TaxTMI 
TaxTMI 
2024 (2) TMI 812
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.... R. Venkatramani, AG Mr. Tushar Mehta, SG Mr. R. Balasubramanium, Sr. Adv. Mr. Raj Bahadur Yadav, AOR Ms. Seema Bengani, Adv. Mr. Shyam Gopal, Adv. Mr. Chinmayee Chandra, Adv. Mr. Kanu Agarwal, Adv. Mr. Rajat Nair, Adv. Mr. Raman Yadav, Adv. Mr. Chitvan Singhal, Adv. Mrs. Shraddha Deshmukh, Adv. Mr. Abhishek Kumar Pandey, Adv. Mr. Kartikay Aggarwal, Adv. Mr. Ameyvikrama Thanvi, Adv. Ms. Sonali Jain, Adv. Mr. R. Venkataramani, AG Mr. Tushar Mehta, SG Mr. R. Bala, Sr. Adv. Mr. Rajan Kumar Chourasia, Adv. Mr. Chinmayee Chandra, Adv. Ms. Seema Bengani, Adv. Ms. Shraddha Deshmukh, Adv. Mr. Ankur Talwar, Adv. Mr. Shyam Gopal, Adv. Mr. Raman Yadav, Adv. Mr. Chitvan Singhal, Adv. Mr. Arvind Kumar Sharma, AOR Page 2 of 4 WPC 880/2017 Mr. Amit Sharma, AOR Mr. Dipesh Sinha, Adv. Ms. Pallavi Barua, Adv. Ms. Aparna Singh, Adv. Mr. Varun K Chopra, Adv. Mr. Mehul Sharma, Adv. M/s. VKC Law Offices Mr. Kaleeswaram Raj, Adv. Ms. Thulasi K Raj, Adv. Ms. Aparna Menon, Adv. Mr. Mohammed Sadique T.a., AOR Ms. Sneha Kalita, AOR Mr. Prasanna S., AOR Mr. Sanjay R Hegde, Sr. Adv. Mr. Suren Uppal, Adv. Mr. Aviral Kashyap, AOR Mr. Prabhsharan Singh Mohi, Adv. Mr. Sanjeev Menon, Adv. Mr. Shahrukh Ali, Adv. Mr.....
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........................................... 95 I. Informational privacy of financial contributions to political parties ...... 96 II. Privacy vis-à-vis political party .......................................................... 103 III. Balancing the right to information and the right to informational privacy 103 a) Judicial Approach towards balancing fundamental rights: establishing the double proportionality standard ...................................................... 103 b) Validity of the Electoral Bond Scheme, Section 11 of the Finance Act and Section 137 of the Finance Act ..................................................... 113 c. Validity of Section 154 of the Finance Act amending Section 182(3) to the Companies Act ............................................................................................ 120 G. Challenge to unlimited corporate funding .............................................. 124 i. The application of the principle of non-arbitrariness ........................ 127 a. Arbitrariness as a facet of Article 14 ..................................................... 127 b. Beyond Shayara Bano: entrenching manifest arbitrariness in ....
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....mounts exceeding twenty-five thousand rupees in a financial year or five percent of its average net profits during the three financial years immediately preceding the contribution, whichever is greater. Companies were also required to disclose the amount contributed in a financial year in their profit and loss accounts and furnish particulars of the total amount contributed and the name of the party, individual or entity to which or to whom such amount was contributed. Companies defaulting in complying with the disclosure requirement were punishable with a fine which could extend to rupees five thousand. 5. The Companies (Amendment) Act 1969 amended Section 293A8 so as to ban contributions to political parties and for political purposes. Companies acting in contravention of the prohibition were punishable with a fine which could extend to five thousand rupees, and every officer who defaulted was punishable with imprisonment which could extend to three years, besides being liable to fine. 6. The Companies (Amendment) Act 1985 amended Section 293A9 to permit contributions to political parties and for political purposes once again. The explanation of the phrase "political purpose" i....
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....e political party to which the contribution was made. 9. Section 182 of the Companies Act 2013 made two modifications from Section 293-A of the Companies Act 1956: (a) the cap on the contributions which can be made by companies was increased from 5 % to 7.5% of their average net profits; and (b) more stringent consequences for violation of were imposed. The fine was extendable to five times (instead of three times prescribed in the earlier provision) of the contribution. 10. The Finance Act 2017 made three changes to Section 182 of the Companies Act: a. The first proviso to Section 182(1) which prescribed a cap on corporate funding was omitted; b. Section 182(3) was amended to only require a disclosure of the total amount contributed to political parties by a company in a financial year and excluded the requirement to disclose the particulars of the amount contributed to each political party; and c. Sub-section 3A was introduced, by which a company could contribute to a political party only by a cheque, bank draft, or electronic clearing system. The proviso to the sub-section states that a company may also contribute through any instrument issued pursuant to any scheme noti....
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....ted to the Election Commission before the due date for furnishing a return of income of that financial year under the IT Act.20 A political party which fails to submit the report shall not be entitled to any tax relief as provided under the IT Act.21 15. The provision was amended by the Finance Act 2017 to include a proviso by which the political party was not required to disclose details of contributions received by electoral bonds. Annexure I to this Judgment depicts in a tabular form the amendments to the provisions of the RP Act, the IT Act, the Companies Act, and the RBI Act by the Finance Act 2017. 16. The effect of the amendments introduced by the Finance Act to the above legislations is that: a. A new scheme for financial contribution to political parties is introduced in the form of electoral bonds; b. The political parties need not disclose the contributions received through electoral bonds; c. Companies are not required to disclose the details of contributions made in any form; and d. Unlimited corporate funding is permissible. iv. Objections of RBI and ECI to the Electoral Bond Scheme 17. On 2 January 2017, the RBI wrote a letter to the Joint Secretary in ....
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....nds will be open only for a limited period, may be twice a year for seven days each; and f. The electoral bonds will be issued only at RBI, Mumbai. 20. The draft of the Electoral Bond Scheme was circulated to the RBI for its comments. The draft conferred notified scheduled commercial banks, apart from the RBI, with the power to issue electoral bonds. The RBI objected to the draft Scheme by a letter dated 14 September 2017. The RBI stated that permitting a commercial bank to issue bonds would "have an adverse impact on public perception about the Scheme, as also the credibility of India's financial system in general and the central bank in particular." The RBI again flagged the possibility of shell companies misusing bearer bonds for money laundering transactions. The RBI recommended that electoral bonds may be issued in electronic form because it would (a) reduce the risk of their being used for money laundering; (b) reduce the cost; and (c) be more secure. 21. The Electoral Bond Scheme was placed for deliberation and guidance by the RBI before the Committee of the Central Board. The Committee conveyed serious reservations on the issuance of electoral bonds in the physical form....
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....ision in the Companies Act requiring companies to disclose particulars of the amount contributed to specific political parties, the ECI recommended that companies contributing to political parties must declare party-wise contributions in the profit and loss account to maintain transparency in the financial funding of political parties. Further, the ECI also expressed its apprehension to the deletion of the first proviso to Section 182(1) by which the cap on corporate donations was removed. The ECI recommended that the earlier provision prescribing a cap on corporate funding be reintroduced because: a. Unlimited corporate funding would increase the use of black money for political funding through shell companies; and b. Capped corporate funding ensured that only profitable companies with a proven track record could donate to political parties. v. Electoral Bond Scheme 24. On 2 January 2018, the Ministry of Finance in the Department of Economic Affairs notified the Electoral Bond Scheme 2018 in exercise of the power under Section 31(3) of the RBI Act. The Electoral Bond is a bond issued in the nature of promissory note which is a bearer banking instrument and does not carry th....
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..... The bond issued is non-refundable;39 i. The information furnished by the buyer is to be treated as confidential by the authorized bank. It shall be disclosed only when demanded by a competent court or upon the registration of criminal case by any law enforcement agency;40 j. The bond shall be available for purchase for a period of ten days on a quarterly basis, in the months of January, April, July, and October as specified by the Central Government.41 Bonds will be available for an additional period of thirty days as specified by the Central Government in a year when General Elections to the House of People are to be held;42 k. No interest is payable on the bond.43 No commission, brokerage, or any other charges for issue of a bond shall be payable by the buyer against purchase of the bond;44 l. The value of the bonds shall be considered as income by way of voluntary contributions received by an eligible political party for the purpose of exemption from Income Tax under Section 13A of the IT Act;45 and m. The bonds are not eligible for trading.46 25. The petitioners instituted proceedings under Article 32 seeking a declaration that Electoral Bond Scheme and the followi....
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.... No. 8588/2019 The petitioners submitted that they would press the grounds of challenge to the Finance Act independent of the issue on Money Bills in view of the upcoming elections to Parliament. 28. By an order dated 31 October 2023, the batch of petitions was directed to be listed before a Bench of at least five-Judges in view of the provisions of Article 145(3) of the Constitution. It is in this background that the challenge to the Electoral Bond Scheme and the amendments is before the Constitution Bench. B. Issues 29. The present batch of petitions gives rise to the following issues: a. Whether unlimited corporate funding to political parties, as envisaged by the amendment to Section 182(1) of the Companies Act infringes the principle of free and fair elections and violates Article 14 of the Constitution; and b. Whether the non-disclosure of information on voluntary contributions to political parties under the Electoral Bond Scheme and the amendments to Section 29C of the RPA, Section 182(3) of the Companies Act and Section 13A(b) of the IT Act are violative of the right to information of citizens under Article 19(1)(a) of the Constitution. C. Submissions i. Submissi....
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.... disclosure of information to them; and e. The statutory amendments and the Electoral Bond Scheme subvert democracy and interfere with free and fair elections because the huge difference in the funds received by ruling parties in the States and Centre vitiates a level playing field between different parties and between parties and independent candidates. 31. Mr Kapil Sibal, learned senior counsel made the following submissions: a. The amendments and the Electoral Bond Scheme skew free and fair elections by permitting unlimited contributions to political parties by corporate entities and removing the requirement of disclosure of information about political funding; b. Freedom of a voter in the negative connotation refers to the freedom to cast their vote without interference and intimidation. Freedom in the positive connotation includes the freedom to vote on the basis of complete and relevant information. This includes information about financial contributions to political parties; c. The argument of the Union of India that Courts should show judicial restraint is erroneous because the amendments in question relate to the electoral process and do not pertain to economic po....
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....e 19(1)(a). The right to information on funding of political parties is a natural consequence of the judgment of this Court in ADR (supra) and PUCL (supra) because the underlying principle in the judgments is that an informed voter is essential for a functioning democracy. Information about funding to political parties is necessary for an informed voter since the Symbols Order 1968 and the provisions of the Tenth Schedule allow political parties to influence legislative outcomes and policies; l. The infringement of the right to information does not satisfy the proportionality standard vis-à-vis the purpose of curbing black money. Even if the argument that the Electoral Bond Scheme fulfills the purpose is accepted, non-disclosure of information on political funding is not the least restrictive means to achieve the purpose; m. The infringement of the right to information does not satisfy the proportionality standard vis-à-vis the purpose of guaranteeing informational privacy because: i. Protecting donor privacy is not a legitimate purpose. There is no legitimate expectation of informational privacy to political contributions. The argument that it lies at the heart....
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....ould have sufficient safeguard to prevent abuse has also not been satisfied. d. The statutory amendments and the Scheme are manifestly arbitrary because (i) large scale corruption and quid pro quo arrangements would go unidentified due to the non-disclosure of information about political funding; (ii) they enable capture of democracy by wealthy interests; and (iii) they infringe the principle of 'one person-one vote' because a selected few overpower the voice of the masses because of their economic wealth; e. The deletion of the limit on corporate contributions is manifestly arbitrary Relied on Shayara Bano v. Union of India, (2017) 9 SCC 1 because it (i) permits donations by loss making companies; (ii) removes the control of shareholders over the decisions of the Board; (iii) permits unlimited contribution by corporates and thereby abrogates democratic principles; f. The provision permitting non-disclosure of funding by companies is violative of the shareholders' rights under: i. Article 25 which includes the right of the shareholder to know how the resources generated from their property are utilized. Once a shareholder comes to know that a company is financing a po....
