Bench: CJI Dr. DY Chandrachud, BR Gavai, JB Pardiwala, Manoj Misra and Sanjiv Khanna.

Case Title: Association for Democratic Reforms & Anr. v. Union of India & Ors., Writ Petition (C) No. 880 of 2017.

Jurisdiction: Petitioner Instituted the petition under Article 32 of the constitution of India challenging the constitutional validity of the Electoral Bond Scheme (EBS) and Provisions of Finance Act which amended the provisions of RBI Act, 1934, RPA, 1951, The IT Act, 1961 and companies Act, 2013.

I. Background of the case

a. The Amendment by Finance Act, 2017

The Electoral Bond Scheme (EBS) was introduced through the Finance Act, 2017. Before dealing with the issue of the electoral bond, it is essential to understand the amendment introduced through the Act. So, the changes were the following:

1. Firstly, the changes that were made in the RBI Act was the addition of sec. 31(3) which authorizes any scheduled bank to issue electoral bonds. Before the amendment, Section 31 of the RBI Act stipulates that only the RBI or the Central Government authorized by the RBI Act shall draw, accept, make, or issue any bill of exchange or promissory note for payment of money to the bearer of the note or bond.  (¶ 2)
2. Secondly, there were changes to the Companies Act, 2013, related to election funding. The history of amendments was traced, starting from the 1956 Companies Act, which did not regulate corporate funding for elections. The 1960 amendment introduced Section 293A, limiting contributions to political parties or individuals for political purposes. In 1969, contributions were banned, but in 1985, another amendment allowed contributions to political parties with certain conditions. The 2013 Companies Act, section 182, incorporated provisions from 293A, limiting contributions to 7.5% of the average net profits of the preceding three financial years and approval from Board of directors were necessary. The Finance Act 2017 made changes: removing the cap on corporate funding, simplifying disclosure requirements like only total contributed amount to political party to be disclosed and excluded the requirement to disclose the particulars of the amount contributed to each political party, and introducing a method of contribution through specified instruments. (¶ 10).
3. Thirdly, the changes were made in the Income Tax Act, the political parties were not required to maintain a record of contributions received through Electoral Bond. Amounts exceeding rupees twenty thousand only through bank draft, electronic clearing system, or electoral bond. Earlier, Taxation Laws (Amendment) Act 1978 included s. 13A of IT Act exempting the income of political parties. However, there were three conditions, The political party was obligated to maintain books of account and documents allowing the Assessing Officer to determine its income. Specifically, the party had to record voluntary contributions exceeding twenty thousand rupees, including the contributor’s name and address. Additionally, the party’s accounts needed to undergo auditing by an accountant. (¶ 12).
4. Finally, there were changes in RPA, sec. 29C was amended to include a proviso by which the political party was not required to disclose details of contributions received by electoral bonds. (¶ 16).

b. Objections of RBI and ECI

The RBI raised certain objections that the proposed amendment allowing multiple non-sovereign entities to issue bearer instruments is criticized as it was challenging the RBI’s exclusive authority in this regard. This could potentially undermine faith in the Central Bank’s currency, especially if electoral bonds are issued in large quantities. Despite the Know Your Customer(KYC) requirement for bond purchasers, the lack of transparency in the identities of intervening entities may violate the principles of the Prevention of Money Laundering Act 2002.

The argument asserts that the objective of introducing electoral bonds could be achieved through existing payment methods like cheques, demand drafts, and electronic transactions, making the introduction of a new bearer bond unnecessary. Thereafter, certain safeguards were suggested by RBI, some of which were accepted by the finance ministry. After the draft EBS, they flagged the possibility of shell companies which was completely ignored. (¶ 19)

Further, the ECI also stated that EBS will have a “serious impact on transparency of political finance/funding of political parties.” (¶ 23)

c. Introduction of the scheme

Despite all the red flags by the RBI and ECI, on 2^nd Jan 2018, EBS was introduced by the Ministry of Finance exercising power under sec. 31 (3) of the RBI Act. It was challenged soon after the introduction and interim relief was asked which was rejected by stating that “scheme are not placed behind the Iron curtain incapable of being pierced.”. The petitioner also challenged the introduction of the Finance Act as a money bill under Article 110. The issue of the scope of Article 110 has been referred to a 7-judge bench and is pending. (¶ 27)

