By Sumant Batra
Last week, in a landmark verdict, the Supreme Court struck down the government’s electoral bond scheme as unconstitutional, reviving the decades-old debate on political funding in the general election year. Notified in January 2018 via a money bill, the scheme allowed the purchase of bonds by natural and legal persons which could be encashed only by eligible political parties. A person could purchase limitless bonds of infinite amounts, removing the 7.5% cap on corporate donations. The details of the buyer were to be kept confidential. The bond was exempted from income tax.
Simply stated, the scheme allowed unlimited funding by corporates to political parties without disclosing the donor. Both the Reserve Bank of India and the Election Commission had expressed reservations on the various features of the scheme. Democracy watchdogs challenged the scheme in court, alleging that it violated the right to information of citizens, and was contrary to the principle of free and fair elections. An affluent person could make financial contributions to political parties with a legitimate possibility of quid pro quo arrangements, the petitions said.
The government justified the scheme, stating it provided the shift from the cash-driven, unregulated, and unaccounted regime of political donations to a regulated, digital, and legal political donation framework. It also served a specific object of curbing black money. The right of a citizen to know how political parties are being funded must be balanced against the right of a person to maintain privacy of their political affiliations, the government pleaded. It implored that the scheme was an economic reform and urged the court to refrain from judicial review of an economic policy.
Noting that the government had itself classified the scheme as an “electoral reform”, the Court held that the amendments introduced to make way for the scheme relate to the electoral process and the scheme cannot be tested on the parameters applicable to economic policy. It would thus be subject to judicial scrutiny. The Court has held that the scheme infringes upon the right to information of the voter by anonymising contributions through electoral bonds.
Recognising the nexus between the right of citizens and open governance, the judgment holds that effective participation in democratic governance is not just a means to an end but is an end in itself. The citizens have a duty to hold the government of the day accountable for their actions and inactions, and they can effectively fulfill this duty only if the government is not clothed in secrecy. The freedom of speech and expression includes the right to acquire information which would enable people to debate on social, moral, and political issues. These debates would foster the spirit of representative democracy.
Regarding black money, the judgment states that the scheme is not the only means for curbing black money in electoral finance; there are other alternatives which substantially do so while not impacting the right to information. Stating that at a primary level, political contributions give a “seat at the table” to the contributor, which can translate into influence over policy-making, the judgment notes there is a legitimate possibility that financial contribution by an affluent person to a political party would lead to quid pro quo arrangements in the form of introducing a policy change or license granting.
The scheme is not fool-proof and gaps enable political parties to find the particulars of the contributions made to them. Thus, de jure anonymity of the contributors does not translate to de facto anonymity. Notably, the judgment does not cite any instance of such political contributions possibly influencing a policy change or extracting a political favour in the last six years.
Having struck down the scheme, the Court directed the Election Commission to disclose the full particulars of the donor and the amount donated to the particular political party through bonds. The decision has renewed the debate on the complex and controversial subject of political funding. India is the largest democracy in the world. Finance is a necessary component of the democratic processes. The conventional system of political funding has been to rely on donations and incur expenditures in cash. The scheme was a substantial improvement from a non-transparent to a partially transparent system, albeit with fatal legal flaws.
The decision provides a fresh opportunity to the government to go back to the drawing board and reimagine the framework on financing democracy. The judgment itself offers many cues. It neither holds that corporate donations should be prohibited nor does it suggest a cap on the quantum of donations. It has only removed the anonymity of the electoral bond scheme. The decision recognises that private funding is a fundamental right of citizens. The decision also concedes that money is a necessary component of the overall vibrancy of the political sphere. In his separate reasoning, Justice Sanjeev Khanna has suggested that the Electoral Trust Scheme introduced in 2013 best realises the objective of the government in a real and substantial manner without significantly impacting the fundamental right of the voter to know.
The new framework should aim to strengthen the cleansing of political funding in India while enabling information to citizens, and perhaps, regulation on end-use if the income of the political parties is exempted from income tax, with codes of conduct and conflicts of interest rules to foster a wider culture of integrity.
The author is a policy expert and Advocate, Supreme Court of India.
Views are personal.