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....egulations, including those from the United States, the United Kingdom, Switzerland and Singapore, emphasize the importance of transparency, disclosure, and reporting in political contributions. These examples underscore the global consensus on transparency in the political funding process. 35. Mr Sanjay R. Hegde, learned senior counsel made the following submissions: a. Public listed companies are subject to scrutiny since they raise funds from the public. Information pertaining to the company is essential to be brought to the public domain. This will enable informed debates and discussions regarding the use of money by such companies. Such information must particularly be made available to shareholders to enable them to make an informed choice with regard to trading of securities. Thus, the amendment to the Companies Act which removes the requirement of disclosure of information about political contributions is violative of the right to information of shareholders which flows from Article 19(1)(a); b. Public listed companies should not be allowed to make contributions without the consent of the majority of the shareholders or the consent of three-fourths of shareholders; c....
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....neral right to know regarding the funding of political parties. Right to know is not a general right available to citizens; e. This Court has evolved the right to know for the specific purpose of enabling and furthering the voter's choice of electing candidates free from blemish; and f. The influence of contributions by companies to political parties ought not to be examined by this Court. It is an issue of democratic significance and should be best left to the legislature. 38. The learned Solicitor General of India made the following submissions: a. The legal framework prior to the enactment of the Electoral Bond Scheme was mostly cash-based which incentivized infusion of black money into political parties, and consequently, into the electoral process in India. The Electoral Bond Scheme is an improvement on the prior legal framework; b. Donors to a political party often apprehended retribution from other political parties. Such apprehension incentivized donors to contribute unaccounted money to political parties to avoid identification and victimization by other political parties. The Electoral Bond Scheme maintains the confidentiality of donors and thereby incentivizes t....
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.... parties are being funded must be balanced against the right of a person to maintain privacy of their political affiliations. Donating money to one's preferred party is a form political self-expression, which lies at the heart of privacy; g. Maintaining anonymity of donations to political parties is a part of the concept of secret ballot because it enables a person to make political choices without any fear of victimization or retaliation; h. The right to information only operates against information in the possession or in the knowledge of the state. It cannot operate for seeking information not in the knowledge or possession of the state; i. The amendments to the RBI Act, RPA, and the IT Act are intended to curb donations made by way of cash and other means to political parties and secure the anonymity of donors; j. The amendment to Section 182 of the Companies Act removes the limitation of seven and a half percent of the net profits on the amount contributed by political parties. The removal of the contribution limit was intended to disincentivize creation of shell companies; k. This Court has recognized that the legislature has a wide latitude in matters concerning ec....
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....alysis of the true nature of the law. The amendment to Section 31 of the RBI Act can be classified as a financial provision to the extent that it seeks to introduce a new form of a bearer banking instrument. However, any resemblance to an economic policy ends 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 to the electoral process. 42. In fact, it is evident from the correspondence between the Ministry of Finance and RBI (which have been summarized above) on the apprehensions of the Bonds being used as an alternative currency that the Bonds were introduced only to curb black money in the electoral process, and protect informational privacy of financial contributors to political parties. The Union of India has itself classified the amendments as an "electoral reform". Thus, the submission of the Union of India that the amendments deal with economic policy cannot be accepted. 43. The second argument that this Court needs to address is to determine the scope of judicial revi....
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....onstitution, on a prima facie case of such violation having been made out, the onus would shift upon the respondent State to show that the legislation comes within the permissible limits of the most relevant out of clauses (2) to (6) of Article 19 of the Constitution, and that the restriction is reasonable. The Constitutional Court would expect the State to place before it sufficient material justifying the restriction and its reasonability. On the State succeeding in bringing the restriction within the scope of any of the permissible restrictions, such as, the sovereignty and integrity of India or public order, decency or morality etc. the onus of showing that restriction is unreasonable would shift back to the petitioner. Where the restriction on its face appears to be unreasonable, nothing more would be required to substantiate the plea of unreasonability. Thus the onus of proof in such like cases is an ongoing shifting process to be consciously observed by the Court called upon to decide the constitutional validity of a legislation by reference to Article 19 of the Constitution." 45. The broad argument of the petitioners that the presumption of constitutionality should not ap....
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....ect influence of money on electoral politics.64 The primary way through which money directly influences politics is through its impact on electoral outcomes. 48. One way in which money influences electoral outcomes is through vote buying. Another way in which money influences electoral outcomes is through incurring electoral expenditure for political campaigns. Campaigns have a measurable influence on voting behavior because of the impact of television advertisements, campaign events, and personal canvassing.65 An informed voter is one who is assumed to be aware of the policy positions of the candidate or the party they represent and votes on a thorough analysis of the pros and cons of electing a candidate. On the other hand, an uninformed voter is assumed to not possess knowledge of the policy positions of the candidates.66 Campaigns have an effect on the voting behavior of both an informed and an uninformed voter. The impact of campaigns on an informed voter is supplementary because campaign activities enable an informed voter to be further informed about the policies and ideology of the political party and the candidate, and their views on specific issues. Electoral campaigns r....
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....he electoral process in India. The decision in Kanwar Lal Gupta v. Amar Nath Chawla, (1975) 3 SCC 646 notices that money serves as an asset for advertising and other forms of political solicitation that increases a candidate's exposure to the public. The court observed that the availability of large funds allows a candidate or political party "significantly greater opportunity for the propagation of its programme" in comparison to their political rivals. Such political disparity, it was observed, results in "serious discrimination between one political party or individual and another on the basis of money power and that in turn would mean that "some voters are denied an 'equal' voice and some candidates are denied an 'equal chance'". 53. In Vatal Nagaraj v. R Dayanand Sagar, (1975) 4 SCC 127 Justice V R Krishna Iyer noted that candidates often evade the legal ceiling on expenditure by using big money channelled by political parties. The court acknowledged that large monetary inputs are "necessary evils of modern elections", which they hoped would be eradicated sooner rather than later. In P Nalla Thampy Terah v. Union of India, 1985 Supp SCC 189 a Constitution Be....
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....ned without recognizing the influence of money on politics. Therefore, we must bear in mind the nexus between money and electoral democracy while deciding on the issues which are before us in this batch of petitions. F. The challenge to non-disclosure of information on electoral financing 56. Section 29C of the RPA as amended by the Finance Act 2017 stipulates that the political party need not disclose financial contributions received through electoral bonds. Similarly, Section 13A of the IT Act as amended does not require the political party to maintain a record of contributions for contributions received through electoral bonds. Section 182 of the Companies Act 2013 as amended by the Finance Act 2017 by which the earlier requirement of disclosure of particulars of the amount contributed by companies to political parties in their profit and loss accounts was deleted. The company which has made financial contributions is now only required to disclose the total amount contributed to political parties without disclosing specific particulars about the political party to which the contribution was made. 57. Maintaining the anonymity of the contributor is a crucial and primary chara....
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....e party. See State of Punjab v. Sodhi Sukhdev Singh, (1961) 2 SCR 371 [13] So, when a party seeks the disclosure of documents, and when such disclosure is denied on the ground that it would violate public interest, there is a conflict between private interest and public interest. In subsequent cases, the courts cast the principle underlying the provisions of disclosure in the Indian Evidence Act as a conflict between two conceptions of public interest. This Court held that disclosure of information aids the party to the proceedings. But beyond that, disclosure also serves the public interest in the administration of justice. See State of Punjab v. Sodhi Sukhdev Singh, (1961) 2 SCR 371 [Subba Rao J] 62. In State of Uttar Pradesh v. Raj Narain (1975) 4 SCC 428, the respondent sought to summon documents in an election petition. The State made a claim of privilege from disclosure of documents. In his concurring opinion in the Constitution Bench, Justice KK Mathew observed that there is a public interest in the impartial administration of justice which can only be secured by the disclosure of relevant and material documents. The learned Judge reaffirmed this proposition by....
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....mportance of information to form views on social, cultural and political issues, and participate in and contribute to discussions. Secy., Ministry of Information & Broadcasting, Govt. of India v. Cricket Assn. of Bengal, (1995) 2 SCC 161; Indian Express Newspapers v. Union of India, AIR 1986 SC 515 ; Romesh Thappar v. State of Madras, AIR 1950 SC 124 Courts recognised that the relevance of information is to not only to hold the government accountable but also to discover the truth in a marketplace of ideas which would ultimately secure the goal of selfdevelopment. DC Saxena v. Hon'ble The Chief Justice of India, (1996) 5 SCC 216 [29] This Court also recognised that freedom of speech and expression includes the right to acquire information which would enable people to debate on social, moral and political issues. These debates would not only foster the spirit of representative democracy but would also curb the prevalence of misinformation and monopolies on information. Thus, in the second phase, the Court went beyond viewing the purpose of freedom of speech and expression through the lens of holding the government accountable, by recognising the inherent value in effecti....
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....other information which ECI considers necessary for judging the capacity of the candidate fielded by the political party. 67. The Union of India appealed against the decision of the High Court before this Court. This Court held that voters have a right to be sufficiently informed about candidates so as to enable them to exercise their democratic will through elections in an intelligent manner. Such information was held to be necessary for elections to be conducted in a "free and fair manner": "34. ...the members of a democratic society should be sufficiently informed so that they may influence intelligently the decisions which may affect themselves and this would include their decision of casting votes in favour of a particular candidate. If there is a disclosure by a candidate as sought for then it would strengthen the voters in taking appropriate decision of casting their votes. [...] we fail to understand why the right of a citizen/voter - a little man - to know about the antecedents of his candidate cannot be held to be a fundamental right under Article 19(1)(a). In our view, democracy cannot survive without free and fair election, without free and fairly informed voters.....
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....te some of the directions issued by this Court.87 Section 33-B of RPA stipulated that the candidate need not disclose any other information (other than the information required by law) notwithstanding any judgment. In PUCL v. Union of India (2003) 4 SCC 399, proceedings were initiated before this Court under Article 32 for challenging Section 33-B of the RPA. Justice M B Shah, writing for the majority, noted that the decision of the three-Judge Bench in ADR (supra) tracing the right to know the antecedents of candidates contesting elections had attained finality and Section 33-B was unconstitutional because it had the effect of rendering the judgment of this Court inoperative. The learned Judge on an independent interpretation also held that the right to information of a voter is a facet of Article 19(1)(a). (2003) 4 SCC 399 [18, 27] 71. Justice Venkatarama Reddi observed in his concurring opinion that there are two postulates which govern the right to vote : first, the formulation of an opinion about candidates, and second, the expression of choice based on the opinion formulated by casting votes in favour of a preferred candidate. A voter must possess relevant and essenti....
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....gislature in utter disregard of the indicators enunciated by this Court proceeds to make a legislation providing only for a semblance or pittance of information or omits to provide for disclosure on certain essential points, the law would then fail to pass the muster of Article 19(1)(a). Though certain amount of deviation from the aspects of disclosure spelt out by this Court is not impermissible, a substantial departure cannot be countenanced. The legislative provision should be such as to promote the right to information to a reasonable extent, if not to the fullest extent on details of concern to the voters and citizens at large. While enacting the legislation, the legislature has to ensure that the fundamental right to know about the candidate is reasonably secured and information which is crucial, by any objective standards, is not denied. [...] The Court has to take a holistic view and adopt a balanced approach, keeping in view the twin principles that the citizens' right to information to know about the personal details of a candidate is not an unlimited right and that at any rate, it has no fixed concept and the legislature has freedom to choose between two reasonable a....
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.... not an essential component of the right to information because educational qualifications do not serve any purpose for the voter to decide which candidate to cast a vote for since the characteristics of duty and concern of the people is not "monopolised by the educated". A conclusion to the contrary, in the learned Judge's opinion, would overlook the stark realities of the society. (2003) 4 SCC 399 [122] 77. The following principles can be deduced from the decisions of this Court in ADR (supra) and PUCL (supra): a. The right to information of voters which is traced to Article 19(1)(a) is built upon the jurisprudence of both the first and the second phases in the evolution of the doctrine, identified above. The common thread of reasoning which runs through both the first and the second phases is that information which furthers democratic participation must be provided to citizens. Voters have a right to information which would enable them to cast their votes rationally and intelligently because voting is one of the foremost forms of democratic participation; b. In ADR (supra), this Court observed that while the disclosure of information may violate the right to privacy ....
