TaxTMI 
TaxTMI 
2024 (2) TMI 812
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....ir, Adv. For the Respondent : Mr. 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 Me....
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....or Privacy ........................................................................................ 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 .........................................................
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....y political party; and (b) to any individual or body for any political purpose, amounts 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 f....
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.... the financial year with specific particulars of the total amount contributed along with the name of the 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. Th....
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....in excess of twenty thousand rupees received by the party from a person or company other than Government companies in that financial year. The report prepared must be submitted 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 ....
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.... c. The purchase of electoral bonds would be allowed from a KYC compliant bank account of the purchaser; d. The electoral bonds can be redeemed only upon being deposited into the designated bank account of an eligible political party; e. The sale of electoral bonds 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....
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....s of the political parties, it cannot be ascertained whether the political party has taken any donation in violation of provisions under Section 29B of the Representation of the People Act 1951 which prohibits the political parties from donations from Government Companies and Foreign sources." 23. Referring to the deletion of the provision 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 politic....
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....sed bank with the Prime Minister's Relief Fund;35 g. A buyer who wishes to purchase electoral bond(s) can apply in the format specified in Annexure II of the Scheme.36 The issuing branch shall issue the bond if all the requirements are fulfilled.37 The application shall be rejected if the application is not KYC compliant or if the application does not meet the requirements of the scheme;38 h. 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 ....
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....m both sides (purchaser of bond and political party) and do some "match the following". Therefore, it is not as though the operations under the Scheme are behind iron curtains incapable of being pierced." 27. The petitioners have also challenged the introduction of the Finance Act as a Money Bill under Article 110 of the Constitution. The issue of the scope of Article 110 has been referred to a seven-Judge Bench and is pending adjudication. Roger Mathew v. South Bank of India, CA 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 Sectio....
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....ro quo arrangements. The available data indicates that more than ninety four percent of the total electoral bonds are purchased in denominations of rupees one crore. This indicates that bonds are purchased by corporates and not individuals. The limited disclosure clause in the Electoral Bond Scheme prevents investigating agencies such as the Central Bureau of Investigation and Enforcement Directorate from identifying corruption; and d. They violate the rights of shareholders of Companies who are donating money to political parties by preventing 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 o....
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....ade through electoral bonds; i. The Electoral Bond Scheme skews the principle of one person, one vote because it gives the corporates a greater opportunity to influence political parties and electoral outcomes; j. The amendment to Section 182(3) permits: (i) loss making companies to contribute to political parties; (ii) unlimited contributions to political parties enabling significant policy influence; and (iii) non-disclosure of information on political funding to shareholders; k. The amendments permitting non-disclosure of information on political funding are violative of the right to information under Article 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 ....
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....ucing political funding through non-banking channels" because: i. The purpose is not satisfied: The regime still permits cash funding up to Rupees two thousand. The operation of the Scheme increases anonymous funding through electoral bonds at the cost of contributions through regular banking channels; ii. There is no rational nexus between the means and the purpose; iii. Other less restrictive means of contributing through banking channels are available; and iv. The fifth prong of the proportionality analysis as laid down in Gujarat Mazdoor Sabha v. State of Gujarat (2020) 10 SCC 459 and Ramesh Chandra Sharma v. State of Uttar Pradesh 2023 SCC OnLine SC 162 that the legislation should 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....
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....ed Laws (Amendment) Act 2003 which amended the Companies Act 1956, IT Act 1961, and the RPA indicates that the amendments were made to incentivize contributions through banking channels. Thus, the amendments to Section 13A of the Income Tax Act and Section 29C of the RPA are contrary to the object of inserting Section 13A and Section 80GGB and Section 80GGC of the Income Tax Act; b. Since 1959, when companies were permitted to contribute to political parties, all companies were required to mandatorily disclose the total contributions made and the name of party to which they have contributed. Further, ceiling limits for total contribution by companies were prescribed. The Finance Act 2017 does away with these transparency requirements; and c. International perspectives on political funding regulations, 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: ....
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....rival political parties to enable them to critique it before the public. ii. Submissions of Union of India 37. The learned Attorney General for India made the following submissions: a. Political parties are an integral product of a free and open society and play an important role in the administration of the affairs of the community. Accordingly, they are entitled to receive all support, including financial contributions; b. The Electoral Bond Scheme allows any person to transfer funds to political parties of their choice through legitimate banking channels instead of other unregulated ways such as direct transfer through cash; c. The Scheme ensures confidentiality of the contributions made to political parties. The benefit of confidentiality to contributors ensures and promotes contribution of clean money to political parties; d. Citizens do not have a general 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; ....
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....ision ensures that ghost political parties are barred from seeking and receiving political funding; ii. Clause 4 requires a buyer of electoral bonds to meet the requisite KYC Norms. This ensures that only KYC compliant persons are entitled to buy electoral bonds; iii. The limited validity period of fifteen days ensures that the bond is not used as a parallel currency; iv. Clause 7(4) mandates the authorized bank to treat the information furnished by a buyer as confidential which shall not be disclosed to any authority, except when directed by a competent court or upon registration of criminal case by any law enforcement agency. This provision protects the privacy and personal details of the buyer visà- vis the state; and v. Clause 11 mandates that all payments for the purchase of electoral bonds shall be accepted through banking channels. This provision curbs the circulation of black money. f. The right of a citizen to know how political 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-expres....
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.... freedom of speech or the freedom of religion. RK Garg v. Union of India, (1981) 4 SCC 675 [8]; See Balco Employees Union v. Union of India, (2002) 2 SCC 333; DG of Foreign Trade v. Kanak Exports, (2016) 2 SCC 226 More recently, in Swiss Ribbons v. Union of India (2019) 4 SCC 17, this Court while deciding a challenge to the constitutional validity of provisions of the Insolvency and Bankruptcy Code 2016 observed that the legislature must be given "free play" in the joints to experiment with economic policy. This position was also followed in Pioneer Urban Land and Infrastructure Limited v. Union of India (2019) 8 SCC 416, where amendments to the Insolvency and Bankruptcy Code were challenged. 41. The question is whether the amendments under challenge relate to economic policy. While deciding on a constitutional challenge, the Court does not rely on the ipse dixit of the government, that a legislation is an economic legislation. Courts before classifying the policy underlying a legislation as economic policy must undertake an analysis 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 se....
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....rts as an adjudicating authority are not. However, the policy underlying the legislation must not violate the freedoms and rights which are entrenched in Part III of the Constitution and other constitutional provisions. It is for this reason that previous judgments of this Court have held that the presumption of constitutionality is rebutted when a prima facie case of violation of a fundamental right is established. The onus then shifts on the State to prove that the violation of the fundamental right is justified. In Dharam Dutt v. Union of India AIR 2004 SC 1295; Also see Ramlila Maidan Incident, In re, (2012) 5 SCC 1; State of Bombay v. FN Balsara, 1951 SCR 682; Ameerunissa Begum v. Mahboob Begum, 1952 2 SCC 697, a two-Judge Bench of this Court elucidated the principle in the following terms: "49. In spite of there being a general presumption in favour of the constitutionality of the legislation, in a challenge laid to the validity of any legislation allegedly violating any right or freedom guaranteed by clause (1) of Article 19 of the Constitution, on a prima facie case of such violation having been made out, the onus would shift upon the respondent State to show that ....
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....the size of the State and the Union Territory.62 The maximum limit of election expenses in an Assembly constituency varies between rupees twenty eight lakhs and forty lakhs depending on the size of the State.63 However, the law does not prescribe any limits for the expenditure by a political party. Explanation 1 to Section 77 stipulates that the expenditure incurred by "leaders of a political party" on account of travel for propagating the programme of the political party shall not be deemed to be election expenditure. Thus, there is an underlying dicohotomy in the legal regime. The law does not regulate contributions to candidates. It only regulates contributions to political parties. However, expenditure by the candidates and not the political party is regulated. Be that as it may, the underlying understanding of the legal regime regulating electoral finance is that finance is crucial for the sustenance and progression of electoral politics. 47. It is believed that money does not vote but people do. However, studies have revealed the direct and indirect influence of money on electoral politics.64 The primary way through which money directly influences politics is through its i....
