Electoral Bond Scheme and its Distortions
Before proceeding with the analysis of the judgment within the above framework, it becomes imperative to analyze the specific distortions caused by the Electoral Bond Scheme to better contextualize the judgment.
The Electoral Bond Scheme was provided for by the Finance Act of 2017, which introduced an interest-free banking instrument (Bearer Bonds) that any company or individual can buy. They were to be introduced by any authorized branch of the SBI and could be used to make donations to Political Parties. The govt claimed that the said bond was to be purchased through regular banking channels, which mandated requirements of certain disclosures like KYC to the Banks (here SBI), thereby safeguarding political funding from the inflow of Black money.
The devil, however, lay in the details, the scheme’s particular distortions of the political process becoming manifest when seen in the context of other changes it made to political funding for political funding. The Finance Act of 2017, apart from introducing the Electoral Bond framework, made two more important changes –
1. It amended the proviso to Sec 182(1) to the Companies Act to remove any cap on corporate funding for political parties while also amending Sec 182(3) to only require disclosure of the totality of the amount contributed to political parties in a financial year by corporates and not the particulars of the amount contributed.
2. It amended Sec 13A of the Income Tax Act and introduced Sec 29C of the Representatives of People Act to remove any requirements upon political parties to maintain a record of contributions received by electoral bonds for Income Tax relief or otherwise.
As the majority judgment aptly recognized, the scheme’s net effect was then on both essentials of a representative political process –
Distorting Association of Interests –
The net effects of the scheme were not just to introduce a new banking system of political funding but also to cloak this scheme in a shroud of secrecy while allowing vested corporate interests unlimited access to political space through large anonymized donations.
This meant disproportionate access to political processes for large corporations at the expense of the common man, which would invariably translate into policies that attend to the needs of the few above the many, especially in an era where India has seen exacerbating inequalities in its growth model.
Blocking the chain of accountability –
The disclosure requirements upon political funding as a pre-condition for Income Tax relief were introduced to deal with the very menace of Black Money infiltrating into the political system and bring in accountability by providing citizens a right to know about whose interests their representatives are beholden to. The scheme here reneges on both aspects; by making such disclosures not mandatory, it not only blocks any accountability for political parties over their funding, but it also allows for black money to flow into the system through regular banking channels, i.e., allows for the conversion of black money into white.
As I show in the next section, at the heart of the majority judgment were these particular distortions of the political process, which it sought to invalidate by invalidating the scheme altogether.
A representation-reinforced assessment
This section analyses the judgment on the whole, which placed the idea of representative Democracy and open political processes (herein in specific electoral processes) at its core.
The majority judgment displayed this particular concern even in its dismissal of the Union’s preliminary objection to the court’s scope of intervention. In responding to the Union’s argument that the Electoral Bond Scheme was an economic policy and thereby deserved a lower scope of review and wide latitude for the govt, the opinion emphasized that while the scheme was brought about by a Finance Act and introduced a system of bared of bonds, but any resemblance to an economic policy ended there.
The amendments in question can be clubbed into two heads: first, provisions mandating non-disclosure of information on electoral financing, and second, provisions permitting unlimited corporate funding to political parties. Both these amendments relate centrally to the electoral process, demanding an active intervention by the court.
Non-Disclosure – keeping open channels of political change
Central to the majority judgment’s analysis of the electoral bond’s promise of anonymizing donor identity was a concern for effective participation in the electoral process and, consequently, of a truly representative democracy.
It traced the essence of previous judgments of Union of India v Association of Democratic Reforms (hereinafter ‘ADR’) and PUCL v Union of India (hereinafter ‘PUCL’) on the Right to Information about political representatives to two distinct functions –
- Right to form an opinion about the candidate
- Right to make an informed choice in the elections.
Disclosure of essential information like criminal cases, assets, and liabilities of candidates, amongst others, was then essential to exercise the franchise and to ensure continued accountability at the ballot as opposed to entrenching the political authority in power.
Once the centrality of these dual functions was established to be an effective exercise of the franchise of citizens, the majority opinion simply extended this framework even to the working of political parties. To draw the necessary parallel, the court draws on two fundamental questions –
1. Could the said right to information about candidates be extended to political parties?
While the opinion recognized that the Constitution in itself never explicitly referred to the political parties as a relevant political unit, it relied on recent scholarship to argue that “Political Parties” have formed a relevant political unit in the democratic process for three following reasons –
a. Because symbols play such an important role in the election process, voters tend to identify voting with political parties.
b. The system of governance in which the political party or coalition of political parties with the majority votes selects the executive branch from the legislature;
c. The importance placed on political parties by the Constitution’s Tenth Schedule.
