ASSOCIATION FOR DEMOCRATIC REFORMS AND ANOTHER V. UNION OF INDIA AND OTHERS BY - VAIBHAV NAGPAL, SHRAY CHIBBER, RIYA SOOD & RAHUL MARYA
ASSOCIATION FOR DEMOCRATIC REFORMS
AND ANOTHER V. UNION OF INDIA AND OTHERS
AUTHORED BY - VAIBHAV
NAGPAL,
SHRAY CHIBBER, RIYA SOOD
& RAHUL MARYA
1.
Introduction
Every democratic system
must be founded on the appropriate use of electoral aid. Transparent government
aid becomes even more important in the Republic of India, where elections are a
major democratic exercise worldwide. In the past, electoral investment has been
defrauded by insufficient transparency, corruption, and untraceable money. Over
the past interval, the legal system has played a key role in promoting
transparency in political resources, stressing the need for facts (RTI) as a
basic requirement under point 19(1)(a) of the Indian constitution.[1].
The establishment of the
Electoral Bond Scheme (EBS) in 2018, which was introduced through the Finance
Act, 2017, aimed at carrying out several of these transactions. It has been
designed to increase political investment by taking part in the management
system, reducing the reliance on cash contributions and reducing the risk of
untraceable funds used in political campaigns. However, the system has greatly
been affected by allowing anonymity of contributions, compromise openness, and,
perhaps, opportunities to organize quarrels.
In the present case, Association
for Democratic Reforms and Another v Union of India and Others[2]. The Supreme Court of India was charged with
examining the constitutionality of the EBS. The main concerns, such as the
breach of the basic conditions for information, the arbitrariness of the
scheme, and its influence on election democracy, are at stake.
The assessment
investigates the setting, the correct argument, the verdict, and the broad
consequences of the case. Furthermore, it provides a crucial assessment of its
strengths and weaknesses in a global situation.
2.
Historical Context of
Electoral Funding in India
2.1. Evolution of Political Funding Laws in India: Governance of Political
Funding in India has been going on for a very long time, together with several
legislations and forum interventions. The essential milestones include.
1.
Representation of The People Act, 1951 (RPA): It is necessary
to disclose contributions higher than a certain limit and control campaign
expenditures by campaign operatives[3].
2.
Income Tax Act, 1961: Political parties were exempted from
paying revenue tax on voluntary contributions as long as they kept records of
their contributions[4].
3.
Companies Act, 2013: Limited Corporate contributions to 7.5 %
of the average net profit of a company for the last three fiscal years[5].
4.
Finance Act, 2017: Introduced the Electoral Bond Scheme,
abolished the maximum corporate contribution limit, and different procedures
for unwrapping company contributions[6].
2.2. Judicial Precedents on Electoral Transparency:
In Union of
India v. Association for Democratic Reforms[7],
a landmark case. The Supreme Court of India has ensured that voters have the
opportunity to become acquainted with the background of the Candidate
contesting elections. The Court interpreted Article 19(1)(a) broadly Affirming
that the Right to Information is an essential Facet of Free Speech and
Expression.
People’s Union
for Civil Liberties (PUCL) v. Union of India[8],
The Court underlined the importance of Transparency during election procedures
to ensure society's confidence in a democratic system.
2.3.Introduction of the Electoral Bond Scheme (2018): The Electoral Bond Scheme
aims at –
1.
Reducing the influence of Black money on election financing.
2.
Facilitating immaculate and clear political contributions
through banking entities.
3.
Maintaining the identity of donors to avoid civic
retaliation.
However, the
scheme differs markedly from world-leading practices in that it allows donors
to remain completely anonymous, primarily due to concerns about possible misuse
of funds.
2.4.Criticisms of the Electoral Bond Scheme:
1.
Large corporate donations were permitted without revealing
the identities of the donors.
2.
The possibility of undisclosed policy favours in return for
financial contributions existed due to the anonymity of donors.
3.
The scheme did not have sufficient measures in place to
prevent misuse.