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....cs. 51. Money also excludes parties which are new to the electoral fray, and in particular, parties representing the cause of marginalized communities. Political parties which do not have enough finance have had to form electoral coalitions with other established political parties who would in exchange shoulder a lion's share of the campaign expenditure of the newly established political party extending to costs related to coalition propaganda, print and digital advertising, vehicle and equipment hire, political rallies, food transportation, and daily expenditure for party cadres69. The compromises which newly formed political parties have to make lead to a dilution of the ideology of the party in exchange of its political sustenance. In this manner, money creates an exclusionary impact by reducing the democratic space for participation for both candidates and newer and smaller political parties. 52. The judgments of this Court have recognized the influence of money on politics. They take a critical view of the role played by big business and "big money" in the electoral process in India. The decision in Kanwar Lal Gupta v. Amar Nath Chawla, (1975) 3 SCC 646 notices tha....
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....d exhortations and extravagant promises. VIPs and VVIPs come and go, some of them in helicopters and air-taxis. The political parties in their quest for power spend more than one thousand crore of rupees on the General Election (Parliament alone), yet nobody accounts for the bulk of money so spent and there is no accountability anywhere. Nobody discloses the source of the money. There are no proper accounts and no audit. From where does the money come from nobody knows. In a democracy where rule of law prevails this naked display of black money, by violating the mandatory provisions of law, cannot be permitted." 55. The challenge to the statutory amendments and the Electoral Bond Scheme cannot be adjudicated in isolation without a reference to the actual impact of money on electoral politics. This Court has in numerous judgments held that the effect and not the object of the law on fundamental rights and other constitutional provisions must be determined while adjudicating its constitutional validity. The effect of provisions dealing with electoral finance cannot be determined without recognizing the influence of money on politics. Therefore, we must bear in mind the nexus betwe....
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....aced the right to information to the values of good governance, transparency and accountability. These judgments recognize that it is the role of citizens to hold the State accountable for its actions and inactions and they must possess information about State action for them to accomplish this role effectively. 61. In the first phase, this Court delineated the scope of the right to information in the context of deciding the disclosure of evidence relating to affairs of the State. Provisions of the Indian Evidence Act stipulate that evidence which is relevant and material to proceedings need not be disclosed to the party if the disclosure would violate public interest.76 In the 1960's, this Court framed the issue of disclosure of documents related to the affairs of the State in terms of a conflict between public interest and private interest. This Court observed that the underlying principle in the provisions of the Indian Evidence Act bearing on the disclosure of evidence related to the affairs of the State is that if such disclosure is denied, it would violate the private interest of the party. See State of Punjab v. Sodhi Sukhdev Singh, (1961) 2 SCR 371 [13] So, when a ....
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....ccountability and transparency of governance as important features of democratic governance. Democratic governance, the learned Judge remarked, is not restricted to voting once in every five years but is a continuous process by which the citizens not merely choose the members to represent themselves but also hold the government accountable for their actions and inactions for which citizens need to possess information Also see Dinesh Trivedi v. Union of India, (1997) 4 SCC 306 where this Court observed that sunlight is the best disinfectant. 64. Our discussion indicates that the first phase of the jurisprudence on the right to information in India focussed on the close relationship between the right and open governance. The judgments in this phase were premised on the principle that the citizens have a duty to hold the government of the day accountable for their actions and inactions, and they can effectively fulfil this duty only if the government is open and not clothed in secrecy. 65. In the second phase of the evolution of the jurisprudence on the right to information, this Court recognised the importance of information to form views on social, cultural and political issue....
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....ocratic Reforms (2002) 5 SCC 294 ("ADR"), this Court traced the right of voters to have information about the antecedents, including the criminal past, of candidates contesting elections, to Article 19(1)(a) of the Constitution. In ADR (supra), proceedings under Article 226 of the Constitution were instituted before the High Court of Delhi seeking a direction to implement the Law Commission's recommendations to (a) debar candidates from contesting elections if charges have been framed against them by a Court in respect of certain offences; and (b) ensure that candidates furnish details regarding criminal cases which are pending against them. The High Court held that the Court cannot direct Parliament to implement the recommendations of the Law Commission. However, the High Court directed the ECI to secure information relating to (a) the details of cases in which a candidate is accused of any offences punishable with imprisonment;(b) assets possessed by a candidate, their spouse and dependents; (c) facts bearing on the candidate's competence, capacity, and suitability for representing the people; and (d) any other information which ECI considers necessary for judging the capacity of....
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....n on affidavit as a part of nomination: a. Whether the candidate has been convicted, acquitted or discharged of any criminal offence in the past and if convicted, whether they are punished with imprisonment or fine; b. In the six months prior to the filling of nomination papers, whether the candidate was accused in any pending case for an offence punishable with imprisonment for two years or more, and in which a charge is framed or cognizance is taken by the court of law; c. The assets (immovable, movable, bank balances and others) of a candidate and of his/her spouse and that of dependents; d. Liabilities, if any, particularly whether there are any over dues to any public financial institution or government dues; and e. The educational qualifications of the candidate. 69. This Court observed that the ECI can ask candidates to disclose information about the expenditure incurred by political parties to maintain the purity of elections.86 However, the operative portion of the judgment did not reflect this observation. 70. Pursuant to the decision of this Court in ADR (supra), Parliament amended the RPA to incorporate some of the directions....
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....five directions which were issued by this Court in ADR (supra) were not construed to be inflexible and immutable theorems. The learned Judge observed that though the voters have a fundamental right to know the antecedents of candidates, all the conceptions of this right formulated by this Court in ADR (supra) cannot be elevated to the realm of fundamental rights. 73. The majority was of the view that the voters have a fundamental right to all the information which was directed to be declared by this Court in ADR (supra). Justice Venkatarama Reddi disagreed. In the opinion of the learned Judge, only certain information directed to be disclosed in ADR (supra) is "crucial" and "essential" to the right to information of the voter: "109. In my view, the points of disclosure spelt out by this Court in Assn. for Democratic Reforms case [Ed.: See full text at 2003 Current Central Legislation, Pt. II, at p. 3] should serve as broad indicators or parameters in enacting the legislation for the purpose of securing the right to information about the candidate. The paradigms set by the Court, though pro tempore in nature as clarified supra, are entitled to due weight. If the legislat....
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....d judge observed that the extent of disclosure mandated in RPA is fairly adequate with respect to past criminal records but not with regard to pending cases.92 With respect to assets and liabilities, the learned Judge observed that the disclosure of assets and liabilities is essential to the right to information of the voter because it would enable voters to form an opinion about whether the candidate, upon being elected in the past, had amassed wealth in their name or their family Additionally, information about dues which are payable by the candidate to public institutions would enable voters to know the candidate's dealing with public money in the past. 76. Justice Reddi observed that the requirement to disclose assets of the candidate's family was justified because of the prevalence of Benami transactions. Though mandating the disclosure of assets and liabilities would infringe the right to privacy of the candidate and their family, the learned Judge observed that disclosure which is in furtherance of the right to information would trump the former because it serves the larger public interest. Justice Reddi then observed that disclosure of the educational qualifications of a....
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.... a. Whether the requirements of disclosure of information about "candidates" can be extended to "political parties"; and b. If the answer to (a) above is in the affirmative, whether information on the funding of political parties is "essential" for exercising choice on voting. c. The focal point of the electoral process: candidate or political party 79. The decisions in ADR (supra) and PUCL (supra) recognise the right to information of a voter about candidates, which enables them to cast their vote in an effective manner. The relief which was granted by this Court in PUCL (supra) and ADR (supra) was restricted to the disclosure of information about candidates contesting the election because of the limited nature of the reliefs sought. The ratio decidendi of the two judgments of this Court is that voters have a right to receive information which is essential for them to cast their votes. This Court has to first analyse if the 'political party' is a relevant 'political unit' in the electoral process to answer the question whether funding details of political parties are essential information for the voter to possess. 80. The Constitution of India did not make a....