II. Issues

Two issues were framed by SC:

a. Whether unlimited corporate funding to political parties, as envisaged by the amendment to Section 182(1) of the Companies Act infringes the principle of free and fair elections and violates Article 14 of the Constitution; and

b. Whether the non-disclosure of information on voluntary contributions to political parties under the Electoral Bond Scheme and the amendments to Section 29C of the RPA, Section 182(3) of the Companies Act and Section 13A(b) of the IT Act are violative of the right to information of citizens under Article 19(1)(a) of the Constitution.

III. Arguments

a. Petitioners

7 learned counsel and senior counsel have submitted their arguments from the petitioner side which can be summarized into the following points (¶ 30-36):

1. No Rational Basis as cash donations are still permitted.
2. The Central Government ignored the objections raised by both RBI and ECI.
3. Freedom of voters to have information under Art. 19(1)(a). Non-disclosure is unconstitutional.
4. Violates the rights of shareholders to know. Transparency, disclosure and reporting is important for political funding and followed by US, UK, Switzerland and Singapore.
5. Subvert democracy and interfere with free and fair elections. Corporate funding promotes a quid pro quo nexus.
6. It is a matter of electoral process and not economic policy so court can interfere.
7. Presumption of constitutionality should not be applied here.
8. Corporate funding per se is violative of the constitution.
9. The scheme promotes information asymmetry as Central Government is privy to such information through SBI.
10. Violates the judgment of ADR and PUCL on disclosure of important information related to funding of political parties.
11. It is unreasonable and disproportionate as there are other alternatives. It violates Article 14 and 15 by disproportionately impacting regional parties as they do not have corporate ties.
12. It is manifestly arbitrary as it creates a quid pro quo nexus between corporate and political party, capture the democracy by wealth interest and infringes one person, one vote.

b. UOI

The submission was made by the learned Attorney General for India and the learned Solicitor General of India, which can be summarized as follows (¶ 37 and ¶ 38):

1. Political parties are an integral product of a free and open society. They are entitled to receive all support.
2. EBS allows any person to transfer through regulated banking channels. It curbs infusion of black money.
3. Ensuring confidentiality is beneficial. Contributors are protected from any apprehensions and it protects their right to privacy.
4. Citizens do not have a general right to know regarding the funding of political parties.
5. Right to know for a specific purpose only.
6. The influence of contributions by companies to political parties ought not to be examined by this Court. It is an issue of democratic significance and should be best left to the legislature.
7. EBS is an improvement of the prior legal framework which was earlier cash-based mostly.
8. Maintaining anonymity is part of the concept of secret ballot.
9. RTI only works against information in possession of the state.
10. EBS provides an effective framework for receiving and donating money through electoral bonds.
11. Removal of limits is to disincentivize the creation of shell companies.
12. Possibility of abuse cannot be ground for holding provision procedurally or substantially unreasonable.

IV. The Analysis by the Court

a. The scope of Judicial Review

Firstly, the Hon’ble Supreme Court analyzed whether this matter was within the scope of judicial review or whether it was a matter of economic policy. The court mentioned two cases, first, in Swiss Ribbons v. UOI, the Court while deciding a challenge to the constitutional validity of provisions of the Insolvency and Bankruptcy Code 2016 observed that the legislature must be given “free play” in the joints to experiment with economic policy. This position was also followed in Pioneer Urban Land and Infrastructure Limited v. UOI. (¶ 40).

The court does not rely on the ipse dixit (unproven statement or statement without evidence) of the government, that Finance Act, 2017 is an economic legislation and there is no scope for judicial review. Rather, the court classified section 31 of the RBI as a financial provision to the extent that it seeks to introduce a new form of a bearer instrument. The amendments in question can be clubbed into two heads: first, provisions mandating non-disclosure of information on electoral financing; and second, provisions permitting unlimited corporate funding to political parties. Both these amendments relate to the electoral process. (¶ 41). The UOI itself classified the amendments as an “electoral reform”. (¶ 42).

