Electoral bonds: How the SC verdict counters former FM Arun Jaitley’s arguments

What the SC said

○ The court said since information on the funding of political parties is essential, the electoral bonds scheme violates the right to information.

○ Elaborating on a quid pro quo — a link between political funding and policy making — CJI D Y Chandrachud said lack of disclosure about corporate funding is “unconstitutional”.

○ On the government’s reasoning that the Electoral Bonds Scheme curbs black money, the court said the objective does not justify the “encroachment of fundamental rights”. The court here applied the three pronged-test outlined in the 2017 Justice K S Puttaswamy (retd) V Union of India ruling that upheld privacy as a fundamental right and concluded that the electoral bond scheme is not the least restrictive method that the government could have adopted.

○ The government scheme, as per the proportionality test, would have to essentially satisfy three aspects — first, the existence of a law. The electoral bond scheme was brought through the Finance Act that introduced a series of amendments in the Income Tax Act and the Representation of the People Act. Second, the law must demonstrate a legitimate state interest that has a nexus to the object sought to be achieved by Parliament. The government argued that the objectives range from curbing black money to protecting the privacy of the donors. The third, and the most crucial, is whether the encroachment upon fundamental rights is proportional to the objection sought to be achieved. Here, the CJI said the state did not adopt the least restrictive method.

○ The court declared amendments to the Income Tax Act and Section 29C of the Representation of the People Act unconstitutional.

What Jaitley had said

The former Finance Minister had in an article posted on the PIB website on January 7, 2018 sought to explain why who donated how much to a political party could not be disclosed.

“How much each donor has distributed to a political party would be known only to the donor. This is necessary because once this disclosure is made, past experience has shown, donors would not find the scheme attractive and would go back to the less-desirable option of donating by cash. In fact, the choice now has to be consciously made between the existing system of substantial cash donations, which involves total unclean money and is non-transparent and the new scheme which gives the option to the donors to donate through entirely a transparent method of cheque, online transaction or through electoral bonds. While all three methods involve clean money, the first two are totally transparent and the electoral bonds scheme is a substantial improvement in transparency over the present system of no-transparency,” Jaitley had said.

“…Despite strengthening various institutions for the last seven decades, India has not been able to evolve a transparent political funding system… The conventional system of political funding is to rely on donations. These donations, big or small, come from a range of sources – from political workers, sympathisers, small business people and even large industrialists… The sources are anonymous or pseudonymous. The quantum of money was never disclosed… It is a wholly non-transparent system. Most political groups seem fairly satisfied with the present arrangement and would not mind this status quo to continue. The effort, therefore, is to run down any alternative system which is devised to cleanse up the political funding mechanism,” Jaitley wrote.

He explained the scheme he had placed in Parliament envisaging “total clean money and substantial transparency”. “A donor can purchase electoral bonds from a specified bank only by a banking instrument. He would have to disclose in his accounts the amount of political bonds that he has purchased. The life of the bond would be only 15 days. A bond can only be encashed in a pre-declared account of a political party. Every political party in its returns will have to disclose the amount of donations it has received through electoral bonds to the Election Commission. The entire transactions would be through banking instruments… Some element of transparency would be introduced in as much as all donors declare in their accounts the amount of bonds that they have purchased and all parties declare the quantum of bonds that they have received”.