Thus, the observations of this Court in PUCL and ADR on the right to information about a candidate contesting elections were also applicable to political parties.
2. Is the disclosure of electoral bonds essential for the functions envisaged?
The opinion aptly recognized that there existed an inseparable link between money and electoral politics in India, which then translated into govt policy. A link that was further solidified by the Electoral Bond Scheme, which even at the outset didn’t mandate their use to campaign use only and thereby could be used for other purposes like Horse-Trading or corruption.
The Union, in its arguments, contended that this could not be because the bonds were issued anonymously. However, the court negatived this by arguing that de jure anonymity isn’t the same as de facto anonymity. The contributor could physically hand over the electoral bond to an office bearer of the political party or to the legislator belonging to the political party, or it could have been sent to the office of the political party with the name of the contributor or the contributor could after depositing the electoral bond disclose the particulars of the contribution to a member of the political party for them to cross-verify, opening up the possibility of existence of a quid pro quo which was substantiated by subsequent disclosures made after the court’s order. The quid pro quo is evidenced by the disproportionately high amount of donations received by political parties by certain corporations. The clandestine reciprocity of favors took place in form of relaxations granted in ED investigations and taxation defaults.
Thus, on the whole, the court framed the Non-disclosure of Electoral Bonds as a possible blockage in the political process, which restricted the effective enjoyment of the franchise of voters and possible distortion of representative democracies, which was violated by the scheme and was thus held to violative of Article 19(1)(a).
Unlimited Donations – Distorting Association of Interests
Central to the Majority Opinion’s analysis of the proviso providing for unlimited corporate donation was a concern for the little man of politics, i.e., the common man.
The petitioner challenged the deletion of the proviso, which deleted a cap on political donations by companies and deleted the proviso that prohibited non-profit making companies from making donations. They argued that this was manifestly arbitrary as it removed the distinction between a profit-making and loss-making company and provided for the creation of shell companies.
The opinion, while agreeing with the petitioner’s submission, demonstrated its commitment to preventing distortions of the political process for two distinct reasons –
1. Removal of restrictions on loss-making companies opens up the possibility of interference with free and fair elections, as there is a high reasonable chance that they will influence the political process to favour themselves.
2. Removing the cap on donations equated individuals and companies with substantial differences in their financial capacity, thus reducing the value of their vote and harming the principle of one man, one vote.
In effect, this leads to creation of a political minority as conceptualized by Ely, such minority would face de jure ostracization from political participation by virtue of not being in cahoots with the incumbent class, ‘association of interest’ thus remains absent and interests of demos is conveniently translated into interests of corporate aristocracy symbiotically catering to the interests of class of political elites. Representative Democracy demands equal concern and respect for all varied perspectives, and privileging the views of few (herein the corporate donors) is a deliberate distortion of the political process which must be removed through the court’s intervention.
Conclusion
One of the primary criticisms of Ely’s process-oriented approach is its exclusive focus on the American Constitution as a framework for its analysis. However, the primary advantages of such a process-oriented approach, which envisages judicial review as not an imposition or reinforcement of substantive values of a community (which invariably vary across countries) but rather as an exercise in providing for adequate representation to different communities (which is a universal precept of a liberal democratic framework) is the comparative framework it provides to analyze different jurisdictions.
It becomes imperative herein to contrast the Indian Supreme Court’s response to such political distortions with that of the SCOTUS. In Citizens United v Federal Election Commission, the SCOTUS, by a 5-4 majority, laid the groundwork for corporations and other large financiers to spend unlimited money on elections by classifying it as a form of protected speech under the First Amendment. This inevitably led to the creation of Super-PACs and the flow of dark money into the election process, undermining the electoral value of the common man and reinforcing racial biases inherent in Big-money to flow into political policies.
The Indian Supreme Court’s response to the Electoral Bond scheme thus demonstrates an exercise in safeguarding political processes from vested interests and affirms the representative precepts of constitutional democratic systems.
Prabhash is a fourth-year B.A.LL.B. student at NALSAR University of Law. His interest areas include constitutional law, public policy, and political science. Praseem is also a fourth-year B.A. LL.B. student at NALSAR University of Law. His areas of interest include human rights and general corporate and commercial laws.
[Ed. Note: Edited by Jeetendra Vishwakarma and published by Baibhav Mishra from the Student Editorial Team]
