Holding the electoral bonds scheme as violative of Article 19(1)(a) of the Constitution of India, a five-judge Constitution bench of the Supreme Court led by Chief Justice of India DY Chandrachud on Thursday struck down the scheme and all related amendments to separate laws as unconstitutional.
The court held that the amendment to Section 182 of the Companies Act that allowed blanket corporate political funding was unconstitutional as it violated the citizens’ right to information about a possible quid pro quo. A company has a graver influence on the political process than contributions by individuals, it said, adding that contributions by companies are purely business transactions. “Amendment to Section 182 Companies Act is manifestly arbitrary for treating companies and individuals alike,” the court noted.
The court further observed that the Companies Act restricted loss-making companies from contributing through electoral bonds prior to the amendment. “The amendment does not recognise the harm of allowing loss-making companies to contribute due to quid pro quo. The amendment to Section 182 of the Companies Act is manifestly arbitrary for not making a distincition between loss-making and profit-making companies,” the court said.
The court also held that the Centre had failed to establish that the measure adopted in clause 7(4)(1) of the electoral scheme is the least restrictive measure.
“Amendments to Income Tax Act provision and the Section 29C of the Representation of Peoples Act are declared to be ultra vires,” the court ruled.
Observing that the electoral bonds scheme must be scrapped, the court further the State Bank of India to furnish all details of electoral bonds and the political parties that encashed it to the Election Commission of India. The court also directed the EC to publish the data provided by the state-run lender by March 13, 2024, and also directed issuing banks to stop any further issue of the bonds with immediate effect.