In a dramatic turn of events, the State Bank of India (SBI) fulfilled a crucial directive from the Supreme Court by submitting comprehensive details regarding electoral bonds to the Election Commission of India on March 12, 2024. Following the Supreme Court’s direction issued on March 11, 2024. SBI was under stringent orders to disclose all pertinent information regarding electoral bonds to the Election Commission by the close of business hours on March 12.
The submission of electoral bond details by SBI underscores a pivotal moment in India’s electoral landscape, signalling a potential shift towards greater accountability and openness in the country’s democratic processes. With the information now in the hands of the Election Commission, stakeholders eagerly await further developments that may shape the future of political financing in India.
In the ruling dated February 15, 2024, the Court delivered a unanimous decision, watering down the Union’s 2018 Electoral Bonds (EB) Scheme. The Bench while invoking its jurisdiction of judicial review tested the validity of electoral bond scheme on the yardstick of fundamental right and arrived at the decision that the bill should go with immediate effect and central government demonstrating its spirit of constitutionalism had acted on the direction of the Hon’ble Supreme Court and did not resort to presidential ordinance or parliamentary act to frustrate the mandate of apex court of this country.
In a move that reverberated across the political spectrum, the Court mandated an immediate halt to the sale of electoral bonds. Furthermore, the SBI was tasked with the crucial responsibility of furnishing intricate details regarding the Electoral Bonds purchased from April 12, 2019, onwards to the Election Commission of India (ECI). These details encompassed not only the identity of the purchaser but also meticulously documented the political parties that received these bonds.
In an unprecedented stride towards transparency, the Supreme Court heralded a new era of accountability and openness in the realm of political financing. However, before we extol the Hon’ble Court for its well-reasoned decision, it becomes imperative to analyse the demarcations set for every organ of government. Judicial review of a government decision per se is an exceptional act of judiciary, and in the normal course of events, judiciary refrains from indulging in the same, unless the government’s action by way of any statute or any legislation goes beyond the scope of constitutional propriety.
While it is acknowledged that the interpretation outlined may limit the scope of judicial review under Article 13, it is imperative to emphasise that vague or ambiguous concepts should not serve as the foundation for reviewing legislation or exercising judicial power under the public interest jurisdiction. And in the matter of public interest litigation the judicial approach qua governmental action witness changes in every decade. For example, The Green Litigation of 90’s in 21st century is no more limited to the environmental impacts rather it has outgone its reach to the domain of scrutinising the legislative intent of any legislation to the same. Instead, it is firmly established that judicial review must be grounded in the explicit provisions of the Constitution, rather than relying on nebulous notions of the Constitution’s presumed spirit or the petitioner’s subjective interpretations.
Before we analyse the judgment, it becomes important to analyse the legal framework behind this scheme. On 14 May 2016, the Finance Act, 2016 brought about significant changes to the Foreign Contribution Regulation Act, 2010 (FCRA). One of the notable amendments was to Section 2(1)(j)(vi), redefining “foreign source” to include foreign companies with a majority share in Indian companies, thereby allowing them to contribute to political parties. This amendment marked a departure from previous regulations which prohibited foreign companies from making such donations under both the FCRA and the Foreign Exchange Management Act, 1999. Subsequently, on 31 March 2017, the Finance Act, 2017 introduced further amendments affecting various laws including the Representation of the People Act, 1951 (RoPA), the Reserve Bank of India Act, 1934, the Income Tax Act, 1961, and the Companies Act, 2013.
One of the key changes introduced by Section 11 of the Finance Act, 2017 was the modification of Section 13A of the Income Tax Act, exempting political parties from the obligation to maintain detailed records of contributions received via electoral bonds. Section 135 of the Finance Act, 2017 amended Section 31 of the RBI Act, empowering the Union government to authorize scheduled banks to issue electoral bonds. This move aimed to streamline the process of political funding.
Additionally, Section 137 of the Finance Act, 2017 introduced a proviso to Section 29C of RoPA, exempting political parties from disclosing contributions received through electoral bonds in their “Contribution Reports.” These reports typically disclose contributions exceeding twenty thousand rupees from both companies and individuals. Furthermore, Section 154 of the Finance Act, 2017 amended Section 182 of the Companies Act, 2013 by eliminating the previous restriction on the amount of donations a company could make to a political party. Previously, companies were limited to contributing up to 7.5 percent of their net profits averaged over three years. This removal of the upper limit on contributions aimed to provide more flexibility to corporate entities in their support for political parties.
In this case government contended that the preservation of donor anonymity is crucial not only to combat black money but also to uphold the fundamental right to privacy of the donor. While the objective of tackling black money enjoys widespread agreement, the government emphasised that safeguarding donor anonymity serves a legitimate state interest. The government’s attempts to address the issue of unaccounted cash in political financing despite several measures could not bring the favourable outcome due to donors’ insistence on confidentiality regarding their identities and the recipients of their donations.
However, Justice Khanna, in his distinct opinion, challenged the notion of donor anonymity as a legitimate state aim. He argued that the principle of proportionality, when applied, does not support anonymity in political party funding. Instead, he emphasised that the voters’ right to know should take precedence over donor anonymity. On the other hand, Chief Justice Chandrachud introduced a nuanced approach, termed the “double proportionality” test. Recognising the complexity of the case, which involves balancing competing fundamental rights—the right to information and the right to privacy—he asserted that a mere proportionality test would not suffice.
He proposed that while the proportionality test traditionally examines the direct confrontation between a right and state action, a deeper evaluation is necessary for a balance of rights. This entails scrutinising the situation from the perspective of both rights and determining whether the state has employed the “least restrictive” means to uphold both rights. Furthermore, any disproportionate impact on either of the two rights must be thoroughly considered. In essence, his approach calls for a meticulous examination that accounts for the intricate interplay between the right to information and the right to privacy, ensuring that neither is unduly compromised.
Undoubtedly, the regulation of spending in elections is crucial for preserving the integrity and legitimacy of democratic processes. While funding is necessary for elections to function effectively, excessive financial influence can lead to a “pay for play” culture and the dictation of public policy by a few wealthy donors. This undermines public faith in democracy and aggravates inequality. The role of judiciary becomes humungous as it has to take into account the existing practical problems in curbing the black money, mandatory election funding and yet keeping the spirit of constitution alive.
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