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.... of their political party while contesting elections. Even within candidates who are set up by political parties, the Symbols Order creates a distinction between unrecognised but registered political parties and recognised political parties. Recognised political parties shall continue to be allotted the same symbol for all General elections until the time these political parties fulfil the conditions for recognition under the Symbols Order.104 The effect of the provisions of the Symbols Order is that the symbols of certain political parties, particularly those which have enjoyed the status of a recognised political party for long are entrenched in the minds of the voters that they associate the symbol with the political party. 85. For unrecognised but registered political parties, though a common symbol is allotted for all candidates being set up by the political parties, the symbol is not "reserved" for the Party. The ECI could allot different symbols to that political party in each General election. The candidates of a registered but unrecognised political party may be represented by a common symbol but the people would not attach a specific symbol to the political party becau....
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....ar. For example, political parties by the names of "Dravida Munnetra Kazhagam", "All Indian Anna Dravida Munnetra Kazhagam", "Dravida Kazhagam", "Desiya Murpokku Dravida Kazhagam", "Makkal Desiya Murpokku Dravida Kazhagam", "Kongu Desa Makkal Katchi", "Kongunadu Makkal Desia Katchi", and "Kongunadu Makkal Katchi" contest elections in Tamil Nadu. The names of all the political parties bear similarities due to the usage of the same words with certain additions or deletions. The allocation of Symbols to political parties would help voters identify and distinguish between political parties which have similar sounding names. It is precisely because of the close association of the symbol with the political party by voters that both factions of the party vie for the symbol that is allotted to the Party when there is a split in a recognised political party. 88. India follows the open-list first past the post form of election in which votes are cast for a candidate and the candidate who secures the highest number of votes is chosen to represent the people of that constituency. It could be argued that this system of elections gives prominence to candidates and not political parties unlike....
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....l recognition in Rameshwar Prasad v. Union of India, (2006) 2 SCC 1 also prioritises political parties making them central to the governance structure.111 92. The centrality of political parties in the electoral system is further accentuated by the inclusion of the Tenth Schedule. The Tenth Schedule deals with disqualification on the ground of defection from the political party which set up the elected individual as its candidate. Paragraph 2 provides the following grounds of defection: a. Voluntarily giving up membership of the political party; and b. Voting or abstaining from voting in the House contrary to direction issued by the political party without obtaining prior permission from the political party and when such voting has not been condoned by the political party. 93. The underlying principle of anti-defection law which has been recognised by a seven-Judge Bench of this Court in Kihoto Hollohon v. Zachillhu, (1992) Supp (2) SCC 651 [4] is that a candidate set up by a political party is elected on the basis of the programme of that political party. In the course of years, while deciding disputes related to the Tenth Schedule, judgments of this ....
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....justice and rarely includes political inequality. 96. Electoral democracy in India is premised on the principle of political equality which the Constitution guarantees in two ways. First, by guaranteeing the principle of "one person one vote" which assures equal representation in voting. The Constitution prescribes two conditions with respect to elections to seats in Parliament which guarantee the principle of "one person one vote" with respect to every voter and amongst every State: a. Each State shall be divided into territorial constituencies in such a manner that the ratio between the population of each constituency and the number of seats allotted to it shall be the same throughout the State;116 and b. The total number of seats allotted to each State in Parliament should be such that the ratio between the number of seats, and the population of the State is the same for all States.117 97. Second, the Constitution ensures that socio-economic inequality does not perpetuate political inequality by mandating reservation of seats for Scheduled Castes and Scheduled Tribes in Parliament118 and State Assemblies.119 98. The Constitution guarantees political eq....
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....s.121 This access also translates into influence over policy-making. An economically affluent person has a higher ability to make financial contributions to political parties, and there is a legitimate possibility that financial contribution to a political party would lead to quid pro quo arrangements because of the close nexus between money and politics. Quid pro quo arrangements could be in the form of introducing a policy change, or granting a license to the contributor. The money that is contributed could not only influence electoral outcomes but also policies particularly because contributions are not merely limited to the campaign or pre-campaign period. Financial contributions could be made even after a political party or coalition of parties form Government. The possibility of a quid pro quo arrangement in such situations is even higher. Information about political funding would enable a voter to assess if there is a correlation between policy making and financial contributions. 101. For the information on donor contributions to be relevant and essential, it is not necessary that voters have to take the initiative to peruse the list of contributors to find relevant infor....
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....oss-verify. Further, according to the data on contributions made through electoral bonds, ninety four percent of the contributions through electoral bonds have been made in the denomination of one crore. Electoral bonds provide economically resourced contributors who already have a seat at the table selective anonymity vis-à-vis the public and not the political party. 104. In view of the above discussion, we are of the opinion that the information about funding to a political party is essential for a voter to exercise their freedom to vote in an effective manner. The Electoral Bond Scheme and the impugned provisions to the extent that they infringe upon the right to information of the voter by anonymizing contributions through electoral bonds are violative of Article 19(1)(a). ii. Whether the infringement of the right to information of the voter is justified 105. The next issue which falls for analysis is whether the violation of the right to information is justified. This Court has laid down the proportionality standard to determine if the violation of the fundamental right is justified. Modern Dental College & Research Centre v. State of Madhya Pradesh, (2016) 4 S....
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.... purpose of the restriction is traceable to the grounds stipulated in Article 19(2). They argue that the purpose of curbing of black money cannot be traced to any of the grounds in Article 19(2), and thus, is not a legitimate purpose for restricting the right to information. 110. Article 19(2) stipulates that the right to freedom of speech and expression can only be restricted on the grounds of: (a) the sovereignty and integrity of India; (b) the security of the State; (c) friendly relations with foreign states, (d) public order; (e) decency or morality; (f) contempt of court; (g) defamation; and (h) incitement to an offence. The purpose of curbing black money is traceable to public interest. However, public interest is not one of the grounds stipulated in Article 19(2). Of the rights recognized under Article 19, only Article 19(1)(g) which guarantees the freedom to practice any profession or to carry on any occupation, trade or business can be restricted on the ground of public interest. Constitution of India 1950; Article 19(6). 111. In Sakal Papers v. The Union of India AIR 1962 SC 305, the constitutional validity of the Newspaper (Price and Page) Act 1965 and the Daily Ne....
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....PUCL (supra) observed that the right under Article 19(1)(a) can be restricted on grounds which are not "strictly within the confines of Article 19(2)". PUCL (supra), [111] For this purpose, Justice Reddi referred to the observations of Justice Jeevan Reddy in The Secretary, Ministry of Information v. Cricket Association of Bengal 1995 AIR 1236: "99. [...] This raises the larger question whether apart from the heads of restriction envisaged by sub-article (2) of Article 19, certain inherent limitations should not be read into the article, if it becomes necessary to do so in national or societal interest. The discussion on this aspect finds its echo in the separate opinion of Jeevan Reddy, J. in Cricket Assn. case [(1975) 4 SCC 428] . The learned Judge was of the view that the freedom of speech and expression cannot be so exercised as to endanger the interest of the nation or the interest of the society, even if the expression "national interest" or "public interest" has not been used in Article 19(2). It was pointed out that such implied limitation has been read into the First Amendment of the US Constitution which guarantees the freedom of speech and expression in un....
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....erved that public interest is synonymous to state interest which is one of the grounds underlying Article 19(2): "189. Reference may also be made in this connection to the decision of the United States Supreme Court in FCC v. National Citizens Committee for Broadcasting [56 L Ed 2d 697 : 436 US 775 (1978)] referred to hereinbefore, where it has been held that "to deny a station licence because the public interest requires it is not a denial of free speech". It is significant that this was so said with reference to First Amendment to the United States Constitution which guarantees the freedom of speech and expression in absolute terms. The reason is obvious. The right cannot rise above the national interest and the interest of society which is but another name for the interest of general public. It is true that Article 19(2) does not use the words "national interest", "interest of society" or "public interest" but as pointed hereinabove, the several grounds mentioned in clause (2) are ultimately referable to the interests of the nation and of the society." (emphasis supplied) 115. The observations of Justice Sawant and the concurring opinion of Justice Jeevan Re....
