Association for Democratic Reforms v. Union of India

Case Title & Citation

Case Title: Association for Democratic Reforms and Another v. Union of India and Others (2024)

Official Citation: (2024) 5 SCC 1; 2024 INSC 113

Court Name & Bench

Court: Supreme Court of India

Bench Type: Five-Judge Constitution Bench

Judges: Chief Justice D.Y. Chandrachud, Justice Sanjiv Khanna, Justice B.R. Gavai, Justice J.B. Pardiwala and Justice Manoj Misra

 Date of Judgment

February 15, 2024

 Parties Involved

Petitioners: Association for Democratic Reforms (ADR), Common Cause, and the Communist Party of India (Marxist)

Respondents: Union of India, Election Commission of India (ECI), and State Bank of India (SBI)

Facts of the Case

1.     In 2017, the Union Government introduced the Electoral Bond Scheme through the Finance Act, 2017.
2. This scheme allowed individuals and corporations to purchase bearer bonds from the State Bank of India and anonymously donate them to political parties.
3. To facilitate this, amendments were made to the Representation of the People Act, 1951, the Income Tax Act, 1961, and the Companies Act, 2013, to remove disclosure requirements and caps on corporate funding.
4. Petitioners challenged the scheme, alleging that it legalized “non-transparency” and corruption by allowing unlimited, anonymous corporate donations.

Issues Raised

1. Whether the non-disclosure of information regarding political funding violates the voter’s right to information under Article 19(1)(a).
2. Whether unlimited corporate funding to political parties infringed upon the principle of free and fair elections and violated the right to equality under Article 14.

Arguments of the Parties

1. Petitioners: Argued that voters have a fundamental right to know the source of political funding to assess potential quid pro quo arrangements and that the scheme favored the ruling party through SBI’s data access.
2.   Respondents (Union of India): Contended that the scheme was a policy measure to curb black money by shifting donations to banking channels. They argued for balancing the voter’s right to know with the donor’s right to privacy and protection from political retribution.

Judgment

1. The Supreme Court unanimously ruled the Electoral Bonds Scheme unconstitutional.
2. The Court declared the amendments to the Representation of the People Act, Income Tax Act, and Companies Act (Section 182), which enabled anonymity and unlimited funding, unconstitutional.
3. Orders Issued: Directed the SBI to immediately stop issuing bonds and disclose all details of bonds purchased and redeemed since April 12, 2019, to the ECI for public publication.

Legal Reasoning

• Article 19(1)(a) Violation: The right to information of a voter is essential for the effective exercise of the choice of voting and for holding the government to account.

•  Failure of the Proportionality Test: While curbing black money is a legitimate goal, the scheme failed the “least restrictive means” test as other methods (like Electoral Trusts) could achieve the goal without total anonymity.

•  Manifest Arbitrariness: Allowing unlimited corporate funding via the amendment to Section 182 of the Companies Act was deemed manifestly arbitrary, as it treated corporate “quid pro quo” donations the same as individual contributions.

•  Double Proportionality: The Court held that the voter’s right to information outweighs the donor’s interest in informational privacy regarding public political contributions.

Conclusion

• The judgment reinforces transparency as the “lifeblood of democracy” and ensures that financial influence does not erode the principle of “one person, one vote.”

• It marks a significant step in the judicial review of electoral reforms and the protection of the Constitution’s ‘basic structure”