Standing Up for the Voter: Voter Must Know Who Funds Political Parties

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Why in News?

  • The recent unanimous decision by the Constitution Bench of the Supreme Court, authored by CJI, has marked a significant turning point for Indian democracy.
  • This verdict pertains to the constitutionality of the Electoral Bond Scheme (EBS) introduced by the Finance Act, 2017.
  • The decision not only declares the EBS unconstitutional but also highlights the crucial principles of equality, information, and proportionality in the context of corporate election funding.

Reasons Behind SC’s Scrutiny of Electoral Bond Scheme (EBS)

  • Removal of Donation Caps
    • One of the key elements of the EBS that drew the court's scrutiny was the removal of donation caps imposed on political parties.
    • The Finance Act 2017 lifted restrictions on the amount of contributions that political parties could receive.
    • It created a scenario where substantial sums of money could flow unchecked into electoral campaigns.
    • The court recognised this as a potential threat to the level playing field essential for democratic elections.
  • Anonymity of Donations through Promissory Notes
    • The EBS introduced a mechanism whereby donations to political parties could be made through anonymous promissory notes issued by recognised banks.
    • This aspect of the scheme raised serious concerns about transparency and accountability, as it allowed for substantial financial support to political entities without disclosing the identity of the contributors.
    • The court, in its decision, underscored the fundamental importance of transparency in the functioning of a democratic system.
  • Exemption of Corporate Donors from Disclosure Duties
    • One of the most contentious features of the EBS was the exemption granted to corporate donors from the obligation to disclose their contributions in balance sheets.
    • This created a veil of secrecy around corporate funding of political parties, diminishing the transparency required for a healthy democracy.

SC Verdict on Electoral Bond Scheme

  • Invalidation of Electoral Bond Scheme
    • The verdict rendered the EBS unconstitutional, emphasising the removal of donation caps, the anonymity of donations through promissory notes, and the exemption of corporate donors from disclosure duties.
    • This underscores the necessity of disclosure in corporate election funding, grounded in the constitutional rights enshrined in Article 14 (right to equality) and Article 19(1)(a) (right to information).
  • Immediate Discontinuation of Electoral Bonds and Disclosure Orders
    • The Court ordered the immediate discontinuation of electoral bonds and mandates disclosure of information by all relevant agencies since April 12, 2019.
    • The State Bank of India's request for an extension was seen with scepticism, and a contempt petition is filed against them for non-compliance.
  • Guidelines on the Money Bill Route to Pass the Bills
    • The SC’s decision did not address the Speaker's power to categorise bills as money bills.
    • However, it provides guidance that not every legislative determination qualifies as a financial or economic decision, challenging the presumption of constitutionality.

SC’s Analysis of the Proportionality Doctrine: Its Implications on Legislative Goals and the Restriction of Fundamental Rights

  • Evolution of the Proportionality Doctrine
    • The proportionality doctrine, as articulated in the judgment, emerges as a mechanism to impose self-discipline on constitutional judicial review.
    • While evolving from case to case, its fundamental role is to establish a balance between governmental powers and individual rights.
    • This doctrine acts as an introduction to constitutional discipline, setting parameters that bind all institutions of governance.
  • Distinction Between Manifest Arbitrariness and Reasonable Use of Power
    • The decision underscores a clear distinction between manifest arbitrariness and the reasonable exercise of power.
    • It emphasises that the power to restrict a fundamental right does not extend to the power to outright abrogate the right.
    • This distinction, according to the court, safeguards against the arbitrary exercise of governmental authority, reinforcing the idea that limitations on rights must be reasonable and proportionate.
  • Legitimate Goals and Suitable Means
    • Applying the proportionality test, the court scrutinises the legislative goals behind the Electoral Bond Scheme.
    • It mandates that any restriction on a fundamental right should have a legitimate goal and employ suitable means to achieve that goal.
    • In the case of the EBS, the court questions the legitimacy of curbing black money as a specific ground under Article 19(2), emphasising that the state should justify its actions with reasonable objectives.
  • Nexus Between Law and Stated Objectives
    • The court introduced the concept of a reasonable nexus between the law and its stated objectives.
    • It holds that the law should not only have a legitimate goal but also demonstrate a rational connection between the means employed and the objectives sought to be achieved.
    • This requirement ensures that restrictions on fundamental rights are not arbitrary and are directly related to the purpose they aim to fulfil.
  • Double Proportionality Test: Conflict of Equal Rights
    • A significant development within the proportionality doctrine discussed in the judgment is the introduction of the double proportionality test.
    • This test addresses conflicts between two equal rights – in this instance, the donor's right to privacy and the voter's right to equality of information and influence.
    • The court mandates a second proportionality assessment, ensuring that any infringement on one right is justified and not disproportionate in its impact.
  • Alternative Measures and Judicial Restraint
    • The court, while advocating for proportionality, suggested alternative measures that could achieve the legislative goals of curbing black money and ensuring transparency in political funding.
    • These include setting up an electoral trust or imposing a cap on corporate funding of elections.
    • Importantly, the court exercises judicial restraint, respecting the autonomy and powers of the executive and legislative branches of the government.
  • Chief Justice M C Chagla's Cautionary Note
    • The judgment references Chief Justice M C Chagla's 1958 caution against the influential role of big business and money bags in the democratic process.
    • Chagla's foresight, articulated over six decades ago, warned of the potential threat posed by excessive corporate influence on democracy.
    • The court underscored Chagla's call for the judiciary to prevent any improper or corrupt influence, indicating a long-standing concern about the impact of financial power on the democratic ethos.
  • Historical Perspectives Laid Out by the CJI
    • The historical perspective laid out by Chief Justice Chandrachud underscores the judiciary's responsibility to prevent improper influences on the democratic apparatus.
    • This implies a proactive role for the courts in safeguarding the democratic values enshrined in the Constitution.
    • The court's assertion aligns with the idea that the judiciary is duty-bound to act as a check against any attempts to compromise the democratic process, particularly by powerful corporate entities.


  • The invalidation of the Electoral Bond Scheme by the Supreme Court is a robust defence of democratic ideals.
  • By striking down provisions that compromise transparency, equality, and accountability, the court has reinforced the foundational principles that underpin the democratic fabric of the nation.
  • This decision marks a pivotal moment in India's legal history, setting a precedent for safeguarding the democratic process against potential distortions arising from opaque financial contributions.

Source: The Indian Express