In deciding the ‘Electoral Bonds Scheme’ case (EBS), the Supreme Court (SC) was faced with the task of balancing two constitutional rights. The first being the voters’ right to know about the political funding and the second being the donors’ right to privacy, under which fall confidentiality and anonymity.

The petitioners argued that the EBS introduced several harmful alterations to the legal regime for political funding. These included the (i) elimination of transparency and disclosure requirements, especially for companies, (ii) removing the cap on corporate political donations and (iii) delinking the tax exemptions granted for political funding. They felt the EBS impeded free and fair elections, which were held by the Supreme Court in Kihoto Hollohan vs Zachillhu, to be a basic feature of the Constitution.

Further, the non-disclosure of vital information pertaining to political funding, as per the petitioners, also left the door open to quid pro quo donations, which hampered the policy formation in favour of those who donated heavily to the ruling party.

The petitioners also argued that funding a political party could never further the objectives of a company. Further, a company doesn’t have rights under Article 19 of the Constitution as held by the SC in State Trading Corporation of India vs Commercial Tax Officer.

However, as per the petitioners, EBS had the effect of equating companies with the citizens of India, permitting them to interfere and influence the electoral process. This was diametrically opposite to the legal regime, which historically either barred companies from making political donations or had a tight threshold on corporate contributions.

Lastly, the petitioners contended that information about a political party’s source of funding is an invaluable aid for a voter to make an informed choice, and shielding such sensitive information violates Article 19(1)(a) of the Constitution.

Delicate balance

The Union of India, on the other hand, argued that EBS was introduced with the object of incentivising the use of clean money through official banking channel while maintaining the confidentiality of their names. Until the introduction of EBS, an entirely parallel economy based on black money had arisen, which was being used to make donations to political parties in a wholly opaque manner. EBS was, therefore, a policy which sought to shift the political funding ecosystem from a cash-driven, unregulated system to a digital and regulated one. Thus, the Union argued that EBS was implemented in the legitimate interest of the state in terms of the landmark decision in KS Puttaswamy vs Union of India.

On confidentiality, the Union argued that the non-disclosure of donor details was to prevent the donors from being victimised for supporting a political party. Thus, the right of a citizen to know had to be balanced against the right of people to maintain privacy of their political affiliations. The conflict between the balance of transparency and confidentiality, as per the Union, was very delicate and discussed by the Supreme Court in Supreme Court Advocates-on-Record Assn vs Union of India.

The Union also suggested that in terms of the EBS, even the incumbent government was not entitled to know whether a particular electoral bond purchaser bought bonds to donate to them or the opposition parties. This, in view of the Union, created a true level-playing field and did not prejudice anyone.

Lastly, as per the Union, it was not as if the confidentiality requirements were entirely impassable. The information regarding political funding could be disclosed if demanded by a law enforcement agency or a Court. Further, if any quid pro quo took place, the same would be treated as a criminal offence, in which case, the beneficiaries would not go unpunished.

A question of integrity

The SC extensively examined the legal position of the right to information of a person. It held that there were settled proportionality standards to determine if the violation of the right to information (being a fundamental right) was justified. The proportionality standards included cases where (i) there exists a legitimate object, (ii) the measures adopted are in furtherance of such legitimate object (iii) the measures adopted are the least restrictive yet effective way of achieving the legitimate object and (iv) the measures adopted do not have a disproportionate impact of the right to seek information.

The SC observed that the right to information under Article 19(1)(a) could only be curtailed based on the grounds stipulated in Article 19(2). As far as the purpose of curbing black money is concerned, the SC opined that the same did not fall under the grounds stipulated in Article 19(2).

On donor privacy, the Court observed that the Puttaswamy judgment covered the right to informational privacy of political affiliation. Applying the proportionality standards, the Court observed that the right to privacy did not extend to those donations which were made with the intent of influencing policies.

Moreover, the Court did not find any basis for having no-cap for corporations to make contributions regardless of their profitability.

Therefore, EBS was held to be unconstitutional for completely tilting the balance in favour of the donor’s privacy and failing to appeal to reason and rationality.

This is a watershed ruling recognised the importance of donor privacy, but observed that the opacity was deemed disproportionately restrictive and arbitrary towards the citizens’ right to information.