Secondly, the petitioners submitted that the presumption of constitutionality does not apply since the Scheme deals with the electoral process. The presumption of constitutionality is based on two premises. First, it is based on democratic accountability, that is, legislators are elected representatives who are aware of the needs of the citizens and are best placed to frame policies to resolve them. Second, legislators are privy to information necessary for policy-making which the Courts as an adjudicating authority are not.

However, the policy underlying the legislation must not violate the freedoms and rights which are entrenched in Part III of the Constitution and other constitutional provisions. The court stated that only when violation of Part III is established. So, the onus then shifts on the State to prove that the violation of fundamental rights is justified. The case of Dharma Dutt v. UOI was cited illustrating this principle. (¶ 44). So, the argument of petitioners stating presumption of constitutionality should not apply to a specific class of statutes was rejected. (¶ 45).

b. The close association of Politics and Money

The court finds that there is a close association between politics and money. The money has the power to influence the electoral politics directly or indirectly. The law does not bar electoral financing by the public. The legal regime has not prescribed a cap on the financial contributions that can be received by a political party or a candidate contesting elections. However, Sec. 77 of RPA read with Rule 90 of the Conduct of Election Rules 1961 prescribes a cap on the total expenditure that can be incurred by a candidate or their agent in connection with Parliamentary and Assembly elections between the date on which they are nominated and the date of the declaration of the result.

The maximum limit for the expenditure in a Parliamentary constituency is between Rupees seventy-five lakhs to ninety-five lakhs depending on the size of the State and the Union Territory. The maximum limit of election expenses in an Assembly constituency varies between rupees twenty-eight lakhs and forty lakhs depending on the size of the State. However, the law does not prescribe any limits for the expenditure by a political party. Thus, there is an underlying dichotomy in the legal regime. The law does not regulate contributions to candidates. It only regulates contributions to political parties. However, expenditure by the candidates and not the political party is regulated. (¶ 46)

It was observed by the court that campaigning has a huge effect. Political parties try to use innovative techniques such as sponsoring religious festivals, conducting events, orgainsing sports matches and literary competitions, these have a lasting impression on the mind of uninformed voters. Further, the money excludes parties representing marginalized communities’ interests. (¶ 47-51)

The decision in Kanwar Lal Gupta v. Amar Nath Chawla, notices that money serves as an asset for advertisingand other forms of political solicitation that increases a candidate’s exposureto the public. The court observed that the availability of large funds allows a candidate or political party “significantly greater opportunity for the propagation of its programme” in comparison to their political rivals. Such political disparity, it was observed, results in “serious discrimination between one political party or individual and another based on money power and that in turn would mean that “some voters are denied an ‘equal’ voice and some candidates are denied an ‘equal chance’.” (¶ 52)

The court emphasized the role of money and stated that EBS cannot be read in isolation without a reference to the actual impact of money on electoral politics. The Supreme Court in numerous judgments held that the effect and not the object of the law on fundamental rights and other constitutional provisions must be determined while adjudicating its constitutional validity. (¶ 55).

c.  Challenge to non-disclosure of election funding

Sec. 29C of RPA, Sec. 13A of IT Act and Sec. 182 of Companies Act, 2013 as amended by Finance Act prescribe non-disclosure of funds received through electoral bonds as it was stated that maintaining the anonymity of the contributor is crucial and primary characteristic of the EBS. The court examined whether there is infringement of RTI of a voter and whether it is justified infringement.

i.  Infringement of RTI of voters

First, the court referred to matters involving conflict between public interest and private interest. In State of Uttar Pradesh v. Raj Narain, the respondent sought to summon documents in an election petition. The State made a claim of privilege from disclosure of documents. In his concurring opinion in the Constitution Bench, Justice KK Mathew observed that there is a public interest in the impartial administration of justice which can only be secured by the disclosure of relevant and material documents. The learned Judge reaffirmed this proposition by tracing the right to information to Article 19(1)(a) of the Constitution (¶ 62):

