The Right to Information of Political Funding and its Potential to Enhance Democratic Dialogue

Ashwani Kumar Singh

Vinayaka Mission’s Law School

On 15 Feb 2024, a 5-judge bench of the Supreme Court of India (SCI) unanimously struck down the Electoral Bond (EB) Scheme 2018 as unconstitutional. The Scheme allowed individuals and corporations to make anonymous donations to political parties. It also allowed for unlimited corporate funding. The Finance Act 2017 amended provisions of multiple pieces of legislation – namely, the Reserve Bank of India (RBI) Act 1934, the Representation of the People Act (RPA) 1951, the Income Tax Act 1965, and the Companies Act 2013 – to remove disclosure requirements for political contributions received through electoral bonds, and thus laid down the foundation for the scheme. In this post, I discuss and assess the approach adopted by the SCI in addressing the issue of anonymous political funding (it also discussed unlimited corporate funding) I argue that the judgment has the potential to enhance the quality of democratic dialogue and strengthen democratic accountability. The discussion is limited to the majority opinion authored by the Chief Justice of India for himself and his 3 fellow judges (Justice Sanjiv Khanna has authored a concurring opinion).

About the Scheme

The scheme permitted individuals holding Indian citizenship and entities incorporated or established in India to buy electoral bonds from an authorised bank. The bank was required to keep the buyer’s information confidential. It could disclose such information only ‘when demanded by a competent court or upon registration of criminal case by any law enforcement agency’. The compound effect of the scheme and amendments was that: a) political parties were not required to disclose the details of funding they received through electoral bonds, and b) companies were not required to disclose the details of funds contributed to each political party. This left the public with no means to know which corporate entities were funding which political parties. The petitioners in the case before the SCI argued that the non-disclosure of political funding would violate voters’ right to information guaranteed under Article 19(1)(a) of the Constitution. In defending the scheme, the Central Government argued that the purpose of anonymity was to protect the identity of the donor (informational privacy) and to curb black money.

The Decision

The Court traced back the evolution of the right to information to conclude that it is not limited to accessing public information. It extends to accessing information ‘necessary to further participatory democracy’. The Court relied on the two leading judicial precedents (ADR 2002 and PUCL 2003) to reiterate voters’ right to know about their candidates, and showed why this right should also extend against political parties. The Court followed a two-step process to determine whether voters have a right to access information on the funding of political parties. 

First, it examined whether the political parties form a ‘relevant political unit’ in the Indian electoral system. The Court elaborated on how the law treats recognised parties and unrecognised but registered parties differently, and how this difference impacts their candidates. For instance, recognised political parties continue to use the same symbol allotted to them for all general elections provided they also continue to fulfil the recognition requirements. On the other hand, the symbol allotted to unrecognised but registered parties may change with each general election. Voters are more likely to identify and remember recognised parties and their candidates, especially when many parties have similar names. Further, voters are interested in the capability and promises of the candidates and in the broader manifestos of the political parties. The Court also referred to the anti-defection law (which disqualifies a Member of Parliament or State Legislature from being a member of the House if they leave their party or vote against the party’s mandate) to emphasise the significance and prominence of political parties.

Second, it determined whether the disclosure of information about political funding is essential for voters to effectively exercise their right to vote. Political funding could influence both electoral outcomes and policy decisions because parties are free to utilise the funds for both election campaigns and non-campaign purposes. This led the Court to conclude that information about political funding is essential for an effective exercise of the right to vote because it would enable voters to ‘assess if there is a correlation between policy-making and financial contributions’.

Thereafter, the Court proceeded to determine whether the restriction of the right to information was justifiable in the present case. The Government had sought to justify the restriction on two grounds: curbing black money and preserving the informational privacy of donors. The Court refused to accept that curbing black money could be a justifiable ground. Even if it were, electoral bonds were not the least restrictive means to achieve that purpose, since electoral trusts were an effective alternative. On informational privacy, the Court adopted a double proportionality approach to balance voters’ right to information  and donors’ right to informational privacy. It concluded that a blanket ban on the disclosure of political funding received through the electoral bonds scheme ‘completely tilts the balance in favor of the purpose of informational privacy’. For these reasons, the electoral bonds scheme was struck down as unconstitutional.

Assessing the Decision

The Court provided a detailed account of the relationship between politics and money. It laid down the possible and realistic effect of the electoral scheme on constitutional and democratic principles. It would, however, be wrong to say that the matter was politically or legally difficult. First, the Court did not any public or political outcry or opposition, unlike in the Article 370 case or the same-sex marriage case. Second, it had the support of two fourth-branch institutions: the Reserve Bank of India and the Election Commission of India (see pages 13-17 of the judgment). Third, the nature of the issues made it difficult for the government to severely criticise the Court (or take a political stand like it did in the Article 370 case: see here and here) without risking a loss of public support. Having said that, if ongoing democratic backsliding (in India and beyond) has taught us anything, it is not to take normalcy for granted.

The judgment is significant in strengthening India’s dying democracy for the following reasons. First, it makes political parties accountable to the people by equipping voters with the right to access essential information relating to parties – in this case, detail about the sources of political funding. It is possible that this right may be extended to include further essential information relating to parties.

Second, it ensures information symmetry among stakeholders (political parties, media, and the people). The Central Government could have accessed funding information through back channels because it controlled which bank(s) could issue electoral bonds. Clause (3) of Section 31 of the RBI Act (added by means of the Finance Act 2017) empowered it to authorise any bank listed in the Second Schedule to issue electoral bonds. Section 9 of the EB Scheme stated that banks do not have to pay any interest on electoral bonds. Therefore, the authority to issue electoral bonds came with a likelihood of generating huge capital. Authorised banks might be willing to share confidential information (details of donors and the political parties they fund) with the Central Government out of fear of losing that authority.

Third, it enhances the quality of democratic dialogue by making political funding information public. As per a  report by the Association of Democratic Reforms (ADR), during the 2022-23 FY, national parties received the equivalent of $221.3 million USD in donations through unknown sources including electoral bonds. The current ruling party alone received $169.1 million USD in anonymous donations, of which $156.2 million USD came through electoral bonds.  The judgment provides an opportunity to opposition parties to utilise funding information, as and when it is made public, to hold the Central Government to account. This might be by linking policy decisions and political funding. The impact of the judgment will also depend on how political parties and the media utilise this information.

The Court has directed the State Bank of India (SBI) to stop issuing new electoral bonds and provide details of electoral bonds issued between 12 April 2019 and 15 February 2024. The SBI was required to submit the details to the Election Commission of India (ECI) by 6 March 2024. The ECI must publish the details it receives from the SBI on its website by 13 March 2024. The judgment ensures that the voters will have all the necessary information on political funding before the upcoming Lok Sabha (lower house) elections. However, the SBI had not provided the necessary information to the ECI as of 8 March 2024 and has instead filed for an extension until 30 June 2024. The Supreme Court is expected to hear the SBI’s extension application on 11 March 2024. In the meantime, ADR (one of the petitioners in the present case) has filed a contempt application against the SBI for ‘wilfully and deliberately disobeying’ the deadline provided by the SCI.

Ashwani Kumar Singh is an Assistant Professor of Law at Vinayaka Mission’s Law School, Chennai (India)

Suggested Citation: Ashwani Kumar Singh, ‘The Right to Information of Political Funding and its Potential to Enhance Democratic Dialogue’ IACL-AIDC Blog (12 March 2024) The Right to Information of Political Funding and its Potential to Enhance Democratic Dialogue — IACL-IADC Blog (blog-iacl-aidc.org)