Association for Democratic Reforms & Anr.  [Petitioners] Vs.  Union of India & Ors.  [Respondents]

(Writ Petition No. 880 of 2017)

(5JB, DY Chandrachud, Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra JJ., delivered by DY Chandrachud CJI)

Facts: The petitioners have instituted proceedings under Article 32 of the Constitution challenging the constitutional validity of the Electoral Bond Scheme which introduced anonymous financial contributions to political parties. The petitioners have also challenged the provisions of the Finance Act 2017 which, among other things, amended the provisions of the Reserve Bank of India Act 1934, the Representation of the People Act 1951, the Income Tax Act 1961, and the Companies Act 2013.

Issues:

1. 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?
2. 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?

Arguments on behalf of counsel for petitioners: Mr Prashant Bhushan

Mr Prashant Bhushan, learned counsel made the following submissions:

1. There is no rational basis for the introduction of electoral bonds. The main objective of introducing the Electoral Bond Scheme as reflected in the article written by the then Finance Minister, Mr. Arun Jaitley was that it would enhance transparency in electoral funding since electoral bond transactions can only be made through legitimate banking channels. However, cash donations are still permitted even after the introduction of the Electoral Bond Scheme;
2. The Central Government ignored the objections which were raised by both the RBI and the ECI to the Electoral Bond Scheme;
3. The statutory amendments and the Electoral Bond Scheme which mandates non-disclosure of information of electoral funding are unconstitutional because they violate Article 21 because the non-disclosure of information of political contributions promotes corruption and quid pro quo arrangements.
4. They violate the rights of shareholders of Companies who are donating money to political parties by preventing disclosure of information to them;
5. The statutory amendments and the Electoral Bond Scheme subvert democracy and interfere with free and fair elections because the huge difference in the funds received by ruling parties in the States and Centre vitiates a level playing field between different parties and between parties and independent candidates.

Arguments on behalf of counsel for respondents:

1. Political parties are an integral product of a free and open society and play an important role in the administration of the affairs of the community. Accordingly, they are entitled to receive all support, including financial contributions;
2. The Electoral Bond Scheme allows any person to transfer funds to political parties of their choice through legitimate banking channels instead of other unregulated ways such as direct transfer through cash;
3. The Scheme ensures confidentiality of the contributions made to political parties. The benefit of confidentiality to contributors ensures and promotes contribution of clean money to political parties; d. Citizens do not have a general right to know regarding the funding of political parties. Right to know is not a general right available to citizens;
4. This Court has evolved the right to know for the specific purpose of enabling and furthering the voter’s choice of electing candidates free from blemish; and
5. 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.

Held: The court disposed off the writ petitions and, held:

With respect to the first issue that, “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.”

With respect to the second issue that, “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.”