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....espondents submit that before the introduction of the Electoral Bond Scheme, a major portion of the total contributions received by political parties was from "unknown sources". For example, immediately preceding the financial year (2016-17) in which the Electoral Bond Scheme was introduced, eighty one percent of the contributions (Rupees 580.52 Crores) were received by political parties through voluntary contributions. Since the amount of voluntary contributions is not regulated, it allowed the circulation of black money. However, after the introduction of the Electoral Bond Scheme, fortyseven percent of the contributions were received through electoral bonds which is regulated money. The Union of India submitted that providing anonymity to the contributors incentivizes them to contribute through the banking channel. Assuming, for the purpose of hypothesis that the Union of India is right on this prong, what it urges is that non-disclosure of information about political expenditure has a rational nexus with the goal, that is, curbing black money or unregulated money. 119. The next stage of the proportionality standard is the least restrictive means stage. At this stage, this Co....
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....onents" to whom donations were not made. 121. In addition to the alternatives identified above, the existing legal regime provides another alternative in the form of Electoral Trusts through which the objective of curbing black money in electoral financing can be achieved. Section 2(22AA) of the IT Act defines an Electoral Trust as a trust approved by the Board in accordance with the scheme made in this regard by the Central Government. Section 13B of the IT Act states that any voluntary contributions received by an electoral trust shall not be included in the total income of the previous year of such electoral trust if the it distributes ninety five percent of the aggregate donations received during the previous year. In terms of Rule 17CA of the IT Rules 1962, the features of an electoral trust are as follows: a. An Electoral Trust may receive voluntary contribution from (i) an individual who is a citizen of India; (ii) a company registered in India; (iii) a firm or Hindu undivided family or an Association of persons or a body of individuals residing in India; b. When a contribution is made to an electoral trust, a receipt recording the following information ....
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....ion reports of Electoral Trusts mandating in the interest of transparency that all Electoral Trusts shall submit an Annual Report containing details of contributions received and disbursed by them to political parties. Pursuant to the Guidelines, Electoral Trusts submit Annual Reports to the ECI every year. For example, according to the Annual Report of the Prudent Electoral Trust for the financial year 2021-22, the Trust received contributions of a total of Rupees 4,64,83,00,116 from seventy contributors including individuals and companies. The contributions were unequally distributed to the Aam Aadmi Party, All India Congress Committee, Bharatiya Janata Party, Goa Congress Committee, Goa Forward Party, Indian National Congress, Punjab Lok Congress, Samajwadi Party, Shiromani Akali Dal, Telangana Rashtra Samiti, and YSR Congress. From the report, it cannot be discerned if contributor 'A' contributed to a particular political party. It can only be concluded that contributor 'A' could have contributed to the Party. 124. Thus, even if the argument of the Union of India that the other alternative means such as the other modes of electronic transfer do not realize the objective of c....
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....ose the consolidated amount contributed and received through Electoral Bonds respectively. The particulars about the political party to which the contributions were made which is crucial to the right to information of political funding cannot be identified through the matching exercise. 127. With respect to contributions to an Electoral Trust, a voter receives partial information. The voter would know the total amount contributed by the donor and that the donor contributed to one of the political parties (in case the Electoral Trust has made contributions to multiple parties). But the donor would not be aware of the exact details of the contribution. 128. Assuming that anonymity incentivizes contributions through banking channels (which would lead to curbing black money in the electoral process), electoral bonds would be the most effective means in curbing black money, followed by Electoral Trust, and then other means of electronic transfer. This conclusion is premised on the belief that the Electoral Bond curbs black money. However, the Scheme is not fool-proof. The Electoral Bond Scheme does not provide any regulatory check to prevent the trading of bonds though Clause 14 o....
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....a facet of political affiliation. If the right to informational privacy extends to financial contributions to a political party, this Court needs to decide if the Electoral Bond Scheme adequately balances the right to information and right to informational privacy of political affiliation. I. Informational privacy of financial contributions to political parties 132. In Justice KS Puttaswamy (9J) (supra), a nine-Judge Bench of this Court held that the Constitution guarantees the right to privacy. This Court traced the right to privacy to the constitutional ideals of dignity, liberty, and the thread of non-arbitrariness that runs through the provisions of Part III. The scope of the right to privacy discussed in Justice KS Puttaswamy (9J) (supra) is summarized below: a. The right to privacy includes "repose", that is, the freedom from unwanted stimuli, "sanctuary", the protection against intrusive observation into intimate decisions and autonomy with respect to personal choices; b. Privacy over intimate decisions includes decisions related to the mind and body. Privacy extends to both the decision and the process of arriving at the decision. A lack of privac....
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....se information about the personal character of any candidate152, and providing vehicles for the free conveyance of electors153. The law penalizes practices which have the effect of dis-franchising the voter through illegitimate means. 136. Information about a person's political affiliation can be used to dis-enfranchise voters through voter surveillance.154 Voter databases which are developed through surveillance identify voting patterns of the electors and attempt to interfere with their opinions based on the information. For example, the data of online purchase histories such as the books purchased (which would indicate the ideological leaning of the individual), clothing brands used (which would indicate the social class to which the individual belongs) or the news consumed or the newspapers subscribed (which would indicate the political leanings or ideologies) can be used to draw on the relative political affiliation of people. This information about the political affiliation of individuals can then be used to influence their votes. Voter surveillance gains particular significance when fewer people have attachments to political parties.155 137. At a systemic level, inform....
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....a political party is protected by Articles 19(1)(a) and 19(1)(c). 141. This Court in Justice KS Puttaswamy (9J) (supra) did not trace the right to privacy to a particular provision of the Constitution such as Article 21. Rather, this Court observed that privacy is crucial for the fulfilment of the constitutional values of self-determination, autonomy and liberty in addition to its essentiality for realizing the fundamental freedoms such as the freedom of speech and expression. This Court further held that the non-intrusion of the mind (the ability to preserve beliefs, thoughts and ideologies) is as important as the nonintrusion of the body. This Court (supra) did not hold that privacy is extendable to the action of speech or the action of expression, both of which are required to possess a communicative element to receive the protection under Article 19(1)(a). See Romesh Thappar v. State of Madras, (1950) SCR 594 (602) Rather, the proposition in Justice KS Puttaswamy (9J) is that privacy (including informational privacy) is extendable to thoughts, beliefs, and opinions formed for the exercise of speech and action. Thus, informational privacy would extend to financial contr....
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....der the Electoral Bond Scheme, the political party to which the contribution is made would not know the particulars of the contributor. Hence, it is submitted that the scheme is akin to the secret ballot. 144. We are unable to see how the disclosure of information about contributors to the political party to which the contribution is made would infringe political expression. The disclosure of the particulars of the contributions may affect the freedom of individuals to the limited extent that the political party with the information could coerce those who have not contributed to them. However, we have already held above that the scheme only grants de jure and not de facto confidentiality vis-à-vis the political party. Under the current Scheme, it is still open to the political party to coerce persons to contribute. Thus, the argument of the Union of India that the Electoral Bond Scheme protects the confidentiality of the contributor akin to the system of secret ballot is erroneous. III. Balancing the right to information and the right to informational privacy a) Judicial Approach towards balancing fundamental rights: establishing the double proportionality standard ....