“74. In a Government of responsibility like ours, where all the agents of the public must be responsible for their conduct, there can be but few secrets. The people of this country have a right to know every public act, everything that is done in a public way, by their public functionaries. They are entitled to know the particulars of every public transaction in all its bearing. The right to know, which is derived from the concept of freedom of speech, though not absolute, is a factor which should make one wary, when secrecy is claimed for transactions which can, at any rate, have no repercussion on public security.[…]”

There is a close relationship between the right to information and open governance. The citizens have a duty to hold the government accountable for their actions and inactions, and they can effectively fulfill this duty only if the government is open and not clothed in secrecy. The Supreme Court have earlier recognized that the effective participation in democratic governance is not just a means to an end but is an end in itself. (¶65)

ii. PUCL and ADR Judgment Analysis

The court cited the judgment of ADR and PUCL highlighting the importance of an informed decision by the voters. In these cases, the court stated that information which furthers democratic participation must be provided to citizens. In ADR, the court observed that while disclosure of information may violate the right to privacy of candidates and their families, such information must be disclosed because it furthers public interest. (¶ 77)

iii. Focal point of electoral process: candidate or political party

As the ADR and PUCL judgment highlighted the importance of RTI  of a voter about candidates, whether it can be extended to political parties and if yes, whether it is essential information for exercising choice on voting. The Constitution of India did not make a reference to political parties when it was adopted. However, 52^nd amendment made reference to political parties for purposes of anti-defection practice. (¶ 80)

The ECI notified the Election Symbols (Reservation and Allotment) Order 1968 in exercise of the powers conferred by Article 344 of the Constitution read with Section 29A of the RPA and Rules 596 and 1097 of the Conduct of Election Rules 1961. In terms of the provisions of the Symbols Order, the ECI shall allot a symbol to every candidate contesting the election. The Symbols Order classifies political parties into recognised political parties and unrecognised political parties. The symbols order creates a demarcation between candidates set up by political parties and candidates contesting individually. The purpose of allotting symbols to political parties is to aid voters in identifying and remembering the political party.

In India, voters majorly depend on symbols and the struggle is for the parties which do not have a permanent symbol. It was highlighted by Gayatri Devi, the third Maharani consort of Jaipur who was later set up as a candidate by the Swantantra Party, recalls in her Autobiography that her team spent hours trying to persuade the voters that they had to vote for the Symbol Star (which was the symbol of the Swatantra Party) and not a symbol showing a horse and a rider because she also rode a horse (¶86):

“Since most of India is illiterate, at the polls people vote according to a visual symbol of their party. […] The Swatantra Party had a star. Baby, all my other helpers and I spent endless frustrating hours trying to instruct the women about voting for the star. On the ballot sheet, we said, over and over again, this is where the Maharani’s name will appear and next to it will be a star. But it was not as simple as that. They noticed a symbol showing a horse and a rider, agree with each other that the Maharani rides so that must be her symbol. Repeatedly we said, “No, no, that’s not the right one.” Then they caught sight of the emblem of a flower. Ah, the flower of Jaipur – who else could it mean but the Maharani? “No, no, no, not the flower.” All right, the star. Yes, that seems appropriate for the Maharani, but look, here is the sun. If the Maharani is a star, then the sun must certainly mean the Maharaja. We’ll vote for both. Immediately the vote would have been invalidated. Even up to the final day, Baby and I were far from sure that we had managed to get our point across.”

Gayatri Devi

The Supreme Court concluded that a political party is a relevant political unit in the democratic electoral process for three reasons. First, the symbols of political party as essential tool for voters association, second, the form of government where the executive is chosen from the legislature based on political party and third the prominence of tenth schedule of the Constitution.

iv. Essentiality of information of political funding for effective exercise of choice of voting

The Constitution guarantees political equality by focusing on the ‘elector’ and the ‘elected’. These two constitutional precepts foster political equality in the following two ways. First, the Constitution mandates that the value of each vote is equal. This guarantee ensures formal political equality where every person’s vote is accorded equal weightage. Second, the Constitution ensures that members of socially marginalized groups are not excluded from the political process. This guarantee ensures (a) equality in representation; and (b) equality in influence over political decisions. (¶ 98)

