of modern constitutional jurisprudence. The case addresses the complex interface  between money, people, and political parties. In a historic judgement delivered by the Supreme  Court in a five-judge Constitution Bench, voting on issues of the Electoral Bonds and electoral  transparency was unanimously decided upon. The Electoral Bond Scheme, 2018 and the related  amendments to various statutes were declared as violative of Articles 19(1) (a) and 14 of the  Constitution.  

This ruling is indeed one of the most significant verdicts concerning the basic structure of the  Indian Constitution in recent times. Free and fair elections are an integral and intrinsic  ingredient of a republic’s existence. An informed electorate is indeed the hallmark of a vibrant  democracy. By way of this ruling, the Supreme Court has unequivocally proclaimed the voter’s  ‘Right to Know’ to be sacrosanct and has stood in firm opposition to the state’s attempts at  concealing the source of political donations. The case has laid down a historic contemporary  constitutional law pronouncement concerning the Right to Information, the Right to Equality,  and the Right to Privacy in the domain of electoral politics in India. 

3. Facts of The Case

The case was brought before the Supreme Court by way of petitions under Article 32 of the  Constitution by the Association for Democratic Reforms (ADR) and Common Cause  challenging the Electoral Bonds Scheme as well as the amendments made to various statutes.  The Government of India, in its Union Budget for 2017-18, announced a new Electoral Bond  Scheme as an alternative to cash donations to political parties. The Electoral Bond Scheme,  2018 was notified on 1 st January 2018 by way of an amendment to the Finance Act, 2017.  This scheme was designed to permit anonymous donations to political parties by corporations  and individuals. 

This scheme, therefore, allowed for a greater inflow of unaccounted money into the coffers of  political parties, thus defeating the very purpose of transparency in political funding. The  Electoral Bonds could be availed of by purchasing them from the State Bank of India (SBI) in  denominations of fifty thousand, hundred thousand, five lakhs, ten lakhs, twenty lakhs, fifty  lakhs, one crore, five crores, and ten crores. The bonds did not require the name or identification  of their purchasers. It may also be noted that the amendments to the Representation of the  People Act, 1951, and the Income Tax Act, 1961, inter alia, made disclosure of donations to  political parties by way of Electoral Bonds stand exempt from the electoral transparency norms of the Election Commission of India (ECI).  

The amendment to the Section 182 of the Companies Act, 2013, brought in by the Finance Act,  2017, delinked the restriction on the quantum of donation (earlier it was restricted to 7.5 percent  of the average net profit of the company for the previous three financial years) and the  obligation of a company to disclose the name of the donee party. In view of the apprehension  about a lack of transparency and free and fair elections, ADR and Common Cause approached  the Supreme Court challenging the aforesaid amendments which were brought in by the Union  Government. The petitioners moved the Supreme Court in 2017, but the case was taken up for  hearing only in October and November 2023. 

4. Issues Raised 

The Hon’ble Five Judge Bench of the Supreme Court framed the following issues in the case: 

1. Whether the Electoral Bond Scheme, 2018 and the amendments to the Representation of the  People Act, 1951 and the Income Tax Act, 1961 are violative of the voter’s fundamental Right  to Information under Article 19(1) (a) of the Constitution?
2. Whether the aforesaid curtailment of the voter’s Right to Information violates the Right to  Privacy under Article 19(2) on the ground that the amendment was made to promote the  transparency of political funding and to tackle the issue of black money? 
3. Whether the amendment to the Section 182 of the Companies Act, 2013, which permits  anonymous and unlimited donations by corporates to political parties, is violative of the free  and fair elections doctrine and manifestly arbitrary under Article 14 of the Constitution? 

       5. Arguments Presented 

5.1 Petitioners’ Contentions 

The Petitioners (ADR and Common Cause), represented by senior counsels Kapil Sibal and  Prashant Bhushan, argued that the Electoral Bonds Scheme, which permitted anonymous  donations to political parties, created informational asymmetry between the common people  and the ruling party as only the latter could access the identity of the donors. They asserted, in  this regard, that the Right to Know is inseparable from the right to speech and expression  guaranteed under Article 19(1) (a) of the Constitution.  

They relied upon the Supreme Court’s decision in Association for Democratic Reforms v Union  of India, (2002) 5 SCC 294 and the PUCL v Union of India, (2003) 4 SCC 399 wherein the  Court held that a voter’s Right to Information encompasses not only the antecedents and  credentials of the candidate but also his/her financing sources. They further contended that the  removal of the 7.5 percent average net profit threshold of corporate donations as the ceiling for  corporate donations to political parties and the delinking of the obligation to the corporations  to disclose the identities of the donee parties under the Companies Act, 2013 was bound to  result in crony capitalism and incentivize the creation of shell companies to channel black  money into the political parties. In this regard, the petitioners pointed out the informational  asymmetry between the general public and the ruling party.  

5.2 Respondents’ Contentions 

The Respondents (the Government of India), represented by the Attorney General and Solicitor  General, countered the Petitioners’ contention by asserting that the Electoral Bond Scheme,  2018 was a bona fide effort to take political funding out of the cash transaction mode and  introduce transparency in the donation process. They argued, in this regard, that the main object  of the Electoral Bond Scheme, 2018 was to curb black money in political funding as political  funding through cash donations was hitherto opaque. They argued that guaranteeing full 

confidentiality to donors was absolutely essential to encourage charitable donations to political  parties as without such a protection, there was bound to be misuse of personal information of  donors by the political parties and the donors would remain at the mercy of the political parties  after the donations.  