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....damental rights because the right in question (freedom of speech and expression) was circumscribed to not include the actions challenged (noise pollution). In Subramanian Swamy v. Union of India (2016) 7 SCC 221; Paragraph 11 "While one has a right to speech, others have a right to listen or decline to listen. [...] Nobody can indulge in aural aggression. If anyone increases his volume of speech and that too with the assistance of artificial devices so as to compulsorily expose unwilling persons to hear a noise raised to unpleasant or obnoxious levels, then the person speaking is violating the right of others to a peaceful, comfortable and pollution-free life guaranteed by Article 21. Article 19(1)(a) cannot be pressed into service for defeating the fundamental right guaranteed by Article 21." , Sections 499 and 500 of the Indian Penal Code 1860 which criminalized defamation were challenged. A two-Judge Bench of this Court framed the issue as a conflict between the right to speech and expression under Article 19(1)(a) and the right to reputation traceable to Article 21. In this case, the two Judge Bench held that the right to speech and expression does not include the right to defa....
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.... peaceful residence if authorities had taken adequate safeguards such as earmarking specific areas for protest, placing restrictions on the use of loudspeakers and on parking of vehicles around residential places. 149. The judgment of this Court in Mazdoor Kisan Shakti (supra), represents the gradual shift from the pre-proportionality phase to the proportionality stage which signifies a shift in the degree of justification and the employment of a structured analysis for balancing fundamental rights. In Mazdoor Kisan Shakti (supra), this Court applied one of the prongs of the proportionality standard (the least restrictive means prong) while balancing the right to protest and the right to peaceful residence. The Court identified other means which would have infringed the right to a peaceful residence to a lesser extent. 150. In 2012, a five-Judge Bench of this Court in Sahara India Real Estate Corporation Limited v. Securities and Exchange Board of India (2012) 10 SCC 603, used a standard which resembled the structured proportionality standard used in Justice KS Puttaswamy (5J) v. Union of India (2019) 1 SCC 1 to balance the conflict between two fundamental rights. This ....
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....e restricted for the State interest (that is, the legitimate purpose) and if it can, whether the measure used to restrict the right is proportional to the objective is insufficient for balancing the conflict between two fundamental rights. The proportionality standard is an effective standard to test whether the infringement of the fundamental right is justified. It would prove to be ineffective when the State interest in question is also a reflection of a fundamental right. 153. The proportionality standard is by nature curated to give prominence to the fundamental right and minimize the restriction on it. If this Court were to employ the single proportionality standard to the considerations in this case, at the suitability prong, this Court would determine if non-disclosure is a suitable means for furthering the right to privacy. At the necessity stage, the Court would determine if non-disclosure is the least restrictive means to give effect to the right to privacy. At the balancing stage, the Court would determine if non-disclosure has a disproportionate effect on the right holder. In this analysis, the necessity and the suitability prongs will inevitably be satisfied because....
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....the public employee, creating a clear privacy interest in favour of nondisclosure. It is insufficient to state that the privacy interest in medical records is extremely high and therefore the outcome should be blanket non-disclosure. The principle of proportionality may necessitate that the number of and reasons for the leaves be disclosed and the medical reasons for the leave be omitted. This would ensure that the interest in accountability is only abridged to the extent necessary to protect the legitimate aim of the privacy of the public employee." 156. Baroness Hale in Campbell (supra) employed a three step approach to balance fundamental rights. The first step is to analyse the comparative importance of the actual rights claimed. The second step is to lay down the justifications for the infringement of the rights. The third is to apply the proportionality standard to both the rights. The approach adopted by Baroness Hale must be slightly tempered to suit our jurisprudence on proportionality. The Indian Courts adopt a four prong structured proportionality standard to test the infringement of the fundamental rights. In the last stage of the analysis, the Court undertakes a bal....
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.... Section 29C of the RPA to implement the Electoral Bond Scheme because the EBS mandates anonymity of the contributor. In this Section, we will answer the question of whether the EBS adequately balances the right to informational privacy of the contributor and the right to information of the voter. 159. In Justice KS Puttaswamy (9J) (supra), this Court did not trace the right to privacy only to Article 21. This Court considered privacy as an essential component for the effective fulfillment of the all entrenched rights. Article 25 of the Constitution is the only provision in Part III which subjects the right to other fundamental rights. Article 25 guarantees the freedom of conscience which means the freedom to judge the moral qualities of one's conduct. See Supriyo (supra) [238 , 239]; Aishat Shifa v. State of Karnataka, (2023) 2 SCC 1; Financial contributions to a political party (as a form of expression of political support and belief) can be traced to the exercise of the freedom of conscience under Article 25. See Justice KS Puttaswamy v. Union of India, (2017) 10 SCC 1 [372] (opinion of Justice Chelameswar); It can very well be argued that the right to information....
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....of privacy of political contribution must consider whether the non-disclosure of information to the voter and its disclosure only when demanded by a competent court and upon the registration of criminal case has a rational nexus with the purpose of achieving privacy of political contribution. Undoubtedly, the measure by prescribing non-disclosure of information about political funding shares a nexus with the purpose. The non-disclosure of information grants anonymity to the contributor, thereby protecting information privacy. It is certainly one of the ways capable of realizing the purpose of informational privacy of political affiliation. 163. The suitability prong must next be applied to the purpose of disclosure of information about political contributions to voters. There is no nexus between the balancing measure adopted with the purpose of disclosure of information to the voter. According to Clause 7(4) of the Electoral Bond Scheme and the amendments, the information about contributions made through the Electoral Bond Scheme is exempted from disclosure requirements. This information is never disclosed to the voter. The purpose of securing information about political funding....
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....l be debated whether rupees twenty thousand is on the lower or higher range of the spectrum. However, that is not a question for this Court to answer in this batch of petitions. The petitioners have not challenged the threshold of rupees twenty thousand prescribed for the disclosure of information prescribed by Section 29C. They have only raised a challenge to the disclosure exception granted to contributions by Electoral Bonds. Thus, this Court need not determine if the threshold tilts the balance in favour of one of the interests. We are only required to determine if the disclosure of information on financial contributions in a year beyond rupees twenty thousand is an alternative means to achieve the purposes of securing the information on financial contributions and informational privacy regarding political affiliation. 167. It must be recalled that we have held above that the right to information of the voter includes the right to information of financial contributions to a political party because of the influence of money in electoral politics (through electoral outcomes) and governmental decisions (through a seat at the table and quid pro quo arrangements between the contr....
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....vision in the Electoral Bond Scheme, that is Clause 7(4). However, as explained above, the anonymity of the contributor is intrinsic to the Electoral Bond Scheme. The Electoral Bond is not distinguishable from other modes of contributions through the banking channels such as cheque transfer, transfer through the Electronic Clearing System or direct debit if the anonymity component of the Scheme is struck down. Thus, the Electoral Bond Scheme 2018 will also consequentially have to be struck down as unconstitutional. c. Validity of Section 154 of the Finance Act amending Section 182(3) to the Companies Act 170. Before the 2017 amendment, Section 182(3) of the Companies Act, mandated companies to disclose the details of the amount contributed to a political party along with the name of the political party to which the amount was contributed in its profit and loss account. After the amendment, Section 182(3) only requires the disclosure of the total amount contributed to political parties in a financial year. For example, under Section 182(3) as it existed before the amendment, if a Company contributed rupees twenty thousand to a political party, the company was required to discl....
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.... The disclosure requirements in Section 182(3) were included to ensure that corporate interests do not have an undue influence in electoral democracy, and if they do, the electorate must be made aware of it. 172. Section 182(3) as amended by the Finance Act 2017 mandates the disclosure of total contributions made by political parties. This requirement would ensure that the money which is contributed to political parties is accounted for. However, the deletion of the mandate of disclosing the particulars of contributions violates the right to information of the voter since they would not possess information about the political party to which the contribution was made which, as we have held above, is necessary to identify corruption and quid pro quo transactions in governance. Such information is also necessary for exercising an informed vote. 173. Section 182(3) of the Companies Act and Section 29C of the RPA as amended by the Finance Act must be read together. Section 29C exempts political parties from disclosing information of contributions received through Electoral Bonds. However, Section 182(3) not only applies to contributions made through electoral bonds but through all....