However, the court finds that there is political inequality because of economic inequality. It is highlighted that there is no legal regime in India to distinguish between campaign funding and electoral funding. Political parties use the money to build offices of political party and pay party workers. Similarly, the window of donation is open throughout the year and that money can used for reason other than just election campaigning. Further, there is legitimate possibility of quid pro quo arrangement because of close nexus between money and politics. (¶ 100)

The court finds that there is only de jure anonymity and not de facto anonymity. The scheme is not fool-proof. The contributor could physically hand over the electoral bond to an office bearer of the political party. Further, 94% of the contributions through electoral bonds has been made in the denomination of one crore. Therefore, electoral bonds provide economically resourced contributors who already have a seat at the table selective anonymity vis-à-vis the public and not the political party. Hence, the EBS and impugned provision is infringes RTI and is violative of Art. 19 (1)(a). (¶ 104).

v. Whether the infringement is justified

The court referred to the proportionality standard to determine if the violation of fundamental right is justified.

1. The measure restricting a right must have a legitimate goal (legitimate goal stage);
2. The measure must be a suitable means for furthering the goal (suitability or rational connection stage);
3. The measure must be least restrictive and equally effective (necessity stage); and
4. The measure must not have a disproportionate impact on the right holder (balancing stage).

Mr. Arun Jaitely, the then Finance Minister highlighted that the objective of the EBS is to incentivize donation to political party through banking channel and curb the issue of black money. However, the petitioner argued that purpose is not justified under Article 19(2). In Express Newspapers v. UOI and Kaushal Kishor v. State of UP, the Supreme Court held in both the cases that grounds of restriction is unconstitutional unless the purpose fall “squarely within the provision of Article 19(2).  (¶ 111)

The court after referring to multiple judgment came to conclusion that the grounds are not traceable in Article 19 (2). Then court applied the proportionality standard, the court assumed that curbing black money is legitimate purpose. The second prong of the proportionality analysis requires the state to assess whether the means used are rationally connected to purpose. The respondents have highlighted that during the financial year 2016-17, 81% of the contributions were received by political parties through voluntary contributions.

However, It improved after the introduction of EBS, about 47% contribution were through it which was regulated money. The UOI submitted that providing anonymity to the contributor incentivizes them to donate through banking channel. The court accepted this hypothesis that non-disclosure of information about political expenditure has a rational nexus with the goal that is curbing black money.

Then, moving to the third prong of proportionality standard is the least restrictive means stage. The court stated that this is not the least restrictive means. (¶129). The court held that there are other means that are least restrictive such as electoral trust and contributions through other electronic mediums. (¶ 130)

vi. Donor’s privacy

The court cited 9 bench judgment in KS Puttaswamy which held the constitutional guarantee or right to privacy. The content of privacy is not limited to “private” actions and decisions such as the choice of a life partner, procreation and sexuality. Neither is privacy merely defined from the point of direct State intrusion. (¶ 133) Information about political affiliation could be used to engage in gerrymandering, the practice by which constituencies are delimited based on the electoral preference of the voters. (¶ 137) The court concluded that the Constitution guarantees a right to informational privacy of political affiliation. privacy (including informational privacy) is extendable to thoughts, beliefs, and opinions formed for the exercise of speech and action. Thus,

informational privacy would extend to financial contributions to political parties even if contributions are not traceable to Article 19(1)(a) provided that the information on political contributions indicates the political affiliation of the contributor. (¶ 141) The financial contributions to political parties are usually made for two reasons. First, to express support and second, the contribution may be based on quid pro quo. The huge political contributions made by corporations and companies should not be allowed to conceal the reason for financial contributions made by another section of the population.

vii. Privacy vis-à-vis political party

The contributions through EBS were made private to the political parties to whom contributions are being made. This is done so to prevent coercive donations. The court did not find any reason for such non-disclosure as it already highlighted the de jure and de facto confidentiality, they find the argument of privacy from political party erroneous. (¶144)

viii. Balancing the RTI and Right to Informational privacy

The court referred Subramanian Swamy v. UOI, Sec. 499 and 500 were challenged, issue of conflict between right to speech and expression under Article 19(1)(a) and the right to reputation under Article 21. The court in this case held the right to speech does not include the right to defame a person. (¶ 147)

In Asha Ranjan v. State of Bihar, this court held that when there is a conflict between two individuals with respect to their right under Article 21, the facts and circumstances must be weighed “on the scale of constitutional norms and sensibility and larger public interest.”

