Why Did The Supreme Court Rule Against Electoral Bonds Scheme? Key Points Explained

In a landmark decision, the Supreme Court on Thursday has struck down the electoral bond scheme, ruling it as unconstitutional. The apex court's ruling, delivered by Chief Justice DY Chandrachud with a concurring opinion from Justice Khanna, highlighted concerns regarding the scheme's lack of transparency and its potential to undermine the principles of free and fair elections.

While the apex court reached a unanimous decision, with Chief Justice DY Chandrachud delivering the primary judgment, Justice Khanna offered a concurring opinion with slightly different reasoning. Both judgments addressed two key questions:

• whether the non-disclosure of information on voluntary contributions to political parties under the electoral bond scheme and the amendments to various acts are violative of the right to information under Article 19(1)(a) of the Constitution,
• whether unlimited corporate funding to political parties as permitted by the amendment to the Companies Act violates the principles of free and fair elections.

The Court's Reasoning:

Anonymous donations violate Right to Information: Chief Justice D.Y. Chandrachud, delivering the verdict, held that the lack of transparency regarding donors infringes on the right to information. While protecting financial information related to political affiliation holds merit, the court argued that the electoral bond scheme failed to strike a proper balance. The "restrictive means test" wasn't met - meaning alternate methods to curb black money without anonymity exist.

No Justification for Secrecy: The court also dismissed the government's claim that "Clause 7(4)(c)" of the scheme balanced secrecy with information access. They believed the clause heavily favored confidentiality, with the "suitability prong" of the proportionality standard only partially fulfilled. Additionally, the argument that "Clause 7(4)(1)" was the least restrictive measure to achieve anonymity wasn't adequately demonstrated by the government.

Corporate Funding Raises Red Flags: CJI also expressed concerns about the amended Companies Act allowing unlimited corporate donations. He argued that such provisions raise concerns about undue influence on political parties and can potentially skew the playing field, undermining the principle of free and fair elections.

What are electoral bonds?

Electoral bonds are similar to promissory notes, payable to the bearer on demand and without interest. They allow Indian citizens or corporate entities to finance a political party, which can later redeem them.

The government introduced electoral bonds in 2018 to "cleanse the system of political funding in the country." They are meant to make political party funding more transparent, allowing donors to purchase bonds from authorized banks and redeem them through registered accounts within a specified time frame.