The
constitutional discussion in the ADR v. Union of India (2024) case is grounded
in the historical and legal background of electoral funding reforms.
3.
Facts of the Case
3.1.Petitioners: Association for Democratic Reforms (ADR): ADR, an NGO known for its
advocacy for electoral changes, submitted a petition to challenge the electoral
bond scheme because:
1.
The scheme infringed on voters' right to information as
stated in Article 19(1)(a).
2.
It violates the principle of free and fair elections set out
in Article 324 of the Constitution.
3.
It facilitated a quid pro quo agreement and increased the
power of corporate dominion in policymaking.
The ADR case
indicates externally that the scheme favoured a public party
disproportionately, given their control over the State Bank of India (SBI), the
sole authority empowered to issue the bonds in question and supervise the
electoral bonds.
3.2. Respondent: Union of India: The Union of India
defended the scheme by stating that:
1.
Electoral Bonds replaced unregulated cash donations with
traceable banking instruments.
2.
Anonymity was crucial to protect political donors from
backlash or intimidation.
3.
SBI's supervision and documentation provided adequate
measures to prevent misuse.
3.3. Key Provisions of the Electoral Bond Scheme:
1.
Electoral bonds could only be purchased through SBI.
2.
They came in denominations ranging from ?1,000 to ?1 Crore.
3.
Both individuals and corporations were allowed to buy bonds.
4.
Public parties receiving contributions through electoral
bonds were not necessary to reveal donors' identities.
In the present
situation, the main dispute arises from the chasm between donors' secrecy and
voters' willingness to be clear.
4.
Legal Questions Posed by
the Court:
The Supreme Court raised
the following constitutional queries:
·
Breach of Right to Information: Does the Electoral Bond
Scheme infringe on the right of voters to Information, which is an important
element under Article 19(1)(a)?
·
Evident Arbitrariness: Is the scheme arbitrary and in
violation of Article 14
·
Justification for Restrictions under Article 19(2): Can
maintaining donor anonymity be considered a reasonable restriction under
Article 19(2)
·
Impact on Electoral Democracy: Does the scheme, as described
in Article 324, jeopardize the morality of free and fair elections?
These queries formed the
legal foundation for the Court’s discussions.
5.
Points Presented by the
Petitioner
5.1. Assertion of Right to Information:
The applicant
claims that voters have a Fundamental right to know the identity of individuals
and entities funding the political parties. They referred to the case of India
v. ADR 2002, where the Supreme Court underlined the need for transparency in
the electoral process.
5.2. Manifest Arbitrariness: The petitioners claimed that
the scheme was arbitrary because it:
1.
Lacked safeguards to prevent misuse,
2.
Did not ensure accountability
3.
Disproportionately favoured ruling parties.
5.3.Undermining Electoral Democracy:
Relative
confidence in democratic operations is reduced by undisclosed contributions.
Anonymity fosters excessive corporate influence and distorts election results.
5.4. International Norms:
In order to
avoid the capture of directives and corruption, the petitioner provides a list
of the best practices in the world where clarity in government financing is
given priority.
6.
Arguments Presented by the
Respondent
In support of the
constitutionality of the Electoral Bond Scheme (EBS), the Union of India
provides a multi-sided argument based on policy objectives, legal reasoning,
and pragmatic considerations in support of the benefits of the scheme.
6.1. Reduction of Black Money in Politics:
The main
objective of the administration when implementing the electoral Bond Scheme
was, to eliminate the question of unaccounted cash support, which has been a
longstanding problem in Indian elections. The scheme ensures that electoral
bonds are compulsory to be bought through the State Bank of India and must be subject
to KYC (Know Your Customer) Compliance, ensuring that:
1.
Donor identity documents were recorded at the bank level,
reducing the influx of illegal funds.
2.
Public contributions were made using an evident fiscal
method, thereby reducing the reliance on cash exchanges.
It was
stressed that the system allowed funds to be diverted beyond the depositary
level even though the identity of the supporters was not disclosed to the
public.