The State further argued that the Right to Information of the voters was not absolute and did  not override or outweigh the Right to Privacy of donors as it has been held in the Puttaswamy  case, (2017) 10 SCC 1. They asserted that the disclosure of the identities of donors would  violate the Right to Privacy of Corporates and individuals. 

6. Court’s Analysis of the Issues Raised 

The Chief Justice while delivering the main judgement expounded upon the issues raised in the  case. By virtue of the Proportionality Test, he analyzed the conflict between the Right to  Information and the Right to Privacy, and held that the Right to Information of the voters, inter  alia, encompasses the right to the source of financing of the candidates and political parties and  such a Right to Information is a fundamental right which cannot be fettered by the alleged  Right to Privacy of the donors. 

He further held that the State’s interest in eradicating black money is indeed a legitimate  objective but even so, the Electoral Bonds Scheme, 2018 does not fulfill the proportionality  test. He held that the total denial of the voters’ Right to Information was indeed not the “least  restrictive means” to achieving the objects of the Electoral Bonds Scheme, 2018. The Chief  Justice observed that the Electoral Trust Model which was used to channel funds to political  parties in the electoral trusts model was “banking of money” and not “banking of secrets.” 

He further remarked that the Right to Privacy could not be used as an instrument to enable quid  pro quo between donors and donees and that even if the Right to Privacy of an individual who  donated Rs, 500 out of his/her monthly income of Rs. 5,000 was justifiable, the Right to Privacy  of a corporate entity making donations of Rs 500 crores could not be sustained. On the issue  of the amendment to the Section 182 of the Companies Act, 2013, he ruled that the said  amendment was manifestly arbitrary and violative of Article 14 of the Constitution.  

7. Judgment and Ratio Decidendi 

The Supreme Court delivered a historic, unanimous verdict with the following key directions  (Ratio Decidendi):

1. The Electoral Bond Scheme, 2018 was declared to be violative of the freedom of speech and  expression of the citizens under Article 19(1) (a). 
2. The amendments made to the Representation of the People Act, 1951, the Income Tax Act,  1961 and the Companies Act, 2013 by the Finance Act, 2017 were also held to be violative of  freedom of speech and expression of the citizens under Article 19(1) (a) and the Right to  Equality under Article 14 of the Constitution. 
3. It was further held that the Election Commission should bring out the identity of the donors  in the public domain for ensuring electoral transparency and accountability. 
4. SBI was directed to forthwith stop issuing Electoral Bonds and to disclose the details of the  Electoral Bonds issued since April 12 th , 2019 which included details of the purchasers, the  amount of the Bonds, and the political parties which encashed them. 
5. The Election Commission too was directed to publish such information on its website for  public access. 

        8. Critical Analysis of The Judgment 

8.1 Significance of The Judgment 

The present judgement holds immense significance for the country as it safeguards and upholds  the Right to Know of the common man. In today’s world, where electoral malpractice and  political corruption have become the order of the day, the present judgement is a welcome  relief. For a long time, there has been a feeling of disenfranchisement among the voters as it  was believed that they were being manipulated by the ruling party. Even though the Right to  Privacy of the donors is indeed a significant fundamental right, the Right to Information of the  voters has been held to be a fundamental right and is even more significant. Such a Right to  Information promotes transparency in political funding. 

8.2 Impact and Effect of The Judgment 

The very next day after the judgement was delivered, the SBI revealed thousands of crores of  anonymous donations, including those by big corporate entities, to the political parties. This  judgement, thus, serves as an eye-opener for the people of India as it provides them with the  information concerning the funding of the various political parties, inter alia, revealing the  nexus between some of the political parties and the corporate donors. It must also be noted that  this judgement will have a longlasting effect on the political funding. With this judgement, the 

political parties may now have to resort to other means for funding their campaign expenses,  instead of relying on anonymous donations. The judgement will also ensure that the political  parties can no longer get away with hiding the extent of corporate donations from the public. 

8.3 Criticism of The Judgment 

As stated earlier, this judgement holds immense significance and even though it seems to be a  “feel-good verdict,” there are certain points that require critical evaluation. The most prominent  criticism of this judgement revolves around the timing of its delivery. The scheme was  challenged in 2017, but the Supreme Court took seven years to deliver this judgement and by  then, the electoral process had already been impacted by the electoral bonds. During the six  years in which the petitions were pending, several state Assembly and Lok Sabha elections  were held and political parties had already spent more thanRs 16,000 crores through electoral  bonds.  

9. Conclusion 

The Supreme Court judgement, which invalidated the Electoral Bond Scheme and various  amendments introduced in the statutes relating to electoral bonds, is a landmark judgement for  electoral transparency in India. It has also upheld the principle of equality under Article 14 of  the Constitution, thereby preventing the rich corporate entities from overshadowing the voice  of an ordinary citizen. Even though the judgement was delivered belatedly and may have  already failed to achieve its object of checking political corruption, the judgement is indeed a  resounding reaffirmation of the democratic setup by the Supreme Court of India.