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....rence was made when the Tenth Schedule was included in the Constitution by the Constitution (Fifty-Second) Amendment Act 1985. However, even though the Constitution on its adoption did not make a reference to political parties, statutory provisions relating to elections accorded considerable importance to political parties, signifying that political parties have been the focal point of elections. 81. The ECI notified the Election Symbols (Reservation and Allotment) Order 196895 in exercise of the powers conferred by Article 344 of the Constitution read with Section 29A of the RPA and Rules 596 and 1097 of the Conduct of Election Rules 1961. In terms of the provisions of the Symbols Order, the ECI shall allot a symbol to every candidate contesting the election. The Symbols Order classifies political parties into recognised political parties and unrecognised political parties. The difference in the procedure under the Symbols Order for allotting symbols to recognised political parties, registered but unrecognised political parties and independent candidates indicates both the relevance and significance of political parties in elections in India. 82. A party is classified a National....
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....on. 86. The purpose of allotting symbols to political parties is to aid voters in identifying and remembering the political party. The law recognises the inextricable link between a political party and the candidate though the vote is cast for a candidate. The literacy rate in India was 18.33 percent when the first General Election was held in 1951. Most of the voters identified a political party only with its symbol and this still continues to the day. In a few cases, the voters would not possess any knowledge of the candidate being set up by the political party. They would vote solely based on the symbol which is allotted to the political party; knowledge of which they have obtained through campaigning activities or its sustained presence in the electoral fray. Gayatri Devi, the third Maharani consort of Jaipur who was later set up as a candidate by the Swatantra Party, recalls in her Autobiography that her team spent hours trying to persuade the voters that they had to vote for the Symbol Star (which was the symbol of the Swatantra Party) and not a symbol showing a horse and a rider because she also rode a horse:105 "Since most of India is illiterate, at the polls people vote....
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....e of the candidates that are set up by the Political Party.106 89. However, it cannot be concluded that the decision of voting is solely based on the individual candidate's capabilities and not the political party merely because the voter has knowledge of the candidate who has been set up by the political party. Such a conclusion cannot be definitively drawn particularly in view of the design of the electoral voting machine which has a list of the names of the candidates who are contesting the election from the constituency along with the symbol of the political party which is fielding the candidate. Voters casts their votes based on two considerations: the capability of the candidate as a representative and the ideology of the political party. 90. Political parties publish electoral manifestos containing the ideology of the party, major policies of the political party, plans, programmes and other considerations of governance which would be implemented if they came to power.107 While political manifestos do not necessarily always translate to policies when the party is elected to power, they throw light upon the integral nature of political parties in the electoral system. By pub....
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....ik v. Union of India AIR 1994 SC 1558, this Court observed that voluntarily giving up membership of a political party has a wider connotation and includes not just resignation of the member from the party and an inference can also be drawn from the conduct of the member. In Subash Desai v. Principal Secretary, Governor of Maharashtra, WP (C) No. 493 of 2022 a Constitution Bench of this Court while interpreting the provisions of the Tenth Schedule held that the political party and not the legislature party (which consists of the members of the House belonging to a particular political party) appoints the Whip of a political party for the purposes of Paragraph 2(1)(b) of the Tenth Schedule. Subash Desai [113]. 94. In summation, a 'political party' is a relevant political unit in the democratic electoral process in India for the following three reasons: a. Voters associate voting with political parties because of the centrality of symbols in the electoral process; b. The form of government where the executive is chosen from the legislature based on the political party or coalition of political parties which has secured the majority; and c. The prominence accorded to polit....
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....titution mandates that the value of each vote is equal. This guarantee ensures formal political equality where every person's vote is accorded equal weightage. Second, the Constitution ensures that members of socially marginalized groups are not excluded from the political process. This guarantee ensures (a) equality in representation; and (b) equality in influence over political decisions. 99. However, political inequality continues to persist in spite of the constitutional guarantees. One of the factors which contributes to the inequality is the difference in the ability of persons to influence political decisions because of economic inequality. In a politically equal society, the citizens must have an equal voice to influence the political process.120 We have already in the preceding section elucidated the close association of money and politics where we explained the influence of money over electoral outcomes. However, the influence of money over electoral politics is not limited to its impact over electoral outcomes. It also spills over to governmental decisions. It must be recalled here that the legal regime in India does not distinguish between campaign funding and electora....
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....ies, and the probable link between the contribution and the licenses which were given to the company in an accessible format. The responses to such information by the Government and political parties would go a long way in informing the voter. 102. However, to establish the argument of quid pro quo arrangements between the contributor and the political party, it is necessary that the political party has knowledge of the particulars of funding to its party. The political party to whom contributions are made cannot enter into a quid pro quo arrangements if it is unaware of the donor. The Scheme defines electoral bond "as a bond issued in the nature of promissory note which shall be a bearer banking instrument and shall not carry the name of the buyer or payee."122 The Scheme also stipulates that the information furnished by the buyer shall be treated as confidential which shall not be disclosed by any authority except when demanded by a competent court or by a law enforcement agency upon the registration of criminal case.123 103. The submission of the Union of India is that the political party which receives the contribution does not know of identity of the contributor because neit....
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....able means for furthering the goal (suitability or rational connection stage); c. The measure must be least restrictive and equally effective (necessity stage); and d. The measure must not have a disproportionate impact on the right holder (balancing stage). 106. The legitimate goal stage requires this Court to analyze if the objective of introducing the law is a legitimate purpose for the infringement of rights. At this stage, the State is required to discharge two burdens. First, the State must demonstrate that the objective is legitimate. Second, the State must establish that the law is indeed in furtherance of the legitimate aim that is contended to be served. See Media One v. Union of India, Civil Appeal No. 8129 of 2022 [77-79] 107. The then Finance Minister, Mr. Arun Jaitley encapsulated the objective of introducing the Electoral Bond Scheme thus: a. An attempt was made in the past to incentivize donations to political party through banking channels. Both the donor and the donee were granted exemption from payment of tax if accounts of contributions were maintained and returns were filed. However, the situation had only marginally improved. Political parties c....
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....enged on the ground that it violated the freedom of press under Article 19(1)(a). The Union of India submitted that the restriction on the freedom of press was justified because the purpose of the law was to prevent unfair competition which was in furtherance of public interest. It was argued that the restriction was justified because the activities carried out by newspapers were also traceable to the freedom to carry out a profession which could be restricted on the ground of public interest under Article 19(6). Justice JR Mudholkar writing for the Constitution Bench observed that the impugned legislation "directly and immediately" curtails the freedom of speech guaranteed under Article 19(1)(a), and the freedom cannot be restricted on any ground other than the grounds stipulated in Article 19(2).128 In Express Newspapers v. Union of India, AIR 1958 SC 578 a Constitution Bench while deciding the constitutional challenge to the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act 1955 held that a law violating Article 19(1)(a) would be unconstitutional unless the purpose of the law falls "squarely within the provisions of Article 19(2)". Also see, Indi....
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....tice P B Sawant writing for himself and Justice S Mohan observed while summarizing the law on freedom of speech and expression that Article 19(1)(a) can only be restricted on the grounds mentioned in Article 19(2). Ibid; [45]. The learned Judge specifically refuted the argument that the right can be restricted on grounds other than those stipulated in Article 19(2). Such an argument, the learned Judge states, is to plead for unconstitutional measures. However, while observing so, Justice P B Sawant states that the right to telecast can be restricted on the grounds mentioned in Article 19(2) and the "dictates of public interest": "78. [...] If the right to freedom of speech and expression includes the right to disseminate information to as wide a section of the population as is possible, the access which enables the right to be so exercised is also an integral part of the said right. The wider range of circulation of information or its greater impact cannot restrict the content of the right nor can it justify its denial. The virtues of the electronic media cannot become its enemies. It may warrant a greater regulation over licensing and control and vigilance on the content of the ....
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....Bengal (supra), dealt with the access to and use of a public good (that is, airwaves) for dissemination of information. The Court distinguished airways from other means of dissemination of information such as newsprint and held that since broadcasting involves the use of a public good, it must be utilized to advance free speech rights and plurality of opinion (that is, public interest). Cricket Association of Bengal [201 (1)(a) and 201(1)(b)] The observations in Cricket Association of Bengal (supra) cannot be interpreted to mean that other implied grounds of restrictions have been read into Article 19(2). 116. From the above discussion, it is clear that the right to information under Article 19(1)(a) can only be restricted based on the grounds stipulated in Article 19(2). It could be argued that curbing black money can be traced to the ground of "public order". However, a Constitution Bench of this Court has interpreted the ground "public order" to mean "public safety and tranquility" and "disorder involving breaches of local significance in contradistinction to national upheavals, such as civil strife, war, affecting the security of the State." Superintendent, Central Priso....
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.... a. Whether there are other possible means which could have been adopted by the State; b. Whether the alternative means identified realise the objective in a 'real and substantial manner'; c. Whether the alternative identified and the means used by the State impact fundamental rights differently; and d. Whether on an overall comparison (and balancing) of the measure and the alternative, the alternative is better suited considering the degree of realizing the government objective and the impact on fundamental rights. 120. Before we proceed to determine if the Electoral Bond Scheme is the least restrictive means to curb black money in electoral funding, it is important that we recall the regime on electoral funding. After the amendments introduced by the Finance Act 2017, donations to political parties exceeding rupees two thousand can only be made by an account payee cheque drawn on a bank, an account payee bank draft, the use of electronic clearing system through a bank account or through an electoral bond. IT Act, Section 13A(d) All contributions to political parties through cash cannot be assumed to be black money. For example, individuals who contribute to politica....
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....uch contribution; and (v) PAN of the electoral trust; c. Contributions to the electoral trust can only be made through cheque, bank draft and electronic transfer. Contributions made in cash shall not be accepted by the Electoral Trust; d. The Electoral Trust shall spend five percent of the total contributions received in a year subject to a limit of Rupees five hundred thousand in the first year of incorporation and Rupees three hundred thousand in the second year.141 The remaining money (that is, ninety five percent of the total contributions received in that financial year along with any surplus from the previous year) shall be distributed to political parties registered under Section 29A of the RP Act;142 e. The political party to which the trust donated money shall provide a receipt indicating the name of the political party, the PAN and the amount of contribution received from the trust;143 f. The trust shall also maintain a list of persons from whom contributions have been received and to whom they have been distributed;144 and g. The trust shall furnish a certified copy of the list of contributors and list of political parties to whom contributions have been made t....
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....f the parties will not be disclosed. It is only where the Electoral Trust contributes to one political party, would there be a possibility of political consequences and witch-hunting (assuming that there is a link between anonymity and contributions). However, in that case, it is a choice expressly made by the contributors. Additionally, the law mandates disclosure only of contributions made above twenty thousand in a financial year. So, for contributions less than twenty-five thousand, cheques and other modes of electronic transfer are an effective alternative. 125. When these three methods of political contribution (electronic transfer other than electoral bonds, contribution to Electoral Trust, and Electoral Bonds) are placed on a continuum, transfer through electronic means (other than electoral bonds) would be placed on one end and Electoral Bonds would be placed on the other end. A voter would receive complete information about contributions made above twenty thousand to a political party in the case of electronic transfer made directly to a political party other than through electoral bonds.146 126. With respect to contributions through electoral bonds, the voter would not....
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....butions above twenty thousand rupees, contributions through Electoral Trust is the least restrictive means. Having concluded that the Electoral Bond Scheme is not the least restrictive means to achieve the purpose of curbing black money in electoral process, there is no necessity of applying the balancing prong of the proportionality standard. 130. Based on the above discussion, we conclude that Electoral Bond Scheme does not fulfill the least restrictive means test. The Electoral Bond Scheme is not the only means for curbing black money in Electoral Finance. There are other alternatives which substantially fulfill the purpose and impact the right to information minimally when compared to the impact of electoral bonds on the right to information. b. Donor Privacy 131. The Union of India submitted that information about financial contributions to political parties is not disclosed to protect the contributor's informational privacy to political affiliation. There are two limbs to the argument of the Union of India with respect to the purpose of donor privacy. First, that the State interest in introducing the Electoral Bond Scheme which guarantees confidentiality (or anonymity) to....
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....rivacy cannot be restricted only to the "private" space; and e. Privacy includes informational privacy. Information which may seem inconsequential in silos can be used to influence decision making behavior when aggregated.150 133. The content of privacy is not limited to "private" actions and decisions such as the choice of a life partner, procreation and sexuality. Neither is privacy merely defined from the point of direct State intrusion. Privacy is defined as essential protection for the exercise and development of other freedoms protected by the Constitution, and from direct or indirect influence by both State and non- State actors. Viewed in this manner, privacy takes within its fold, decisions which also have a 'public component'. 134. The expression of political beliefs is guaranteed under Article 19(1)(a). Forming political beliefs and opinion is the first stage of political expression. The freedom of political expression cannot be exercised freely in the absence of privacy of political affiliation. Information about a person's political beliefs can be used by the State at a political level, to suppress dissent, and at a personal level, to discriminate by denying employ....