6.2. Safeguarding Donor Confidentiality:
As a mandatory
reason to continue donor anonymity, the administration mentions the threat of
political persecution. Benefactors faced harassment, retaliation, or otherwise
financial repercussions if their political contributions were made public in a
politically divided atmosphere. Anonymity is an essential safety measure for
individuals and organizations to support public bodies without fear of
retaliation. To justify the guarantee, the Authority mentioned instances of
targeted harassment of promoters during previous election campaigns.
6.3. Oversight by the State Bank of India and Regulatory
Mechanisms:
The sole
responsibility for publishing and delivering electoral bonds was conferred upon
the pronouncement of the financial institution of the Republic of India, SBI.
The Government claimed that the current centralized framework ensures robust
supervision and accountability since:
1.
SBI meticulously recorded each transaction involving bond
purchases.
2.
Governing bodies, such as the Enforcement Directorate and the
Tax Departments, could continue to have access to such files in cases of
suspected misappropriation.
6.4. Proportionality and Reasonability:
According to
the respondent, the Electoral Bond Scheme complies with the Principle of Proportionality
established in the Modern Dental College and Research Centre v. State of Madhya
Pradesh (2016)[9].
That a restriction on necessary immunities should be considered justifiable,
providing:
1.
It serves a legitimate purpose.
2.
To that end, the procedures that we are familiar with are
necessary.
3.
There is to be a proper balance between the restriction and
the objective pursued.
The Union
believed that the system adequately balances transparency and donor
confidentiality, while furthermore actively pursuing the legitimate goal of
minimizing illicit funds in politics.
6.5. Worldwide Comparisons:
The government
mentioned approaches to donor anonymity in certain global areas, such as the
USA and Canada, where comparable Privacy Provisions exist in exact scenarios. Essentially,
the Union relied on the argument that the Electoral Bond Scheme was a rational,
proportionate, and simple solution to deal with the problem of illicit funds in
Indian elections.
7.
Key Findings and Findings
of the Court
In its analysis, the
Supreme Court of India closely examined the conflicted arguments concerning
transparency versus anonymity, the appropriate way of separating donors, and
the essential principles of fair and free elections. The Court has made many
significant observations.
7.1. Right to Information under Article 19(1)(a): It was
affirmed by the Court, with reference to previous cases like Union of India v.
ADR (2002) and PUCL v. Union of India (2003). It was emphasized that the
disclosure of political funding sources is essential for public trust in the
electoral process.
1.
Voters have a fundamental right to be informed about
political funding sources, which directly impacts public trust in elections.
2.
Transparency in political funding is not just a preference
but a constitutional requirement to ensure fair and free elections.
7.2. Doctrine of Manifest Arbitrariness: The Court
referenced the principle of manifest arbitrariness from Shayara Bano v. Union
of India[10]
(2017) and determined that:
1.
The anonymity provision in the Electoral Bond Scheme lacked
sufficient safeguards against misuse, opacity, and potential corruption.
2.
The scheme did not find a proper balance between transparency
and donor confidentiality, thus violating Article 14 of the Constitution.
7.3. By applying the proportionality doctrine: The Court
concluded that,
1.
While the goal of curbing black money was valid, the method
of donor anonymity was excessive and unreasonable.
2.
There were alternative measures that could achieve the same
aim without compromising voters' right to information.
7.4. In terms of regulatory oversight by SBI:
1.
The Court observed that although the State Bank of India was
responsible for oversight, its role was limited to maintaining records and did
not ensure real-time public accountability.
2.
The absence of disclosure mechanisms made the regulatory measures
insufficient.
7.5. Influences on Electoral Democracy:
1.
The Court underlined the importance of overseeing free and
fair elections as a key aspect of the Charter.
2.
There should be no excessive corporate influence in
elections, as this can distort policy rankings and weaken democratic
obligations.
In Conclusion,
the Court of Justice held that donors were subject to excessive secrecy as
compared with voter transparency, violating Articles 14, 19(1)(a) and 324 of
the Constitution.
8.
Decision and Rationale of
the Court
After a thorough
examination, the Supreme Court of India issued a new rule of Law, Declaring key
provisions of the Electoral Bond Scheme to be Unconstitutional.
