Electoral Bond Scheme Struck Down: Constitution Bench Upholds Voters' Right to Know Who Funds Political Parties

Notified on 02.01.2018 under Section 31(3) of the RBI Act, the Electoral Bond Scheme let citizens and entities buy bearer bonds carrying no name of the buyer, for donation to political parties (para 24). Through the Finance Act 2017, the RBI Act, Section 29C of the Representation of the People Act, Section 13A of the Income Tax Act and Section 182 of the Companies Act were amended, exempting such donations from disclosure and removing the cap on corporate donations (paras 25, 216). The Association for Democratic Reforms and others challenged the Scheme and the amendments under Article 32 (para 25).

Information about the funding of political parties is essential for voters to exercise their freedom to vote effectively, so anonymising contributions infringes Article 19(1)(a) (para 104). Curbing black money is a legitimate aim, but the Scheme was not the least restrictive means: electronic transfers for small donations and electoral trusts for larger ones served the purpose with less harm to the right to know (paras 105, 129-130). Donor privacy matters, since contributions may express political support, but under the double proportionality standard total non-disclosure was not justified when disclosure under Section 29C above twenty thousand rupees was a less restrictive alternative (paras 142, 163-165). Treating companies like individuals, and loss-making companies like profitable ones, while allowing unregulated corporate influence made the amended Section 182 manifestly arbitrary under Article 14 (paras 212-215). The interim order of 12.04.2019 required parties to give the ECI donor details in sealed cover, so the ECI must have collected them (paras 217-218). Sanjiv Khanna J. concurred, reaching the same result through his own proportionality analysis.