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....ise. Thus, it follows from the judgment of this Court in Justice KS Puttaswamy (9J) (supra) and the observations above that the Constitution guarantees the right to informational privacy of political affiliation. 139. Having concluded that the Constitution guarantees a right to informational privacy of political affiliation, it needs to be decided if the right can be extended to the contributions to political parties. The Electoral Bond Scheme has two manifestations of privacy: first, informational privacy by prescribing confidentiality vis-à-vis the political party; and second, informational privacy by prescribing non-disclosure of the information of political contributions to the public. The Union of India submitted that contributions made to political parties must be protected both from the political party itself and the public because donor privacy is an extension of the principle of secret ballot and is a facet of free and fair elections. The petitioners argue that equating political contributions with expression of political preference through voting is flawed because it conflates money with speech. The petitioners also argue that informational privacy does not extend....
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....y stands permits contributions to political parties by both corporations and individuals. The huge political contributions made by corporations and companies should not be allowed to conceal the reason for financial contributions made by another section of the population: a student, a daily wage worker, an artist, or a teacher. When the law permits political contributions and such contributions could be made as an expression of political support which would indicate the political affiliation of a person, it is the duty of the Constitution to protect them. Not all political contributions are made with the intent of attempting to alter public policy. Contributions are also made to political parties which are not substantially represented in the legislatures. Contributions to such political parties are made purely with the intent of expressing support. At this juncture, the close association of money and politics which has been explained above needs to be recounted. Money is not only essential for electoral outcomes and for influencing policies. It is also necessary for true democratic participation. It is necessary for enhancing the number of political parties and candidates contesti....
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.... practice and propagation of religion is subject to public order, morality, health and other provisions of Part III. The first exercise that the Court must undertake while balancing two fundamental rights is to determine if the Constitution creates a hierarchy between the two rights in conflict. If the Constitution does not create a hierarchy between the conflicting rights, the Courts must use judicial tools to balance the conflict between the two rights. 146. The judicial approach towards balancing fundamental rights has evolved over the course of years. Courts have used the collective interest or the public interest standard, the single proportionality standard, and the double proportionality standard to balance the competing interests of fundamental rights. 147. Before the proportionality standard was employed to test the validity of the justification for the infringement of fundamental rights, Courts balanced conflicting fundamental rights by according prominence to one fundamental right over the other based on public interest. This approach was undertaken through two modalities. In the first modality, the Court while identifying the fundamental rights in conflict circumscrib....
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....anjan v. State of Bihar (2017) 4 SCC 397, this Court held that when there is a conflict between two individuals with respect to their right under Article 21, the facts and circumstances must be weighed "on the scale of constitutional norms and sensibility and larger public interest." In PUCL (supra), one of the issues before this Court was whether the disclosure of the assets of the candidates contesting the elections in furtherance of the right to information of the voters violates the right to privacy of candidates. Ibid, [121] Justice Reddi authoring the concurring opinion observed that the right to information of the assets of candidates contesting elections trumps the right to privacy because the former serves a larger public interest. In Mazdoor Kisan Shakti Sangathan v. Union of India (2018) 17 SCC 324, proceedings under Article 32 were initiated challenging orders issued under Section 144 of the Code of Criminal Procedure prohibiting protests in certain areas in Delhi. The issue before this Court was whether the total ban of protests at the Jantar Mantar Road would violate the right to protest which is traceable to Articles 19(1)(a) and 19(1)(b). One of the inter-related is....
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....sub-judice. This Court resolved the conflict between the freedom of press protected under Article 19(1)(a) and the right to free trial under Article 21 by evolving a neutralizing device. This Court held that it has the power to evolve neutralizing devices such as the postponement of trial, retrial, change of venue, and in appropriate cases, grant acquittal in case of excessive media prejudicial publicity to neutralize the conflicting rights. This Court followed the Canadian approach in evolving a two prong standard to balance fundamental rights through neutralizing devices which partly resembled the structured proportionality standard. The two-pronged test was as follows : (2012) 10 SCC 603 [42, 22]. a. There is no other reasonable alternative measure available (necessity test); and b. The salutary effects of the measure must outweigh the deleterious effects on the fundamental rights (proportionality standard). 151. Finally, this Court in Justice KS Puttaswamy (5J) (supra) applied the structured proportionality standard to balance two fundamental rights. In this case, a Constitution Bench of this Court while testing the validity of the Aadhar Act 2016 had to resolve the confli....
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....the standard to give prominence to the fundamental right which is alleged to be violated by the petitioners (in this case, the right to information).168 This could well be critiqued for its limitations. 154. In Campbell v. MGM Limited [2004] UKHL 22, Baroness Hale adopted the double proportionality standard to adequately balance two conflicting fundamental rights. In this case, the claimant, a public figure, instituted proceedings against a newspaper for publishing details of her efforts to overcome drug addiction. Baroness Hale applied the following standard to balance the right to privacy of the claimant and the right to a free press: "141. [...] This involved looking first at the comparative importance of the actual rights being claimed in the individual case; then at the justifications for interfering with or restricting each of those rights; and applying the proportionality test to each" 155. In Central Public Information Officer, Supreme Court of India v. Subash Chandra Agarwal Civil Appeal No. 10044 of 2010, one of us (Justice D Y Chandrachud) while authoring the concurring opinion adopted the double proportionality standard as formulated in Campbell (supra). Referring ....
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....oportionality analysis. 157. Based on the above discussion, the standard which must be followed by Courts to balance the conflict between two fundamental rights is as follows: a. Does the Constitution create a hierarchy between the rights in conflict? If yes, then the right which has been granted a higher status will prevail over the other right involved. If not, the following standard must be employed from the perspective of both the rights where rights A and B are in conflict: b. Whether the measure is a suitable means for furthering right A and right B; c. Whether the measure is least restrictive and equally effective to realise right A and right B; and d. Whether the measure has a disproportionate impact on right A and right B. b) Validity of the Electoral Bond Scheme, Section 11 of the Finance Act and Section 137 of the Finance Act 158. To recall, Section 13A of the IT Act before the amendment mandated that the political party must maintain a record of contributions in excess of rupees twenty thousand. Section 11 of the Finance Act 2017 amended Section 13A creating an exception for contributions made through Electoral Bonds. Upon the amendment, political parties ar....
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....(1)(b), the right to form a political association under Article 19(1)(c), and the right to life and liberty under Article 21. The Constitution does not create a hierarchy amongst these rights. Thus, there is no constitutional hierarchy between the right to information and the right to informational privacy of political affiliation. 160. This Court must now apply the double proportionality standard, that is, the proportionality standard to both the rights (as purposes) to determine if the means used are suitable, necessary and proportionate to the fundamental rights. The Union of India submitted that Clause 7(4) of the Electoral Bond Scheme balances the right to information of the voter and the right to informational privacy of the contributor. Clause 7(4) stipulates that the information furnished by the buyer shall be treated as confidential by the authorized bank. The bank has to disclose the information when it is demanded by a competent court or upon the registration of a criminal case by a law enforcement agency. It needs to be analyzed if the measure employed (Clause 7(4)) balances the rights or tilts the balance towards one of the fundamental rights. 161. The first prong of....
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....ally effective measure. To recall, the Court must determine if there are other possible means which could have been adopted to fulfill the purpose, and whether such alternative means (a) realize the purpose in a real and substantial manner; (b) impact fundamental rights differently; and (c) are better suited on an overall comparison of the degree of realizing the purpose and the impact on fundamental rights. 165. The provisions of the RPA provide an alternative measure. Section 29C states that contributions in excess of rupees twenty thousand received from a person or company for that financial year must be disclosed by the political party through a report. The report must be filled in the format prescribed in Form 24A of the Conduct of Election Rules 1961. The form is annexed as Annexure II to this judgment. A crucial component of this provision when juxtaposed with Section 13A of the IT Act must be noted. Section 13A of the IT Act requires the political party to maintain a record of the contributions made in excess of rupees twenty thousand. Section 29C of the RPA requires the political party to disclose information about contributions in excess of rupees twenty thousand made by....
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.... indicate their political affiliation and curb various forms of political expression and association. 168. It is quite possible that contributions which are made beyond the threshold could also be a form of political support and not necessarily a quid pro quo arrangement, and contributions below the threshold could influence electoral outcomes. However, the restriction on the right to information and informational privacy of such contributions is minimal when compared to a blanket non-disclosure of information on contributions to political parties. Thus, this alternative realizes the objective of securing disclosure for an informed voter and informational privacy to political affiliation in a 'real and substantial manner'. The measure in the Electoral Bond Scheme completely tilts the balance in favor of the purpose of informational privacy and abrogates informational interests. On an overall comparison of the measure and the alternative, the alternative is better suited because it realizes the purposes to a considerable extent and imposes a lesser restriction on the fundamental rights. Having concluded that Clause 7(4) of the Scheme is not the least restrictive means to balance th....
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....al meeting of the company must be filed with the Registrar of Companies.175 171. As discussed in the earlier segment of this judgment, the Companies Act 1956 was amended in 1960 to include Section 293A by which contributions by companies to political parties and for political purposes were regulated. Companies were permitted to contribute within the cap prescribed. All such contributions were required to be disclosed by the Company in its profit and loss account with details. Companies which contravened the disclosure requirement were subject to fine. It is crucial to note here that contributions to political parties by companies were regulated long before the IT Act was amended in 1978 to exempt the income of political parties through voluntary contributions for tax purposes (ostensibly to curb black money). It is clear as day light that the purpose of mandating the disclosure of contributions made by companies was not merely to curb black money in electoral financing but crucially to make the financial transactions between companies and political parties transparent. Contributions for "political purposes" was widely defined in the 1985 amendment (which was later incorporated in ....
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....eceding section that the Electoral Bond Scheme and relevant amendments to the RPA and the IT Act mandating non-disclosure of particulars on political contributions through electoral bonds is unconstitutional. 174. In terms of Section 136 of the Companies Act, every shareholder in a company has a right to a copy of the financial statement which also contains the profit and loss account. The petitioners submitted that the non-disclosure of the details of the political contributions made by companies in the financial statement would infringe upon the right of the shareholders to decide to sell the shares of a company if a shareholder does not support the political ideology of the party to which contributions were made. This it was contended, violates Articles 19(1)(a), 19(1)(g), 21 and 25. We do not see the necessity of viewing the non-disclosure requirement in Section 182(3) of the Companies Act from the lens of a shareholder in this case when we have identified the impact of non-disclosure of information on political funding from the larger compass of a citizen and a voter. In view of the above discussion, Section 182(3) as amended by the Finance Act 2017 is unconstitutional. G. C....
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....lection of funds and electioneering by political parties. Report of the Committee on Prevention of Corruption, 1964 [11.5]. The Committee suggested "a total ban on all donations by incorporated bodies to political parties." Subsequently, Section 293A of the 1956 Act was amended through the Companies (Amendment) Act 1969 to prohibit companies from contributing funds to any political party or to any individual or body for any political purpose. 178. In 1985, Parliament again amended Section 293A, in the process reversing its previous ban on political contributions by companies. It allowed a company, other than a government company and any other company with less than three years of existence, to contribute any amount or amounts to any political party or to any person for any political purpose. It further provided that the aggregate of amounts which may be contributed by a company in any financial year shall not exceed five percent of its average net profits during the three immediately preceding financial years. This provision was retained under Section 182 of the Companies Act 2013. The only change was that the aggregate amount donated by a company was increased to seven and a half....