8.1. Principal Decisions:
1.
The provision of anonymity under the Electoral Bond Scheme
has been ruled out in light of Article 19(1) (a) (right to Information).
2.
The scheme was assessed as being blatantly arbitrary and thus
illegal, under Article 14.
3.
The government was instructed to establish stringent
transparency measures in electoral funding.
4.
The State Bank of India (SBI) was directed at disseminating
the details of the previous election bond transactions to society.
8.2. The rationale of the Court:
1.
Transparency over Anonymity: In a democracy, voter access to
information is of paramount importance compared to donor Anonymity about
government contributions.
2.
No Absolute Privacy: Gifts to the Political Party, unlike
personal transactions, have public implications and cannot maintain complete
privacy.
3.
Free and Fair Elections: The Court reiterates the fact that
opaque political contributions undercut electoral democracy and reduce the
courage of the people in the institutions.
This decision
sets a precedent emphasizing the principle that transparency is essential in
electoral democracy.
9.
Comparison
with International Standards
When examining the
Electoral Bond Scheme (EBS), the Supreme Court looked closely at procedures
concerning government financing, donor anonymity, and transparency about
international practices. This review is intended to identify how the EBS
aligned or diverged from them.
9.1. United States of America: The Federal Election
Campaign Act (FECA)[11]
and the Federal Election Commission (FEC) regulate political contributions in
the United States very strictly.
1.
Disclosure standards shall remain in place for contributions
exceeding a specified limit, revealing information on donors, extent, and recipients.
2.
While some super PACs (Political Action Committees) allow
anonymous sponsors, they monitor and deal with criticism in detail.
3.
Law of the United States, in order to avoid excessive
scrutiny while safeguarding the confidentiality of smaller donors, the
Regulation stresses the disclosure of large support.
Nevertheless,
a key observation is that there are several failures in Super PAC funding in,
the U.S. Compared to India's election bond scheme, the system maintains a
higher degree of transparency in public contributions.
9.2. United Kingdom: The Political Parties, Elections, and
Referendums Act of 2000[12],
enforced by the Electoral Commission, oversees public financing in the UK.
1.
Visibility Guidelines: Parties shall disclose contributions
exceeding £7,500 for overseas campaigns and £1,500 for domestic campaigns.
2.
Corporate contributions: The companies must show that the
contributions have been approved by shareholders and published in their annual
financial reports.
3.
Oversight Independence: The Electoral Commission possesses
strong auditing powers to ensure compliance.
The main point
of view is that the UK uses a highly transparent system, monitored rigorously
on both a personal and corporate level, ensuring no significant opacity.
9.3. Germany: The country strictly regulates the
transparency of government financing through the use of The Public Parties Act
(Parteiengesetz)[13].
1.
All contributions exceeding the amount of 10,000 Euros must
be published together with donor information.
2.
Anonymous donations greater than 500 Euros are prohibited.
9.4. The comparative study underlines three essential lessons
for India:
1.
Ordering Transparency above anonymity: Most established
Democracies prioritize public disclosure of significant political
contributions.
2.
A robust oversight mechanism: Such as the FEC of the United
States and the Electoral Commission of the UK play an important role in
ensuring compliance.
3.
State Funding as an Alternative: Community investment as an
option can reduce dependence on opaque intimate donations.
India's
electoral Bond Scheme failed to align with these international best practices,
especially under donor anonymity and supervisory mechanisms.
10.
Impact of the Judgment
The decision of the
Supreme Court in the case of Association for Democratic Reforms v. Union of
India (2024) is set to have significant impacts on electoral funding, political
accountability, and the integrity of democracy in India.
10.1 In terms of the Political Funding Landscape:
1.
There is now a requirement for political parties to reveal
the identities of major donors, leading to increased transparency.
2.
The ruling prevents large anonymous donations, thereby
reducing the potential for corrupt practices.
3.
Smaller political parties are less likely to be overshadowed
by the financial power of larger ruling parties, creating a more level playing
field.