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....to amend its memorandum on the ground that there was no law prohibiting companies from contributing to the funds of a party. Chief Justice M C Chagla, cautioned against the influential role of "big business and money bags" in throttling democracy. The learned Judge emphasized that it is the duty of Courts to "prevent any influence being exercised upon the voter which is an improper influence or which may be looked at from any point of view as a corrupt influence." Chief Justice Chagla highlighted the grave danger inherent in permitting companies to donate to political parties and hoped Parliament would "consider under what circumstances and under what limitations companies should be permitted to make these contributions". 176. Subsequently, Parliament enacted the Companies (Amendment) Act 1960 to incorporate Section 293A in the 1956 Act. The new provision allowed a company to contribute to: (a) any political party; or (b) for any political purpose to any individual or body. However, the amount of contribution was restricted to either twenty-five thousand rupees in a financial year or five percent of the average net profits during the preceding three financial years, whichever wa....
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....pplication of the principle of non-arbitrariness 180. The petitioners argue that Section 154 of the Finance Act 2017 violates Article 14 of the Constitution. The primary ground of challenge is that the amendment to Section 182 of the 2013 Act is manifestly arbitrary as it allows companies, including loss-making companies, to contribute unlimited amounts to political parties. It has also been argued that the law now facilitates the creation of shell companies solely for the purposes of contributing funds to political parties. On the other hand, the respondent has questioned the applicability of the doctrine of manifest arbitrariness for invalidating legislation. a. Arbitrariness as a facet of Article 14 181. At the outset, the relevant question that this Court has to answer is whether a legislative enactment can be challenged on the sole ground of manifest arbitrariness. Article 14 of the Constitution provides that the State shall not deny to any person equality before the law or the equal protection of laws within the territory of India. Article 14 is an injunction to both the legislative as well the executive organs of the State to secure to all persons within the territo....
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...." 183. Immediately after the judgment in Ajay Hasia (supra), Justice E S Venkataramaiah (as the learned Chief Justice then was) in Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India, (1985) 1 SCC 641 laid down the test of manifest arbitrariness with respect to subordinate legislation. It was held that a subordinate legislation does not carry the same degree of immunity enjoyed by a statute passed by a competent legislature. Therefore, this Court held that a subordinate legislation "may also be questioned on the ground that it is unreasonable, unreasonable not in the sense of not being reasonable, but in the sense that it is manifestly arbitrary." In Sharma Transport v. Government of Andhra Pradesh, (2002) 2 SCC 188 this Court reiterated Indian Express Newspapers (supra) by observing that the test of arbitrariness as applied to an executive action cannot be applied to delegated legislation. It was held that to declare a delegated legislation as arbitrary, "it must be shown that it was not reasonable and manifestly arbitrary." This Court further went on to define "arbitrarily" to mean "in an unreasonable manner, as fixed or done capriciously or at pleasure, ....
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....is Court referred to McDowell (supra) to observe that a law may not be struck down as arbitrary without a constitutional infirmity. Thus, it was held that a mere finding of arbitrariness was not sufficient to invalidate a legislation. The Court has to enquire whether the legislation contravened any other constitutional provision or principle. b. Beyond Shayara Bano: entrenching manifest arbitrariness in Indian jurisprudence 187. In Shayara Bano v. Union of India, (2017) 9 SCC 1 a Constitution Bench of this Court set aside the practice of Talaq-e-Bidaat (Triple Talaq). Section 2 of the Muslim Personal Law (Shariat) Act 1937 was also impugned before this Court. The provision provides that the personal law of the Muslims, that is Shariat, will be applicable in matters relating to marriage, dissolution of marriage and talaq. Justice R F Nariman, speaking for the majority, held that Triple Talaq is manifestly arbitrary because it allows a Muslim man to capriciously and whimsically break a marital tie without any attempt at reconciliation to save it. Thus, Justice Nariman applied the principle of manifest arbitrariness for the purpose of testing the constitutional validity of....
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....failing to make a distinction between consensual and non-consensual sexual acts between consenting adults.195 Justice Nariman, in the concurring opinion, observed that Section 377 is manifestly arbitrary for penalizing "consensual gay sex". Justice Nariman faulted the provision for (a) not distinguishing between consensual and non-consensual sex for the purpose of criminalization; and (b) criminalizing sexual activity between two persons of the same gender.196 Justice DY Chandrachud noted that Section 377 to the extent that it penalizes physical manifestation of love by a section of the population (the LGBTQ+ community) is manifestly arbitrary.197 Similarly, Justice Indu Malhotra observed that the provision is manifestly arbitrary because the basis of criminalization is the sexual orientation of a person which is not a "rationale principle" Ibid, [Justice Malhotra, paragraph 14.9]. 191. In Joseph Shine v. Union of India, (2019) 3 SCC 39 a Constitution Bench of this Court expressly concurred with the doctrine of manifest arbitrariness as evolved in Shayara Bano (supra). In Joseph Shine (supra), one of us (Justice D Y Chandrachud) observed that the doctrine of manifest arbit....
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....onal values. The opinion noted that Section 497 makes an "ostensible" effort to protect the sanctity of marriage but in essence is based on the notion of marital subordination of women which is inconsistent with constitutional values. (2019) 3 SCC 39 [Paragraph 35] Chief Justice Misra (writing for himself and Justice AM Khanwilkar) held that the provision is manifestly arbitrary for lacking "logical consistency" since it does not treat the wife of the adulterer as an aggrieved person and confers a 'license' to the husband of the woman. 194. It is now a settled position of law that a statute can be challenged on the ground it is manifestly arbitrary. The standard laid down by Justice Nariman in Shayara Bano (supra), has been citied with approval by the Constitution Benches in Navtej Singh Johar (supra) and Joseph Shine (supra). Courts while testing the validity of a law on the ground of manifest arbitrariness have to determine if the statute is capricious, irrational and without adequate determining principle, or something which is excessive and disproportionate. This Court has applied the standard of "manifest arbitrariness" in the following manner: a. A provision lacks....
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...., is that it is unreasonable, unjust, and arbitrary if the Legislature does not identify the degrees of harm for the purpose of law. 196. It is undoubtedly true that it is not the constitutional role of this Court to second guess the intention of the legislature in enacting a particular statute. The legislature represents the democratic will of the people, and therefore, the courts will always presume that the legislature is supposed to know and will be aware of the needs of the people. Moreover, this Court must be mindful of falling into an error of equating a plenary legislation with a subordinate legislation. In Re Delhi Laws Act 1912, 1951 SCC 568 Justice Fazl Ali summed up the extent and scope of plenary legislation and delegated legislation, in the following terms: "32. The conclusions at which I have arrived so far may now be summed up: (1) The legislature must normally discharge its primary legislative function itself and not through others. (2) Once it is established that it has sovereign powers within a certain sphere, it must follow as a corollary that it is free to legislate within that sphere in any way which appears to it to be the ....
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....upra) by holding that a delegated legislation is manifestly arbitrary if it "could not be reasonably expected to emanate from an authority delegated with the law-making power." Similarly, in State of Tamil Nadu v. P Krishnamurthy, (2006) 4 SCC 517 this Court held that subordinate legislation can be challenged on the ground of manifest arbitrariness to an extent "where the court might well say that the legislature never intended to give authority to make such rules." 198. The above discussion shows that manifest arbitrariness of a subordinate legislation has to be primarily tested vis-a-vis its conformity with the parent statute. Therefore, in situations where a subordinate legislation is challenged on the ground of manifest arbitrariness, this Court will proceed to determine whether the delegate has failed "to take into account very vital facts which either expressly or by necessary implication are required to be taken into consideration by the statute or, say, the Constitution." Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India, (1985) 1 SCC 641 In contrast, application of manifest arbitrariness to a plenary legislation passed by a competent legislation requires the....