In PUCL (supra), one of the issues before this Court was whether the disclosure of the assets of the candidates contesting the elections in furtherance of the right to information of the voters violates the right to privacy of candidates. Justice Reddi authoring the concurring opinion observed that the right to information of the assets of candidates contesting elections trumps the right to privacy because the former serves a larger public interest. (¶ 148)

In Mazdoor Kisan Shakti Sangathan v. UOI, there was conflict between right to protest under Art. 19(1) (a) and 19(1)(b) and right to peaceful residence under Art. 21. The court stated that right to protest could be balance with right to peaceful residence if adequate safeguards such as earmarking specific areas of protest, placing restrictions on the use of loudspeakers and on parking of vehicles around residential places. In this case, the court applied least restrictive prong and it is one of the signifier of gradual shift from the pre-proportionality phase to proportionality stage. (¶149)

ix. The double proportionality standard taken by SC

In Campbell v. MGM Limited, there was conflict between two fundamental rights. Baroness Hale adopted double proportionality standard to adequately balance the right to privacy of claimant and right to free press. The issue was the news paper published the claimant (a public figure) efforts to overcome drug addiction. The UK court stated the following (¶ 154):

“141. […] This involved looking first at the comparative importance of the actual rights being claimed in the individual case; then at the justifications for interfering with or restricting each of those rights; and applying the proportionality test to each.”

The Supreme Court applied this standard in CPIO, SC v. Subhash Chandra Agarwal, the court while balancing between two fundamental rights must identify the precise interests weighing in favour of both disclosure and privacy and not mere undertake a doctrinal analysis to determine if one of the fundamental rights take precedence over the other (¶ 155):

“113. Take the example of where an information applicant sought the disclosure of how many leaves were taken by a public employee and the reasons for such leave. The need to ensure accountability of public employees is of clear public interest in favour of disclosure. The reasons for the leave may also include medical information with respect to the public employee, creating a clear privacy interest in favour of nondisclosure. It is insufficient to state that the privacy interest in medical records is extremely high and therefore the outcome should be blanket non-disclosure. The principle of proportionality may necessitate that the number of and reasons for the leaves be disclosed and the medical reasons for the leave be omitted. This would ensure that the interest in accountability is only abridged to the extent necessary to protect the legitimate aim of the privacy of the public employee.”

The Court stated following standard to be followed while balancing two rights in conflict:

1. Does the Constitution create a hierarchy between the rights in conflict?

If yes, then the right which has been granted a higher status will prevail over the other right involved. If not, the following standard must be employed from the perspective of both the rights where rights A and B are in conflict;

• Whether the measure is suitable means for furthering right A and right B;
• Whether the measure is least restrictive and equally effective to realise right A and right B; and
• Whether the measure has a disproportionate impact on right A and right B.

x. The validity of EBS, S. 11, 157 of Finance Act and sec. 154 of Finance Act amending Sec. 182 (3)

Sec. 11 of finance Act provides that there is no need to maintain a record of any contribution received through electoral bonds. Sec. 29C of RPA was amended by which a political party is now not required to include contributions received by electoral bonds in its report. The court applied the above stated double proportionality standard to state that both these amendments in RPA and IT Act are unconstitutional. (¶ 169)

Sec. 182 (3) of the Companies Act becomes otiose in term of our holding in the preceding section that the EBS and relevant amendments to the RPA and the IT Act mandating non-disclosure of particulars on political contributions through electoral bond is unconstitutional. So, sec. 182(3) is also declared unconstitutional. (¶ 174)

V. Challenge to unlimited Corporate Funding

The 7.5% cap provided under s. 293A was to prevent corruption. In 1963, the report of the Santhanam Committee on prevention of Corruption highlighted the prevalence of corruption at high political levels due to unregulated collection of funds and electioneering by political parties. It was argued by the petitioner that sec. 154 of Finance Act prescribing unlimited fund transfer and donation by loss making company is manifestly arbitrary. The UOI argued that it was done to avoid formation of shell companies.