10.2. Regarding corporate donations:
1.
The judgment is expected to discourage excessive corporate
influence on decision-making processes.
2.
Companies will need to seek approval from shareholders and
face public scrutiny before making substantial contributions.
10.3. About strengthening democratic norms:
1.
Transparency in political funding can help restore public
trust and enhance voter confidence in the electoral system.
2.
Political parties will be subject to greater scrutiny
concerning their financial activities.
Regarding institutional oversight:
1.
Agencies such as the Election Commission of India (ECI) and
the State Bank of India (SBI) will take more proactive steps to enforce transparency
regulations.
2.
There may be new rules introduced for real-time disclosure of
political donations.
10.4. Long-term Reforms:
1.
The decision could pave the way for extensive changes in
electoral funding, including possible discussions on government funding for
elections.
2.
Amendments to the Representation of the People Act (RPA) and
other relevant laws may be introduced to ensure transparency becomes standard
practice.
11.
Critical Analysis of the
Judgment:
The Supreme Court's ruling
is widely seen as a win for transparency and democratic elections, but it also
raises some important questions for further consideration.
11.1 . Strengths of the
Judgment:
1.
The Court's affirmation of Fundamental Rights, particularly
Article 19(1)(a), highlights the importance of the right to information in
political processes.
2.
Emphasis on public accountability and finding a balance
between donor privacy and voter transparency are also laudable aspects of the
ruling.
11.2.Weaknesses of the Judgment:
1.
While the Court struck down certain parts of the existing
scheme, it did not provide clear guidelines for future reforms or suggest
alternative frameworks for electoral financing.
2.
Enforcing transparency requirements may prove to be a
challenge for the Election Commission of India (ECI), and the potential of
state funding as an alternative to private donations was not adequately
addressed.
11.3. Challenges in Implementation:
1.
Resistance from major political parties that benefit from
undisclosed donations could hinder the implementation of transparency
reforms.
2.
Regulatory bodies like the ECI and SBI will need to
strengthen their institutional capacity and independence to effectively enforce
the Court's decision.
11.4. Wider Implications for Democracy:
1.
A standard for the interpretation in favour of transparency
over arbitrary state action.
2.
Moreover, in cases where the executive branch exceeds its
powers, it reinforces the obligation of the legal system to defend democratic
standards.
12.
Recommendations for
Electoral Funding Reform:
1.
Compulsory real-time disclosure of political contributions
exceeding a certain threshold should be made on top of society channels
immediately.
2.
To avoid undue influence on policy-making, a restriction on
corporate contributions should be reinstated.
3.
The enrichment of the Oversight Authority of the Election
Commission of India (ECI) entitles the Commission to additional independence
and resources for oversight.
4.
Enforce State Funding to reduce reliance on private
contributions.
5.
Community Accessibility of Information ensures that voter
information on government contributions can be easily accessible on a
centralised electronic platform.
13.
Conclusion
The case of the Association for Democratic Reforms and
Another v. Union of India and Others, marks a crucial moment in India's
democratic evolution. The Supreme Court confirms its commitment to fundamental
ethics and voter consent by invalidating a part of the Electoral Bond Scheme,
which impedes clarity.
While the ruling is a
significant step forward, its success will ultimately depend on its effective
functioning, institutional autonomy, and political will. India needs to move
forward with reforms of electoral finance in line with international best
practices, promoting openness, trustworthiness, and fairness in government
financing.
The judgement stands as a
notification of the judicial system's responsibility for the protection of
democracy, reminding citizens and political institutions alike that
transparency is not just a Constitutional imperative.
[1] Article 19- Protection
of certain rights regarding freedom of speech, etc.— (1) All citizens shall
have the right—
(a) to freedom of speech and expression
[2] (2024) 3 S.C.R. 417
[3] Section 29C of the Act
[4] Section-80GGC of the
Act
[5] Section- Section-182 of
the Act
[7] (2002) 3 CIVLJ 296
[8] AIR 2003 SUPREME COURT 2363
[9](2016) 7 SCC 353
[10]AIR 2017 SC 4609