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....nd cry of the needy? We have established the close relationship between money and politics above where we explained the importance of money for entry to politics, for winning elections, and for remaining in power. That being the case, the question that we ask ourselves is whether the elected would truly be responsive to the electorate if companies which bring with them huge finances and engage in quid pro quo arrangements with parties are permitted to contribute unlimited amounts. The reason for political contributions by companies is as open as day light. Even the learned Solicitor General did not deny during the course of the hearings that corporate donations are made to receive favors through quid pro quo arrangements. 202. In Kesavananda Bharati v. State of Kerala, (1973) 4 SCC 225 the majority of this Court held that "republican and democratic form of government" form the basic elements of the constitutional structure. Subsequently, in Indira Nehru Gandhi v. Raj Narain, 1975 Supp SCC 1 Justice H R Khanna reiterated that the democratic set up of government is a part of the basic features of the Constitution. Elections matter in democracy because they are the most....
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.... arguments, the learned Solicitor General submitted that the limit of seven and a half percent of the average net profits in the preceding three financial years was perceived as a restriction on companies who would want to donate in excess of the statutory cap. The learned Solicitor General further submitted that companies who wanted to donate in excess of the statutory cap would create shell companies and route their contributions through them. Therefore, it was suggested that the statutory cap was removed to discourage the creation of shell companies. 206. The limit on restrictions to political parties was incorporated in Section 293A of the 1956 Act through the Companies (Amendment) Bill 1985. The original restriction on contribution was five per cent of a company's average net profits during the three immediately preceding financial years. The Lok Sabha debates pertaining to the Companies Bill furnish an insight into why contribution restrictions were imposed in the first place. The then Minister of Chemicals and Fertilizers and Industry and Company Affairs justified the contribution restrictions, stating that: "Since companies not having profits should not be encou....
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....osition on the principle of manifest arbitrariness culled out above needs to be recalled. The doctrine of manifest arbitrariness can be used to strike down a provision where: (a) the legislature fails to make a classification by recognizing the degrees of harm; and (b) the purpose is not in consonance with constitutional values. 210. One of the reasons for which companies may contribute to political parties could be to secure income tax benefit. IT Act, Section 80 GGB However, companies have been contributing to political parties much before the Indian legal regime in 2003 exempted contributions to political parties. Contributions are made for reasons other than saving on the Income Tax. The chief reason for corporate funding of political parties is to influence the political process which may in turn improve the company's business performance. Jayantilal Ranchhoddas Koticha v. Tata Iron & Steel Co. Ltd (supra) A company, whatever may be its form or character, is principally incorporated to carry out the objects contained in the memorandum. However, the amendment now allows a company, through its Board of Directors, to contribute unlimited amounts to political parties with....
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.... "In the context of election to public office, the distinction between corporate and human speakers is significant. Although they make enormous contributions to our society, corporations are not actually members of it. They cannot vote or run for office. Because they may be managed and controlled by non-residents, their interests may conflict in fundamental respects with the interests of eligible voters. The financial resources, legal structure, and instrumental orientation of corporations raise legitimate concerns about their role in the electoral process." 213. In view of the above discussion, we are of the opinion that companies and individuals cannot be equated for the purpose of political contributions. 214. Further, Companies before the amendment to Section 182 could only contribute a certain percentage of the net aggregate profits. The provision classified between loss-making companies and profit-making companies for the purpose of political contributions and for good reason. The underlying principle of this distinction was that it is more plausible that loss-making companies will contribute to political parties with a quid pro quo and not for the purpose of in....
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....has been credited and the date on which each such credit was made. During the course of the hearing, Mr Amit Sharma, Counsel for the ECI, stated that the ECI had only collected information on contributions made in 2019 because a reading of Paragraph 14 of the interim order indicates that the direction was only limited to contributions made in that year. Paragraphs 13 and 14 of the interim order are extracted below: "13. In the above perspective, according to us, the just and proper interim direction would be to require all the political parties who have received donations through Electoral Bonds to submit to the Election Commission of India in sealed cover, detailed particulars of the donors as against each bond; the amount of each such bond and the full particulars of the credit received against each bond, namely, the particulars of the bank account to which the amount has been credited and the date of each such credit. 14. The above details will be furnished forthwith in respect of Electoral Bonds received by a political party till date. The details of such other bonds that may be received by such a political party upto the date fixed for issuing such bonds as p....
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.... the above judgment. 221. Pending applications(s), if any, stand disposed of. CJI. [Dr Dhananjaya Y Chandrachud] Justice [B R Gavai] Justice [J B Pardiwala] Justice [Manoj Misra] ANNEXURE I Section 29C, Representation of the People Act 1951 Prior to Amendment by the Finance Act 2017 Upon Amendment by Section 137 of the Finance Act, 2017 29C. Declaration of donation received by the political parties. - (1) The treasurer of a political party or any other person authorized by the political party in this behalf shall, in each financial year, prepare a report in respect of the following, namely; (a) the contribution in excess of twenty thousand rupees received by such political party from any 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. (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 da....
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....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: Provided that the amount referred to in subsection (1) or, as the case may be, 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....
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....the purposes of this section, "political party" means an association or body of individual citizens of India registered with the Election Commission of India as a political party under paragraph 3 of the Election Symbols (Reservation and Allotment) Order, 1968, and includes a political party deemed to be registered with that Commission under the proviso to subparagraph (2) of that paragraph 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 other than contribution by way of electoral bond in excess of ten thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who h....
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....f 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. 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 subsection, 'electoral bond' means a bond issued by any scheduled bank under the scheme as may be notified by the Central Government. ANNEXURE II Conduct of Elections Rules, 1961 (Statutory Rules and Order) 222[FORM 24A (See rule 85B) [This form should be filed with the Election Commission before the due date for furnishing a return of the Political Party's income of the concerned financial year under section 139 of the Income-tax Act, 1961 (43 of 1961) and a certificate to this effect should be attached with the Income-tax return to claim exemption under the Income-tax Act, 1961 (43 of 1961).] 1. Name of Political Party: 2. Status of the Political Party: (re....
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....tion of a financial year of the company falls before the commencement of the Companies (Amendment) Act, 1960, 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. (2) Every company shall disclose in its profit and loss account any amount or amounts contributed by it under sub-section (1) to any political party or for any political purpose to any individual or body during the financial year to which the account relates, giving particulars of the total amount contributed and the name of the party, individual or body to which or to whom such amount has been contributed. (3) If a company makes a default in complying with the provisions of sub-section (2), the company, and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees." 8 "Section 293A. (1) Notwithstanding anything contained in any other provision of this Act, neither a company in general meeting nor its Board of directors shall, after the commencement of the Companies (Amendment) Act 1960 contribute any amount or amounts- (a) To any political....
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....ort for a political party shall also be deemed to be contribution of the amount of such donation, subscription or payment to such person for a political purpose; (b) the amount of expenditure incurred, directly or indirectly, by a company on advertisement in any publication (being a publication in the nature of a souvenir brochure, tract, pamphlet or the like) by or on behalf of a political party or for its advantage, shall also be deemed,- (i) where such publication is by or on behalf of a political party, to be a contribution of such amount to such political party, and (ii) where such publication is not by or on behalf of but for the advantage of a political party, to be a contribution for a political purpose to the publishing it. (4) Every company shall disclose in its profit and loss account any amount or amounts contributed by it to any political party or for any political purpose to any person during the financial year to which that account relates, giving particulars of the total amount contributed and the name of the party or person to which or to whom such amount has been contributed. (5) If a company makes any contribution in contravention of the provisi....