The court checked the validity of this provision applying the twin test of Article 14 laid in State of WB v. Anwar Ali Sarkar, intelligible differentia and rational nexus. This court followed this traditional approach to test the constitutionality of legislation on the touchstone of Art. 14. In E P Royappa v. State of Tamil Nadu, this Court expanded the ambit of Article 14 by laying down non-arbitrariness as a limiting principle in the context of executive actions.

In Shayara Bano v. Union of India, a Constitution Bench of this Court set aside the practice of Talaq-e-Bidaat (Triple Talaq). Section 2 of the Muslim Personal Law (Shariat) Act 1937 was also impugned before this Court. The provision provides that the personal law of the Muslims, that is Shariat, will be applicable in matters relating to marriage, dissolution of marriage and talaq. Justice R F Nariman, speaking for the majority, held that Triple Talaq is manifestly arbitrary because it allows a Muslim man to capriciously and whimsically break a marital tie without any attempt at reconciliation to save it.

The Law Commission of India in its 170th Report also observed that “most business houses already know where their interest lies and they make their contributions accordingly to that political party which is likely to advance their interest more.” This issue becomes particularly problematic when we look at the avenues through which political parties accumulate their capital. (¶ 200)

The reason of corporate donation is as clear as light, it is to receive favourable results and it is also not denied by learned Solicitor General. In Kuldip Nayar v. UOI and PUCL v. UOI, the court held that free and fair election are important facets of democracy. The 7.5% limit was giving rise to shell companies as accepted by learned Solicitor General in his submission. (¶ 205) The condition of 7.5% of profit in three preceding financial year is to avoid loss making company and shell to contribute in political parties. The court find there is no justification for removing the cap on contributions which was included for the very same purpose. (¶ 207)

The court observed that the company has ability to influence the electoral process through political contributions is much higher when compared to that of an individual. When a loss-making company is donating, it is sure that they expect return in form of quid pro quo is way higher. Therefore, it was held that the amendment to the Section 182 is manifestly arbitrary for (a) treating political contributions by companies and individuals alike; (b) permitting the unregulated influence of companies in the governance and political process violating the principle of free and fair elections; and (c) treating contributions made by profit-making and loss-making companies to political parties alike. (¶ 215)

VI. Conclusion and Directions

In view of the discussion above, the following are our conclusions(¶ 216):

1. The Electoral Bond Scheme, the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional; and
2. The deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14.

In view of our discussion above, the following directions are issued:

1. The issuing bank shall herewith stop the issuance of Electoral Bonds;
2. SBI shall submit details of the Electoral Bonds purchased since the interim order of this Court dated 12 April 2019 till date to the ECI. The details shall include the date of purchase of each Electoral Bond, the name of the purchaser of the bond and the denomination of the Electoral Bond purchased;
3. SBI shall submit the details of political parties which have receive contributions through Electoral Bonds since the interim order of this Court dated 12 April 2019 till date to the ECI. SBI must disclose details of each Electoral Bond encashed by political parties which shall include the date of encashment and the denomination of the Electoral Bond;
4. SBI shall submit the above information to the ECI within three weeks from the date of this judgment, that is, by 6 March 2024;
5. The ECI shall publish the information shared by the SBI on its official website within one week of the receipt of the information, that is, by 13 March 2024; and
6. Electoral Bonds which are within the validity period of fifteen days but that which have not been encashed by the political party yet shall be returned by the political party or the purchaser depending on who is in possession of the bond to the issuing bank. The issuing bank, upon the return of the valid bond, shall refund the amount to the purchaser’s account.

Therefore, EBS was declared unconstitutional by unanimous decision. The CJI DY Chandrachud and J. Sanjiv Khanna reached same judgment with different methods. So, both have written their separate judgments to held EBS unconstitutional.

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