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.... 14: first, the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others; and second, the differentia must have a rational relation to the object sought to be achieved by the legislation. In the ensuing years, this Court followed this "traditional approach" to test the constitutionality of a legislation on the touchstone of Article 14. Kathi Raning Rawat v. State of Saurashtra, (1952) 1 SCC 215; Budhan Chowdhury v. State of Bihar, (1955) 1 SCR 1045; Ram Krishna Dalmia v. S R Tendolkar, 1959 SCR 279 182. In E P Royappa v. State of Tamil Nadu, (1974) 4 SCC 3 this Court expanded the ambit of Article 14 by laying down non-arbitrariness as a limiting principle in the context of executive actions. Justice P N Bhagwati (as the learned Chief Justice then was), speaking for the Bench, observed that equality is a dynamic concept with many aspects and dimensions which cannot be confined within traditional and doctrinaire limits. The opinion declared that equality is antithetic to arbitrariness, further finding that equality belongs to the rule of law in a republic, while arbitrariness belongs to the whim and caprice o....
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....d to be arbitrary or unreasonable. Similarly, in Dr. K R Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226 a three-Judge Bench of this Court invalidated a legislation on the ground that it was arbitrary and in violation of Article 14. However, in State of Andhra Pradesh v. McDowell & Co., (1996) 3 SCC 709 another three-Judge Bench of this Court held that a plenary legislation cannot be struck down on the ground that it is arbitrary or unreasonable. In McDowell (supra), this Court held that a legislation can be invalidated on only two grounds: first, the lack of legislative competence; and second, on the violation of any fundamental rights guaranteed in Part III of the Constitution or of any other constitutional provision. 185. This divergence became more apparent when a three-Judge Bench of this Court in Malpe Vishwanath Acharya v. State of Maharashtra, (1998) 2 SCC 1 invalidated certain provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act 1947 relating to the determination and fixation of the standard rent. This Court declared the provisions in question unreasonable, arbitrary, and violative of Article 14. However, the Court did not strike....
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....et of unreasonableness in Articles 19(2) to (6) and therefore arbitrariness can also be used as a standard to strike down legislation under Article 14. It held McDowells (supra) to be per incuriam and bad in law. 189. Shayara Bano (supra) clarified In Re Special Reference No. 1 of 2012 (supra) by holding that a finding of manifest arbitrariness is in itself a constitutional infirmity and, therefore, a ground for invalidating legislation for the violation of Article 14. Moreover, it was held that there is no rational distinction between subordinate legislation and plenary legislation for the purposes of Article 14. Accordingly, the test of manifest arbitrariness laid down by this Court in Indian Express Newspapers (supra) in the context of subordinate legislation was also held to be applicable to plenary legislation. In conclusion, this Court held that manifest arbitrariness "must be something done by the legislature capriciously, irrationally and/or without adequate determining principle." It was further held that a legislation which is excessive and disproportionate would also be manifestly arbitrary. The doctrine of manifest arbitrariness has been subsequently reiterated by this....
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....intercourse with a married woman if he obtains her husband's consent. The learned Judge observed that the provision treats a woman like a chattel: "23. [...] This can only be on the paternalistic notion of a woman being likened to chattel, for if one is to use the chattel or is licensed to use the chattel by the ―licensor‖, namely, the husband, no offence is committed. Consequently, the wife who has committed adultery is not the subject matter of the offence, and cannot, for the reason that she is regarded only as chattel, even be punished as an abettor. This is also for the chauvinistic reason that the third-party male has seduced her, she being his victim. What is clear, therefore, is that this archaic law has long outlived its purpose and does not square with today's constitutional morality, in that the very object with which it was made has since become manifestly arbitrary, having lost its rationale long ago and having become in today's day and age, utterly irrational. On this basis alone, the law deserves to be struck down, for with the passage of time, Article 14 springs into action and interdicts such law as being manifestly arbitrary." 192. The learned Judg....
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....al purpose" of a provision with sufficient clarity. The application of the doctrine of manifest arbitrariness by Chief Justice Misra and Justice Nariman in Navtej Singh Johar (supra) to strike down a provision for not classifying between consensual and non-consensual sex must be understood in the background of two jurisprudential developments on the interpretation of Part III of the Constitution. The first, is the shift from reading the provisions of Part III of the Constitution as isolated silos to understanding the thread of reasonableness which runs through all the provisions and elevating unreasonable (and arbitrary) action to the realm of fundamental rights. The second is the reading of Article 14 to include the facets of formal equality and substantive equality. Article 14 consists of two components. "Equality before the law" which means that the law must treat everybody equally in the formal sense. "Equal protection of the laws" signifies a guarantee to secure factual equality. The legislature and the executive makes classifications to achieve factual equality. The underlying premise of substantive equality is the recognition that not everybody is equally placed and that the....
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....has received in America ever since the American Constitution was framed, enables the American courts to check undue and excessive delegation but the courts of this country are not committed to that doctrine and cannot apply it in the same way as it has been applied in America. Therefore, there are only two main checks in this country on the power of the legislature to delegate, these being its good sense and the principle that it should not cross the line beyond which delegation amounts to "abdication and self-effacement". 197. In Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. Assistant Commissioner of Sales Tax and others, (1974) 4 SCC 98 a Constitution Bench of this Court held that a subordinate legislation is ancillary to the statute. Therefore, the delegate must enact the subordinate legislation "consistent with the law under which it is made and cannot go beyond the limits of the policy and standard laid down in the law." Since the power delegated by a statute is limited by its terms, the delegate is expected to "act in good faith, reasonably, intra vires the power granted and on relevant consideration of material facts." Shri Sitaram Sugar Co. Ltd. v. Union of India, (199....
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....and a company which has been in existence for less than three financial years, can contribute unlimited amounts to any political party; and (b) companies, regardless of the fact whether they are profit making or otherwise, can contribute funds to political parties. The issue that arises for consideration is whether the removal of contribution restrictions is manifestly arbitrary and violates Article 14 of the Constitution. 200. As discussed in the earlier section, this Court has consistently pointed out the pernicious effect of money on the integrity of the electoral process in India. The Law Commission of India in its 170th Report also observed that "most business houses already know where their interest lies and they make their contributions accordingly to that political party which is likely to advance their interest more."209 This issue becomes particularly problematic when we look at the avenues through which political parties accumulate their capital. Section 182 of the 2013 Act is one such legal provision allowing companies to contribute to political parties. The question before us is not how political parties expend their financial resources, but how they acquire their fin....
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....lity and form and are not mere rituals calculated to generate illusion of defence to mass opinion." 203. This Court has also consistently held that free and fair elections form an important concomitant of democracy. Digvijay Mote v. Union of India, (1993) 4 SCC 175; Union of India v. Association for Democratic Reforms, (2002) 5 SCC 294 In Kuldip Nayar v. Union of India, (2006) 7 SCC 1 a Constitution Bench of this Court held that a democratic form of government depends on a free and fair election system. In People's Union for Civil Liberties v. Union of India, (2013) 10 SCC 1 this Court held that free and fair elections denote equal opportunity to all people. It was further observed that a free and fair election is one which is not "rigged and manipulated and the candidates and their agents are not able to resort to unfair means and malpractices." 204. The integrity of the election process is pivotal for sustaining the democratic form of government. The Constitution also places the conduct of free and fair elections in India on a high pedestal. To this purpose, Article 324 puts the Election Commission in charge of the entire electoral process commencing with the....
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....s contended by the learned Solicitor General, was to discourage the creation of shell companies, there is no justification for removing the cap on contributions which was included for the very same purpose: to deter shell companies from making political contributions. In fact, when the proposal to amend Section 182 of the 2013 Act was mooted by the Government in 2017, the Election Commission of India opposed the amendment and suggested that the Government reconsider its decision on the ground that it would open up the possibility of creating shell companies. The relevant portion of the opinion of the ECI is reproduced below: "Certain amendments have been proposed in Section 182 of the Companies Act, where the first proviso has been omitted and consequently the limit of seven and a half percent (7.5 %) of the average net profits in the preceding three financial years on contributions by companies has been removed from the statute. This opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties with no other business of consequence having disbursable profits." Election Commission of India, Letter dated 26 May 2017, No. 56/....
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.... free and fair elections and political equality captured in the value of "one person one vote". 211. The amendment to Section 182 of the Companies Act must be read along with other provisions on financial contributions to political parties under the RPA and the IT Act. Neither the RPA nor the IT Act place a cap on the contributions which can be made by an individual. The amendment to the Companies Act when viewed along with other provisions on electoral funding, seek to equalize an individual and a company for the purposes of electoral funding. 212. The ability of a company to influence the electoral process through political contributions is much higher when compared to that of an individual. A company has a much graver influence on the political process, both in terms of the quantum of money contributed to political parties and the purpose of making such contributions. Contributions made by individuals have a degree of support or affiliation to a political association. However, contributions made by companies are purely business transactions, made with the intent of securing benefits in return. In Citizens United v. Federal Election Commission, 558 U.S 310 the issue before the ....
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....es to political parties alike. The observations made above must not be construed to mean that the Legislature cannot place a cap on the contributions made by individuals. The exposition is that the law must not treat companies and individual contributors alike because of the variance in the degree of harm on free and fair elections. H. Conclusion and Directions 216. In view of the discussion above, the following are our conclusions: a. The Electoral Bond Scheme, the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional; and b. The deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14. 217. We direct the disclosure of information on contributions received by political parties under the Electoral Bond Scheme to give logical and complete effect to our ruling. On 12 April 2019, this Court issu....
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....de to political parties through Electoral Bonds. 219. In view of our discussion above, the following directions are issued: a. The issuing bank shall herewith stop the issuance of Electoral Bonds; b. SBI shall submit details of the Electoral Bonds purchased since the interim order of this Court dated 12 April 2019 till date to the ECI. The details shall include the date of purchase of each Electoral Bond, the name of the purchaser of the bond and the denomination of the Electoral Bond purchased; c. SBI shall submit the details of political parties which have received contributions through Electoral Bonds since the interim order of this Court dated 12 April 2019 till date to the ECI. SBI must disclose details of each Electoral Bond encashed by political parties which shall include the date of encashment and the denomination of the Electoral Bond; d. SBI shall submit the above information to the ECI within three weeks from the date of this judgment, that is, by 6 March 2024; e. The ECI shall publish the information shared by the SBI on its official website within one week of the receipt of the information, that is, by 13 March 2024; and f. Electoral Bonds which are withi....
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....y person in that financial year; (b) the contribution in excess of twenty thousand rupees received by such political party from companies other than Government companies in that financial year. Provided that nothing contained in this subsection shall apply to the contributions received by way of an electoral bond. Explanation - For the purposes of this subsection, "electoral bond" means a bond referred to in the Explanation to subsection (3) of section 31 of the Reserve Bank of India Act, 1934. (2) The report under sub-section (1) shall be in such form as may be prescribed. (3) The report for a financial year under subsection (1) shall be submitted by the treasurer of a political party or any other person authorized by the political party in this behalf before the due date for furnishing a return of income of that financial year under section 139 of the Income-tax Act, 1961 (43 of 1961), to the Election Commission. (4) Where the treasurer of any political party or any other person authorized by the political party in this behalf fails to submit a report under sub-section (3) then, notwithstanding anything contained in the Income-tax Act, 1961 (43 of 1961), such political party shal....
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....3A) Notwithstanding anything contained in subsection (1), the contribution under this section shall not be made except by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account: Provided that a company may make contribution through any instruments, issued pursuant to any scheme notified under any law for the time being in force, for contribution to the political parties. Section 13A, Income Tax Act 1995 Prior to Amendment by the Finance Act, 2017 Upon Amendment by Section 11 of the Finance Act, 2017 13A. Special provision relating to incomes of political parties Any income of a political party which is chargeable under the head "Income from house property" or "Income from other sources" or any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party: Provided that- (a) such political party keeps and maintains such books of account and other documents as would enable the Assessing Officer to properly deduce its income therefrom; (b) in respect of each such voluntary contribution i....
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....Prior to Amendment by the Finance Act, 2017 Upon Amendment by Section 11 of the Finance Act, 2017 31. Issue of demand bills and notes. 1) No person in India other than the Bank or, as expressly authorized by this Act, the Central Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of money payable to bearer on demand, or borrow, owe or take up any sum or sums of money on the bills, hundis or notes payable to bearer on demand of any such person: Provided that cheques or drafts, including hundis, payable to bearer on demand or otherwise may be drawn on a person's account with a banker, shroff or agent. (2) Notwithstanding anything contained in the Negotiable Instruments Act, 1881, no person in India other than the Bank or, as expressly authorised by this Act, the Central Government shall make or issue any promissory note expressed to be payable to the bearer of the instrument 31. Issue of demand bills and notes. 1) No person in India other than the Bank or, as expressly authorized by this Act, the Central Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for th....
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....tributor is a company, whether the conditions laid down under section 293A of the Companies Act, 1956 (1 of 1956) have been complied with (A copy of the certificate to this obtained from the company should be attached). Verification I,______________________________(full name in Block letters), son/daughter of ___________________________solemnly declare that to the best of my knowledge and belief, the information given in this Form is correct, complete and truly stated. I further declare that I am verifying this form in my capacity as ______________________on behalf of the Political Party above named and I am also competent to do so. (Signature and name of the Treasurer/Authorised person)] Date:____________________ Place:____________________ FOOT NOTE 7 "293A. (1) Notwithstanding anything contained in section 293, neither a company in general meeting nor its Board of directors shall, after the commencement of the Companies (Amendment) Act, 1960, contribute- (a) To any political party, or (b) For any political purpose to any individual or body, any amount or amounts which or the aggregate of which will, in any financial year, exceed twenty-five thousand rup....
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....any person: Provided that the amount or, as the case may be, the aggregate of the amounts which may be so contributed by a company in any financial year shall not exceed five percent of its average net profits determined in accordance with the provisions of sections 349 and 350 during the three preceding financial years. Explanation.- Where a portion of a financial year of the company falls before the commencement of the Companies (Amendment) Act, 1985, and a portion falls after such commencement, the latter portion shall be deemed to be a financial year within the meaning, and for the purposes of this sub-section: Provided further that no such contribution shall be made by a company unless a resolution authorizing the making of such contribution is passed at a meeting of the Board of Directors and such resolution shall, subject to the other provisions of this section, be deemed to be justification in law for the making and the acceptance of the contribution authorized by it. (3) Without prejudice to the generality of the provisions of sub-sections (1) and (2)- (a) a donation or subscription or payment caused to be given by a company on its behalf or on its account to a p....
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....ll be allowed under this section in respect of any sum contributed by way of cash." 17 80 GGC. "Deduction in respect of contributions made by any person to political parties- In computing the total income of an assessee, being any person, except local authority and every artificial juridical person wholly or partly funded by the Government, there shall be deducted any amount of contribution made by him, in the previous year, to a political party [or an electoral trust] : [Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash.] Explanation.-For the purposes of sections 80GGB and 80GGC, "political party" means a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951)." 18 IT Act, amendment to Proviso (b) to Section 13A 19 IT Act, Proviso (d) to Section 13A 20 RPA, Section 29C (3) 21 RPA, Section 29C (4) 22 "KYC" 23 "ECI" 24 Electoral Bond Scheme, Clause 2(a) 25 Electoral Bond Scheme, Clause 3(1) 26 Electoral Bond Scheme, clause 3(3) 27 Electoral Bond Scheme, Clause 12 28 Electoral Bond Scheme, Clause 3(3) 29 Electoral Bond Scheme, Clause 3(4) 30 El....
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....66 See David P. Baron, Electoral Competition with informed and uninformed voters, American Political Science Review, Vol. 88, No. 1 March 1994 67 Michael A. Collins, Navigating Fiscal Constraints in "Costs of Democracy: Political Finance in India" (edited by Devesh Kapur and Milan Vaishnav) OUP 2018 68 See Neelanjan Sircar, Money in Elections: the Role of Personal Wealth in Election Outcomes in Costs of Democracy: Political Finance in India (ed. By Devesh Kapur and Milan Vaishnav) OUP 2018 69 Michael A. Collins, Navigating Fiscal Constraints in "Costs of Democracy: Political Finance in India" (edited by Devesh Kapur and Milan Vaishnav) OUP 2018 74 Electoral Bond Scheme, Clause 2(a) 75 Electoral Bond Scheme, Clause 7(4) 76 Indian Evidence Act 1872, Section 124 86 Paragraph 64(4): "To maintain the purity of elections and in particular to bring transparency in the process of election, the Commission can ask the candidates about the expenditure incurred by the political parties and this transparency in the process of election would include transparency of a candidate who seeks election or re-election. In a democracy, the electoral process has a strategic role. The little ....
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....h the preparation of list of contesting candidates. Rule 10(5) states that the allotment of the returning officer of any symbol to a candidate shall be final except where it is inconsistent with the directions issued by the ECI, in which case the ECI may revise the allotment. Rule 10(6) states that every candidate shall be informed of the symbol allotted to the candidate. 98 Symbols Order 1968, Rule 6B 99 Symbols Order 1968, Rule 6A 100 Symbols Order 1968, Rule 5 101 Symbols Order 1968, Rule 8(1) 102 Ibid. 103 Symbols Order 1968, Rule 10B. The party is required to set up candidates in at least five percent of the assembly constituencies. 104 A recognised National or a State Party shall continue to be treated as a recognised party even if the political party does not fulfil the conditions at the next election to the General Assembly stipulated for recognition as a recognised political party. However, it shall continue to be treated as a recognised political party at the subsequent general election only if the party fulfils the conditions laid down. 105 Gayatri Devi and Santha Rama Rau, A Princess remembers: The Memoirs of the Maharani of Jaipur, (Rupa Publications 19....
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....there is a link between political contributions and access to the policy makers. The Organization scheduled meetings between 191 Congressional offices and the organization's members who were campaign donors. When the Congressional offices were informed that prospective attendees were political donor, policymakers made themselves available for the meeting three to four times more often. 122 Electoral Bond Scheme; Clause 2(a) 123 Electoral Bond Scheme; Clause 7(4) 128 Ibid; Paragraph 36:"If a law directly affecting it is challenged, it is no answer that the restriction enacted by it are justifiable under clauses (3) to (6). For the scheme of Article 19 is to enumerate different freedoms separately and then to specify the extent of restrictions to which they may be subjected and the objects for securing which this could be done." 141 IT Rules 1962, Rule 17CA(8)(i) 142 IT Rules 1962, Rule 17CA(7) and Rules 17CA(8)(ii) 143 IT Rules 1962, Rule 17CA(9) 144 IT Rules 1962, Rule 17CA(11)(ii) 145 IT Rules 1962, Rule 17CA(14) 146 RPA; Section 29A 148 Justice Chandrachud (Paragraph 168), Justice Kaul (Paragraph 19) 149 Justice Chandrachud, Justice Chellameshwar, Justice Bo....
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.... Johar (supra) 209 Law Commission of India, 170th Report on the Reform of the Electoral Laws (1999) 222 Ins. By Notifin. No. S.O. 1283(E), dated the 10th November, 2003. ASSOCIATION FOR DEMOCRATIC REFORMS AND ANOTHER VERSUS UNION OF INDIA AND OTHERS WRIT PETITION (CIVIL) NO. 880 OF 2017 WITH WRIT PETITION (CIVIL) NO. 59 OF 2018 WRIT PETITION (CIVIL) NO. 975 OF 2022 A N D WRIT PETITION (CIVIL) NO. 1132 OF 2022 JUDGMENT SANJIV KHANNA, J. I have had the benefit of perusing the judgment authored by Dr. D.Y. Chandrachud, the Hon'ble Chief Justice. I respectfully agree with the findings and conclusions recorded therein. However, since my reasoning is different to arrive at the same conclusion, including application of the doctrine of proportionality, I am penning down my separate opinion. 2. To avoid prolixity, the contentions of the parties are not referred to separately and the facts are narrated in brief. 3. Corporate funding of political parties has been a contentious issue with the legislature's approach varying from time to time. The amendments to the Companies Act, 1956 reveal the spectrum of views of the legislature. It began with regulations and restrictions in 1960....
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....the aggregate of the amount which may be so contributed by the company in any financial year shall not exceed seven and a half per cent of its average net profits during the three immediately preceding financial years: Provided further that no such contribution shall be made by a company unless a resolution authorising the making of such contribution is passed at a meeting of the Board of Directors and such resolution shall, subject to the other provisions of this section, be deemed to be justification in law for the making and the acceptance of the contribution authorised by it. 182. Prohibitions and restrictions regarding political contributions- (1) Notwithstanding anything contained in any other provision of this Act, a company, other than a Government company and a company which has been in existence for less than three financial years, may contribute any amount directly or indirectly to any political party: [First proviso omitted] Provided that no such contribution shall be made by a company unless a resolution authorising the making of such contribution is passed at a meeting of the Board of Directors and such resolution shall, subject to the other provisions of this sectio....
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.... year, no exemption under this section shall be available for that political party for such financial year. 13-A. Special provision relating to incomes of political parties.- Any income of a political party which is chargeable under the head "Income from house property" or "Income from other sources" or "capital gains or" any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party: Provided that- (a) such political party keeps and maintains such books of account and other documents as would enable the Assessing Officer to properly deduce its income therefrom; (b) in respect of each such voluntary contribution other than contribution by way of electoral bond in excess of twenty thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution; (c) the accounts of such political party are audited by an accountant as defined in the Explanation below sub-section (2) of Section 288 and: (d) no donation exceeding two thousand rupees is received by such political party otherwise th....
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....son in India other than the Bank, or, as expressly authorized by this Act the Central Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of money payable to bearer on demand, or borrow, owe or take up any sum or sums of money on the bills, hundis or notes payable to bearer on demand of any such person: Provided that cheques or drafts, including hundis, payable to bearer on demand or otherwise may be drawn on a person's account with a banker, shroff or agent. 2) Notwithstanding anything contained in the Negotiable Instruments Act, 1881 (26 of 1881), no person in India other than the Bank or, as expressly authorised by this Act, the Central Government shall make or issue any promissory note expressed to be payable to the bearer of the instrument. (3) Notwithstanding anything contained in this section, the Central Government may authorise any scheduled bank to issue electoral bond. Explanation.- For the purposes of this sub-section, "electroal bond" means a bond issued by any scheduled bank under the scheme as may be notified by the Central Government. Section 29-C of the Representation of the Peop....
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....cial year under sub-section (1) shall be submitted by the treasurer of a political party or any other person authorised by the political party in this behalf before the due date for furnishing a return of its income of that financial year under Section 139 of the Income Tax, 1961 (43 of 1961) to the Election Commission. (4) Where the treasurer of any political party or any other person authorised by the political party in this behalf fails to submit a report under sub-section (3), then, notwithstanding anything contained in the Income Tax Act, 1961 (43 of 1961), such political party shall not be entitled to any tax relief under that Act. Section 2 of the Foreign Contribution Regulation Act, 2010 Prior to Amendment by the Finance Act 2017 Post Amendment by Section 236 the Finance Act 2017 Section 2 (1) (j) (j) "foreign source" includes,- (i) the Government of any foreign country or territory and any agency of such Government; (ii) any international agency, not being the United Nations or any of its specialised agencies, the World Bank, International Monetary Fund or such other agency as the Central Government may, by notification, specify in this behalf; (iii) a foreign ....
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....bution will require a resolution passed at the meeting of the Board is retained. In the profit and loss account, a company is now only required to disclose the total amount contributed to political parties in a financial year.14 The requirement to disclose the specific amounts contributed and the names of the political parties is omitted. Section 182(3A), as introduced, stipulates that the company could contribute to a political party only by way of a cheque, Electronic Clearing System15, or demand draft.16 The proviso to Section 182(3A) permits a company to contribute through any instrument issued pursuant to any scheme notified under the law, for the time being in force, for contribution to political parties. 7. Section 13A of the Income Tax Act, 1961,17 exempts income of political parties, including financial contributions and investments, from income tax. The object of providing a tax exemption is to increase the funds of political parties from legitimate sources. However, conditions imposed require political parties to maintain books of accounts and other documents to enable the assessing officer to properly deduce their income.18 Political parties are required to maintain re....
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....or a period of 15 days from the date of issue.35 The amount of Bonds not encashed within the validity period of 15 days, would be deposited by the authorised bank to the Prime Minister Relief Fund.36 The Bond is non-refundable.37 A 'person' who wishes to purchase a Bond is required to apply in the specified format.38 Non-compliant applications are to be rejected. To purchase Bonds, a buyer is required to apply to the authorised bank.39 RBI's Know Your Customer40 requirements apply and the authorised bank could ask for additional KYC documents, if necessary.41 The payments for the issuance of Bonds are required to be made in Indian rupees through demand draft, cheque, ECS or direct debit to the buyer's account.42 The identity and information furnished by the buyer for the issuance of Bonds is to be treated as confidential by the authorised issuing bank.43 The details, including identity, can be disclosed only when demanded by a competent court or on registration of any criminal case by any law enforcement agency.44 Only eligible political parties, meaning a party that is registered under Section 29A of the Representation of the People Act, 1951, and has secured not less ....
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....4 SCC 17 and Pioneer Urban Land and Infrastructure and Another v. Union of India and Others, (2019) 8 SCC 416 relating to judicial review on economic policy matters have no application to the present case. To give the legislation the latitude of economic policy, we will be diluting the principle of free and fair elections. Clearly, the importance of the issue and the nexus between money and electoral democracy requires us to undertake an in-depth review, albeit under the settled powers of judicial review. 16. Even otherwise, it is wrong to state as a principle that judicial review cannot be exercised over every matter pertaining to economic policy. R.K. Garg v. Union of India and Others, (1981) 4 SCC 675 The law is that the legislature has to be given latitude in matters of economic policy as they involve complex financial issues. Ibid. See also Bhavesh D. Parish and Others v. Union of India and Others, (2000) 5 SCC 471, and Directorate General of Foreign Trade and Others v. Kanak Exports and Another, (2016) 2 SCC 226 The degree of deference to be shown by the court while exercising the power of judicial review cannot be put in a straitjacket. 17. On the question of burden of pro....
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....icy decisions. Access to information which can materially shape the citizens' choice is necessary for them to have a say in how their lives are affected. Thus, the right to know is paramount for free and fair elections and democracy. 20. The decisions in Association for Democratic Reforms (supra) and People's Union of Civil Liberties (PUCL) (supra) should not be read as restricting the right to know the antecedents of a candidate contesting the elections.63 The political parties select candidates who contest elections on the symbol allotted to the respective political parties64. Upon nomination, the candidates enjoy the patronage of the political parties, and are financed by them. The voters elect a candidate with the objective that the candidate's political party will come to power and fulfil the promises. 21. The Hon'ble Chief Justice has referred to the Tenth Schedule of the Constitution. The Schedule incorporates a provision for the disqualification of candidates on the ground of defection, which reflects the importance of political parties in our democracy. Section 77 of the Representation of the People Act, 1951, requires monetary limits to be prescribed for expenditures in....
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...., donating money to one's preferred political party is a matter of self-expression by the donor. Therefore, revealing the identity invades the informational privacy of donors protected by the Constitution. See K.S. Puttaswamy and Anr. v. Union of India and Ors. (9J) (Privacy), (2017) 10 SCC 1 The identity of the donor can be revealed in exceptional cases, for instance on directions of a competent court, or registration of a criminal case by any law enforcement agency.72 (ii) The Scheme, by incentivising banking channels and providing confidentiality, checks the use of black or unaccounted money in political contributions.73 (iii) The Scheme is an improvement to the prior legal framework. It has inbuilt safeguards such as compliance of donors with KYC norms, bearer bonds having a limited validity of fifteen days and recipients belonging to a recognised political party that has secured more than 1% votes in the last general elections. 24. Hon'ble the Chief Justice has rejected the Union of India's submissions by applying the doctrine of proportionality. This is a principle applied by courts when they exercise their power of judicial review in cases involving a restriction on fun....
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....eps, there exists an alternative which is preferable; and this judgment will go beyond the strict means-ends assessment favoured by Grimm and the German version of the proportionality test; it will also require a form of balancing to be carried out at the necessity stage. 156. Insofar as second problem in German test is concerned, it can be taken care of by avoiding "ad hoc balancing" and instead proceeding on some "bright-line rules" i.e. by doing the act of balancing on the basis of some established rule or by creating a sound rule... xx xx xx 158. ...This Court, in its earlier judgments, applied German approach while applying proportionality test to the case at hand. We would like to proceed on that very basis which, however, is tempered with more nuanced approach as suggested by Bilchitz. This, in fact, is the amalgam of German and Canadian approach. We feel that the stages, as mentioned in Modern Dental College & Research Centre and recapitulated above, would be the safe method in undertaking this exercise, with focus on the parameters as suggested by Bilchitz, as this projects an ideal approach that need to be adopted." 27. The said test was also referred to in Anur....
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....ng opinion in K.S. Puttaswamy (9J) (Privacy) (supra) had held that actions not only should be sanctioned by law, but the proposed actions must be necessary in a democratic society for a legitimate aim. The extent of interference must be proportionate to the need for such interference and there must be procedural guarantees against abuse of such interference. 29. The test of proportionality is now widely recognised and employed by courts in various jurisdictions like Germany, Canada, South Africa, Australia and the United Kingdom.82 However, there isn't uniformity in how the test is applied or the method of using the last two prongs in these jurisdictions. 30. The first two prongs of proportionality resemble a means-ends review of the traditional reasonableness analysis, and they are applied relatively consistently across jurisdictions. Courts first determine if the ends of the restriction serve a legitimate purpose, and then assess whether the proposed restriction is a suitable means for furthering the same ends, meaning it has a rational connection with the purpose. 31. In the third prong, courts examine whether the restriction is necessary to achieve the desired end. When asse....
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.... stage 'normatively'88 by examining the weight of the seriousness of the right infringement against the urgency of the factors that justify it. Examination under the first three stages requires the court to first examine scientific evidence, and where such evidence is inconclusive or does not exist and cannot be developed, reason and logic apply. We shall subsequently be referring to the balancing prong during our application of the test of proportionality. 34. In Germany, the courts enjoy a high judicial discretion. The parliament and the judiciary in Germany have the same goal, that is, to realise the values of the German Constitution.89 Canadian courts, some believe, in practice give wider discretion to the legislature when a restriction is backed by sufficient data and evidence.90 The constitutional court in South Africa, as per some jurists, collectively applies the four prongs of proportionality instead of a structured application.91 While proportionality is the predominant doctrine in Australia, an alternate calibrated scrutiny test is applied by a few judges.92 It is based on the premise that a contextual, instead of broad standard of review, is required to be adopted for ....
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....ty B forms the Government, I would be facing victimization and retribution and vice versa. If I give money to Party B and Party A continues to be in Government, then I would be facing retribution or victimization. Therefore, the safest course was to pay by cash, so that none of the parties know what I paid to which party, and both parties are happy that I have paid something. So, that, the payment by cash ensured confidentiality. Both parties would say that one party would be given 100 crores, one party would be given 40 crores, depending upon my assessment of their winnability. But both would not know who is paid what. My Lord, sometimes what used to happen is in my business, I get only clean money or substantial part of the clean money, but practicalities require that I contribute to the political parties, and practicality again requires that I contribute with a degree of confidentiality so that I am not victimized in the future. And therefore clean money used to be converted into unclean money. White money is being converted into black money so that it can be paid, according to them anonymously, and according to me with confidentiality. And this is disastrous for the economy whe....
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....Bond, he has to provide full particulars and fulfil the KYC norms of the bank.102 His identity is then asymmetrically known to the person and the officers of the bank from where the Bond is purchased.103 Similarly, the officers in the branch of the authorised bank104 where the political party has an account and encashes the Bond are known to the officers in the said bank.105 41. The argument raised by the Union of India that details can be revealed when an order is passed by a court or when it is required for investigation pursuant to registration of a criminal case106 overlooks the fact that it is their stand that the identities of the contributors/donors should be concealed because of fear of retaliation, victimisation and reprisal. That fear would still exist as the identity of the purchaser of the Bond can always be revealed upon registration of a criminal case or by an order/direction of the court. Thus, the fear of reprisal and vindictiveness does not evaporate. The so-called protection exists only on paper but in practical terms is not a good safeguard even if we accept that the purpose is legitimate. It fails the rational nexus prong. 42. The fear of the identities of don....
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....ering, as defined under the Prevention of Money Laundering Act, 2002109. The Financial Action Task Force110 has observed that the signatory States are required to check money laundering on account of contributions made to political parties.111 Article 7(3) of the United Nations Convention against Corruption, 2003 mandates the state parties to enhance transparency in political funding of the candidates and parties.112 The said convention is signed and ratified by India. By ensuring anonymity, the policy ensures that the money laundered on account of quid pro quo or illegal connection escapes eyeballs of the public. 47. The economic policies of the government have an impact on business and commerce. Political pressure groups promote different agendas, including perspectives on economic policies. As long as these pressure groups put forward their perspective with evidence and data, there should not be any objection even if they interact with elected representatives. The position would be different if monetary contributions to political parties were made as a quid pro quo to secure a favourable economic policy. This would be an offence under the Prevention of Corruption Act, 1988 and ....
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....vis-à-vis their contributions to the political party. When we apply the necessity test propounded in Anuradha Bhasin (supra)116, the Trust Scheme achieves the objective of the Union of India in a real and substantial manner and is also a less restrictive alternate measure in view of the disclosure requirements, viz. the right to know of voters. The Trust Scheme is in force and is a result of the legislative process. In a comparison of limited alternatives, it is a measure that best realises the objective of the Union of India in a real and substantial manner without significantly impacting the fundamental right of the voter to know. The ECI, if required, can suitably modify the guidelines dated 06.06.2014. 52. I would now come to the fourth prong. I would begin by first referring to the judgment cited by Hon'ble the Chief Justice in the case of Campbell v. MGM Limited [2004] 2 AC 457. This judgment adopts double proportionality standard to adequately balance two conflicting fundamental rights. Double proportionality has been distinguished from the single proportionality standard in paragraph 152 of the judgment authored by Hon'ble the Chief Justice. Campbell (supra) states ....
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....basis of rival generalities. An intense focus on the comparative importance of the specific rights being claimed in the individual case is necessary before the ultimate balancing test in terms of proportionality is carried out." 56. Fundamental rights are not absolute, legislations/policies restricting the rights may be enacted in accordance with the scheme of the Constitution. However, it is now well settled that the provisions of fundamental rights in Part III of the Constitution are not independent silos and have to be read together as complementary rights. Rustom Cavasjee Cooper v. Union of India, (1970) 1 SCC 248; K.S. Puttaswamy (9J) (Privacy) (supra), and Maneka Gandhi v. Union of India and Another, (1978) 1 SCC 248. Therefore, the thread of reasonableness applies to all such restrictions. The test of single proportionality will apply. Secondly, Article 14, as observed by the Hon'ble Chief Justice in his judgment See paragraphs 191 to 195 of the Hon'ble Chief Justice's judgment. includes the facet of formal equality and substantive equality. Thus, the principle 'equal protection of law' requires the legislature and the executive to achieve factual equality. This prin....
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....ove, the right to privacy operates in the personal realm, but as the person moves into communal relations and activities such as business and social interaction, the scope of personal space shrinks contextually. See Bernstein and Ors. v. Bester NO and Others, (1996) ZACC 2, para 67. In this context, the High Court of South Africa in My Vote Counts NPC v. President of the Republic of South Africa and Ors. My Vote Counts NPC v. President of the Republic of South Africa and Ors. (2017) ZAWCHC 105, para 67. observes that: "(...) given the public nature of political parties and the fact that the private funds they receive have a distinctly public purpose, their rights to privacy can justifiably be attenuated. The same principles must, as a necessary corollary, apply to their donors. (...)" (emphasis supplied) 60. The great underlying principle of the Constitution is that rights of individuals in a democratic set-up is sufficiently secured by ensuring each a share in political power. Harrison Moore, The Constitution of the Commonwealth of Australia, p.329 (1902) This right gets affected when a few make large political donations to secure selective access to those in power. W....
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....se who otherwise might not be heard and the State can also restrict voices that dominate political discourse so that others can be heard as well. 63. The Supreme Court of the United States in Buckley v. R Valeo 424 U.S. 1 (1976). has commented on the concern of quid pro quo arrangements and its dangers to a fair and effective government. Improper influence erodes and harms the confidence in the system of representative government. Contrastingly, disclosure provides the electorate with information as to where the political campaign money comes from and how it is spent. This helps and aides the voter in evaluating those contesting elections. It allows the voter to identify interests which candidates are most likely to be responsive to, thereby facilitating prediction of future performance in office. Secondly, it checks actual corruption and helps avoid the appearance of corruption by exposing large contributions and expenditures to the light of publicity. Relying upon Grosjean v. American Press Co. 297 U.S. 233 (1936), it holds that informed public opinion is the most potent of all restraints upon misgovernment. Thirdly, record keeping, reporting and disclosure are essential m....
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.... will of the people so that the fruits of democracy are truly reaped. 217. The essential hallmark of a genuine democracy is the transformation of the "Ruled" into a citizenry clothed with rights which in the case of the Indian Constitution also consist of fundamental rights, which are also being freely exercised and the concomitant and radical change of the ruler from an "Emperor" to a public servant. With the accumulation of wealth and emergence of near monopolies or duopolies and the rise of certain sections in the Media, the propensity for the electoral process to be afflicted with the vice of wholly unfair means being overlooked by those who are the guardians of the rights of the citizenry as declared by this Court would spell disastrous consequences." 66. The Law Commission of India in its 255th Report noted the concern of financial superiority translating into electoral advantage.135 It was observed that lobbying and capture give undue importance to big donors and certain interest groups, at the expense of the ordinary citizen, violating "the right of equal participation of each citizen in the polity." R.C.Poudyal v. Union of India and Others, (1994) Supp 1 SCC 324 While....
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.... and the States. There has also been a substantial increase in contribution/donation through Bonds. 70. Petitioner no. 1 - Association for Democratic Reforms has submitted the following table which showcases party-wise donation by corporate houses to national parties: PARTY-WISE CORPORATE DONATION (NATIONAL PARTIES) (IN RS. Cr) Party 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Total BJP 515.500 400.200 698.140 720.407 416.794 548.808 3,299.8500 INC 36.060 19.298 127.602 133.040 35.890 54.567 406.4570 NCP 6.100 1.637 11.345 57.086 18.150 15.280 109.5980 CPI(M) 3.560 0.872 1.187 6.917 9.815 6.811 29.1615 AITC 2.030 0.000 42.986 4.500 0.000 0.250 49.7660 CPI 0.003 0.003 0.000 0.000 0.000 0.000 0.0055 BSP 0.000 0.000 0.000 0.000 0.000 0.000 0.0000 TOTAL 563.253 422.010 881.260 921.950 480.649 625.716 3,894.8380 As per the said table, the data shows that the party-wise donation by the corporate houses has been more or less stagnant from the years 2016-17 to 2021-22. We do not have the comments or official details in this regard from the Union of India or the ECI. The figures support our conclusion, bu....
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....of the Companies Act, deleting the first proviso thereunder should be struck down. While doing so, I would rather apply the principle of proportionality which, in my opinion, would subsume the test of manifest arbitrariness.138 In addition, the claim of privacy by a corporate or a company, especially a public limited company would be on very limited grounds, restricted possibly to protect the privacy of the individuals and persons responsible for conducting the business and commerce of the company. It will be rather difficult for a public (or even a private) limited company to claim a violation of privacy as its affairs have to be open to the shareholders and the public who are interacting with the body corporate/company. This principle would be equally, with some deference, apply to private limited companies, partnerships and sole proprietorships. 74. In consonance with the above reasoning and on application of the doctrine of proportionality, proviso to Section 29C(1) of the Representation of the People Act 1951, Section 182(3) of the Companies Act 2013 (as amended by the Finance Act 2017), Section 13A(b) of the Income Tax Act 1961 (as amended by the Finance Act 2017), are held ....
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....e date of each such credit." The intent of the order dated 12.04.2019 is that the ECI will continue to maintain full particulars of the donors against each Bond; the amount of each such Bond and the full particulars of the credit received against each Bond, that is, the particulars of the bank account to which the amount has been credited and the date of each such credit. This is clear from paragraph 14 of the order dated 12.04.2019 which had directed that the details mentioned in paragraph 13 of the order dated 12.04.2019 will be furnished forthwith in respect of the Bonds received by a political party till the date of passing of the order. 78. In view of the findings recorded above, I would direct the ECI to disclose the full particular details of the donor and the amount donated to the particular political party through Bonds. I would restrict this direction to any donations made on or after the interim order dated 12.04.2019. The donors/purchasers being unknown and not parties, albeit the principle of lis pendens applies, and it is too obvious that the donors/purchasers would be aware of the present litigation. Hence, they cannot claim surprise. 79. I, therefore, respectful....
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....cie.140 Therefore, both rights and legislations/policies are required to be balanced and realized to the optimum possible extent. This jurisprudential clash is visible in the various forms and structures of adoptions of proportionality. Generally, two models can be differentiated from works of jurists. 1) Model I - Firstly, the traditional two stages of the means-end comparison is applied. After having ascertained the legitimate purpose of the law, the judge asks whether the imposed restriction is a suitable means of furthering this purpose (rational connection). Additionally in this model, the judge ascertains whether the restriction was necessary to achieve the desired end. The reasoning focuses on whether a less intrusive means existed to achieve the same ends (minimal impairment/necessity). 2) Model II - This model adds a fourth step to the first model, namely the balancing stage, which weighs the seriousness of the infringement against the importance and urgency of the factors that justify it. In the table provided below, we have summarised the different models of proportionality and its alternatives, as propounded by jurists and adopted by courts internationally. We hav....
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...., i.e., the epistemic side, the values assigned are - reliable (r), plausible (p) and not evidently false (e) - in numbers these are - 20, 2-1, 2-2 - i.e., 1, 0.5 and 0.25 Germany Balancing was adopted by the German Constitutional Court in the 1950s as a new methodology for intensive judicial review of rights-restricting legislation. It stems from the belief that the German Constitution posits an original idea of values, and the government and courts, both have a duty to realise these values.142 The main premise of the criticisms of balancing is the wide discretion available to judges. To capture three contemporary criticisms in brief: (i) it leads to a comparison of incommensurable values;143 (ii) it fails to create predictability in the legal system and is potentially dangerous for human rights;144 and (iii) conversely, it is equally intrusive from the perspective of separation of powers.145 Three-stage Proportionality This model proposes limiting the proportionality enquiry to its first three prongs, i.e., minus the balancing stage. Von Bernstorff argues against ad hoc balancing based on two principal reasons: (i) ad hoc balancing fails to erect stable and predictable standa....
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.... standard or balance of probabilities.148 Where scientific or social science evidence is available, it will be required; However, where such evidence is inconclusive, or does not exist and cannot not be developed, reason and logic may suffice.149 David Blichitz's approach was followed in Aadhar (5J) (Privacy) (supra) case. This test was referenced in Anuradha Bhasin (supra), which applied a moderate interpretation of the necessity test. To conclude the findings of the necessity stage this Court in Anuradha Bhasin (supra) suggests that an overall comparison be undertaken between the measure and its feasible alternatives. Means-ends Test The doctrine is similar to a reasonableness inquiry, albeit with some variation. In Australia, for instance, courts enquire whether a law is 'reasonably appropriate and adapted' to achieving a legitimate end in a manner compatible with the constitutionally prescribed system of representative and responsible government. Australia The test was followed in Australia before the development of proportionality and is not frequently used in contemporary times. The test is simplistic and gives limited judicial flexibility. It does no....
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....erica The courts in the United States use a tiered approach of review with strict scrutiny, intermediate scrutiny and rational basis existing in decreasing degree of intensity. Only a limited number of laws survive under the strict scrutiny test. Its application is reserved for instances where the most intensely protected fundamental rights are affected. Unreasonablenes s / Wednesbury Principles A standard of unreasonableness is used for the judicial review of a public authority's decision. A reasoning or decision is unreasonable (or irrational) when no person acting reasonably could have arrived at it. This test has two limbs: (i) The court is entitled to investigate the action to check whether the authority has considered and decided on matters which they ought not to have considered, or conversely, have refused to consider or neglected to consider matters which they ought to have considered. (ii) If the above query is answered in favour of the local authority, it may be held that, although the local authority has ruled on matters which they ought to have considered, the conclusion they have arrived at is nonetheless so unreasonable that no reasonable authority could ever ....
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....ion 2, Election and Other Related Laws (Amendment) Act, 2003. 25 For short, "ECI". 26 Proviso to Section 29C(1) of the Representation of the People Act, 1951. 27 For short, "the Scheme". 28 Finance Act, 2017 has also amended and added Section 31(3) to the RBI Act, 1934 as the Bonds in question are bearer bonds like Indian currency. However, we do not think this amendment is required to be separately adjudicated as it merely effectuates the Bonds scheme. 29 Paragraph 2(a) of the Scheme. 30 Ibid. 31 Paragraph 2(d) of the Scheme defines a 'person' to include an individual, Hindu undivided family, company, firm, an association of persons or body of individuals, whether incorporated or not. It also includes every artificial judicial person and any agency, office or branch owned by such 'person'. 32 Paragraph 3(1) of the Scheme. 33 Paragraph 3(2) of the Scheme. 34 Paragraph 5 of the Scheme. 35 Paragraph 6 of the Scheme. 36 Paragraph 12(2) of the Scheme. 37 Paragraph 7(6) of the Scheme. 38 Paragraph 7 of the Scheme. 39 Paragraph 2(b) of the Scheme defines an authorized bank as the State Bank of India and its specified branches. 40 For short, "KYC". 41 Paragraph 4 of the S....
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....ar) (supra), albeit his observations on the objective of the second prong of rational connection are good and in consonance with the law on the subject. 82 We will be referring to certain facets of the proportionality enquiry employed by these countries in our judgment. The test is also employed in various other jurisdictions like Israel, New Zealand, and the European Union. 83 See David Bilchitz at supra note 76. 84 In Anuradha Bhasin (supra), the Court stipulated the following requirement for a conclusion of findings on the necessity prong: "...A judgment must be made whether the government measure is the best of all feasible alternatives, considering both the degree to which it realises the government objective and the degree of impact upon fundamental rights..." 85 See Jochen von Bernstroff, Proportionality Without Balancing: Why Judicial Ad Hoc Balancing is Unnecessary and Potentially Detrimental to Realisation of Collective and Individual Self Determination, Reasoning Rights - Comparative Judicial Engagement, (Ed. Liaora Lazarus); Bernhard Schlink, 'Abwägung im Verfassungsrecht', Duncker & Humblot, 1976, and Francisco J. Urbina, 'Is It Really That Easy? A Critique....
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.... terms of paragraph 2(b) of the Scheme, only State Bank of India and its specified branches are allowed to issue Bonds. 104 Ibid. 105 Paragraph 3(4) of the Scheme. 106 See paragraph 7(4) of the Scheme. 109 For short, "PMLA". 110 For short, "FATF". 111 Paragraph 3, Section B, International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation - The FATF Recommendations, 2012. 112 See also United Nations General Assembly Resolution A/RES/S-32/1, 02.06.2021, para 12. 113 This is inapplicable to Bonds under proviso (b) to Section 13A of the Income Tax Act, 1961. 114 For short, "Trust Scheme". 115 Similarly, early campaign finance laws in the United Kingdom permitted trusts to donate to political parties. It came to be disallowed since it was contrary to openness and accountability. See Suchindran Bhaskar Narayan and Lalit Panda, Money and Elections - Necessary Reforms in Electoral Finance, Vidhi 2018 at p. 19. See also Lord Neill of Bladen, QC, 'Fifth Report of the Committee on Standards in Public Life: The Funding of Political Parties in the United Kingdom', 1998 pp 61-62. 116 As elaborated in paragraph 27] of this judgement, Anuradha Bhas....
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....ian Rivers, trans. Oxford Univ. Press 2002). 143 See Francisco J. Urbina, 'Is It Really That Easy? A Critique of Proportionality and Balancing as Reasoning' Canadian Journal of Law and Jurisprudence, 2014; and Bernhard Schlink, 'Abwägung im Verfassungsrecht', Duncker & Humblot, 1976. 142 See Article 1 and 20, Basic Law for the Federal Republic of Germany. 144 Jochen von Bernstroff, Proportionality Without Balancing: Why Judicial Ad Hoc Balancing is Unnecessary and Potentially Detrimental to Realisation of Collective and Individual Self Determination, Reasoning Rights - Comparative Judicial Engagement, (Ed. Liaora Lazarus); 145 Ibid. 150 See Charterpedia, Department of Justice, Government of Canada, available at: https://www.justice.gc.ca/eng/csj-sjc/rfc-dlc/ccrf-ccdl/check/art1.html. Also see Niels Petersen (supra). 152 Niels Petersen, 'Proportionality and judicial Activism: Fundamental Rights Adjudication in Canada, Germany and South Africa, (CUP 2017). 146 Jochen von Bernstroff, Proportionality Without Balancing: Why Judicial Ad Hoc Balancing is Unnecessary and Potentially Detrimental to Realisation of Collective and Individual Self Determination, Reasonin....