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....Scheme, Clause 6 35 Electoral Bond Scheme, Clause 12(2) 36 Electoral Bond Scheme, Clause 7(1) 37 Electoral Bond Scheme, Clause 7(3) 38 Electoral Bond Scheme, Clause 7(4) 39 Electoral Bond Scheme, Clause 7(6) 40 Electoral Bond Scheme, Clause 7(4) 41 Electoral Bond Scheme, Clause 8(1) 42 Electoral Bond Scheme, Clause 8(2) 43 Electoral Bond Scheme, Clause 9 44 Electoral Bond Scheme, Clause 10 45 Electoral Bond Scheme, Clause 13 46 Electoral Bond Scheme, Clause 14 47 Roger Mathew v. South Bank of India, CA No. 8588/2019 48 Relied on PUCL v. Union of India, (2003) 4 SCC 399; ADR v. Union of India, (2002) 5 SCC 294; Anjali Bhardwaj v. Union of India, (2019) 18 SCC 246 49 Relied on Kanwar Lal Gupta v. Amar Nath Chawla, 1975 SCC (3) 646 61 Section 77 of the RPA read with Section 169 provides the Central Government in consultation with the Election Commission, the power to prescribe the amount over which the total expenditure incurred by the candidate or their agent in connection with Parliamentary election and Assembly election shall not be exceeded. The total expenditure cap is prescribed in Rule 90 of the Conduct of Election Rules 1961 whic....
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....ws to bind his liberty and property may be enacted." 87 Section 33-A of the RPA required the candidate to furnish the following information: (a) He is accused of any offence punishable with imprisonment for two years or more in a pending case in which a charge has been framed by the court of competent jurisdiction; and (b) He has been convicted of an offence other than any offence referred to in sub-section (1) or sub-section (2), or covered in sub-section (3), of Section 8 and sentenced to imprisonment for one year or more. 91 The right to vote is classified as a statutory vote because only citizens who fulfill certain conditions (such as the age) laid down in a statute can vote. 92 ADR required disclosure related to information of whether the candidate has been convicted/acquitted or discharged of any criminal offence in the past, and whether six months prior to the filing of the nomination pape r, whether the candidate has been accused in any pending case for an offence punishable with imprisonment for more than two years and in which charge has been framed or cognizance is taken by the Court. With respect to the first direction, law created a distinction between seriou....
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....formance, Candidate Selection, and Campaign Effort, VAT Institute for Economic Research Working Papers 120 (2019) 107 Election Commission of India, Instructions to political parties on manifestos dated 24.04.2015, https://www.eci.gov.in/election-manifestos/ 108 Constitution of India 1950, Article 75. See, Aradhya Sethia, "Where's the party?: towards a constitutional biography of political parties, Indian Law Review, 3:1, 1-32 (2019) 109 Ibid. 111 65. "Para 4.11.04 of the Sarkaria Commission Report specifically deals with the situation where no single party obtains absolute majority and provides the order of preference the Governor should follow in selecting a Chief Minister. The order of preference suggested is: a. An alliance of parties that was formed prior to the elections.; b. The largest single party staking a claim to form the Government with the support of others, including "independents"; c. A post-electoral coalition of parties, with all the partners in the coalition joining the Government; d. A post-electoral alliance of parties, with some of the parties in the alliance forming a Government and the remaining parties, including "Independents" suppor....
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....formation silos may seem inconsequential. In aggregation, they disclose the nature of the personality: food habits, language, health, hobbies, sexual preferences, friendships, ways of dress and political affiliation. Justice Chelameshwar (Paragraph 38), Justice Kaul (Paragaph 19) 151 RPA, Section 123(2). The provision includes the threatening with injury including social ostracism and excommunication from any caste or community. 152 RPA; Section 123(4) 153 RPA; Section 123(5) 154 See Philip N Howard and Daniel Kreiss, Political Parties and Voter privacy: Australia, Canada, the United Kingdom, and United States in Comparative Perspective, First Monday 15(12) 2010 155 Colin Bennet, The politics of privacy and privacy of politics: Parties, elections, and voter surveillance in Western Democracies. First Monday, 18(8) 2013 159 144: "[...] Reputation being an inherent component of Article 21, we do not think it should be allowed to be sullied solely because another individual can have its freedom. It is not a restriction that has an inevitable consequence which impairs circulation of thought and ideas. In fact, it is control regard being had to another person's righ....
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....e ban was partially lifted in 1985 with restrictions and stipulations.3 The aggregate amount contributed to a political party in a financial year could not exceed 5% of the average net profit during the three immediately preceding financial years.4 A new condition stipulated that the board of directors5 in their meeting would pass a resolution giving legitimacy and authorisation to contributions to a political party.6 4. The Companies Act of 2013 replaced the Companies Act of 1956. Section 182(1) of the Companies Act, 20137 permitted contributions by companies of any amount to any political party, if the said company had been in existence for more than three immediately preceding financial years and is not a government company. The requirement of authorisation vide Board resolution is retained.8 The cap of 5% is enhanced to 7.5% of the average net profits during the three immediately preceding financial years.9 It is also mandated that the company must disclose the amount contributed by it to political parties in the profit and loss account, including particulars of name of political party and the amount contributed.10 In case of violation of the terms, penalties stand prescribe....
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....f the contribution authorised by it. 182 (3) Every company shall disclose in its profit and loss account any amount or amounts contributed by it to any political party during the financial year to which that account relates, giving particulars of the total amount contributed and the name of the party to which such amount has been contributed. 182 (3) Every company shall disclose in its profit and loss account the total amount contributed by it under this section during the financial year to which the account relates. (3A) Notwithstanding anything contained in sub-section (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 instrument, issued pursuant to any scheme notified under any law for the time being in force, for contribution to the political parties. Section 13-A of the Income Tax Act, 1961 Prior to Amendment by the Finance Act, 2017 Post Amendment by Section 11 of the Finance Act, 2017 13-A. Special provision relating to incomes of political pa....
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.... bank or an account payee bank draft or use of electronic clearing system through a bank account or through electoral bond. Explanation.-For the purposes of this section, "political party" means a political party registered under Section 29-A of the Representation of the People Act, 1951 (43 of 1951). Explanation.- For the purposes of this proviso, "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 of 1934). Provided further that if the Treasurer of such political party or any other person authorised by that political party in this behalf fails to submit a report under subsection (3) of Section 29-C of the Representation of the People Act, 1951 (43 of 1951) for a financial year, no exemption under this section shall be available for that political party for such financial year. Provided also that such political party furnishes a return of income for the previous year in accordance with the provisions of sub-section (4B) of Section 139 on or before the due date under that section. Explanation.-For the purposes of this section, "political party" means a political party registered under Section 2....
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.... to Amendment by the Finance Act 2017 Post Amendment by Section 137 of the Finance Act 2017 29-C. Declaration of donation received by the political parties.- (1) The treasurer of the political party or any other person authorised by the political party in this behalf shall, in each financial year, prepare a report in respect of the following, namely:- (a) the contribution in excess of twenty thousand rupees received by such political party from any 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. (2) The report under sub-section (1) shall be in such form as may be prescribed. (3) The report for a financial 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 fail....
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....mpany; (iv) a corporation, not being a foreign company, incorporated in a foreign country or territory; (v) a multi-national corporation referred to in sub-clause (iv) of clause (g); (vi) a company within the meaning of the Companies Act, 1956 (1 of 1956), and more than one-half of the nominal value of its share capital is held, either singly or in the aggregate, by one or more of the following, namely- (A) the Government of a foreign country or territory; (B) the citizens of a foreign country or territory; (C) corporations incorporated in a foreign country or territory; (D) trusts, societies or other associations of individuals (whether incorporated or not), formed or registered in a foreign country or territory; (E) foreign company; 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 company; (iv) a corporation, not being a foreign company, incor....
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....n records of the name and addresses of persons who make voluntary contributions in excess of Rs.20,000/-.19 Accounts of the political parties are required to be audited.20 8. In 2003, Section 80GGB and 80GGC were inserted in the Income Tax Act, 1961, permitting contributions to political parties. These contributions are tax deductible, though they are not expenditure for purposes of business, to incentivise contributions through banking channels.21 9. By the Finance Act, 2017, Section 13A of the Income Tax Act, 1961, was amended. Section 13A now stipulates that a political party is not required to maintain a record of the contributions received by Bonds.22 Further, donations over Rs.2,000/- are only permitted through cheques, bank drafts, ECS or Bonds.23 10. Section 29C of the Representation of the People Act, 1951 was introduced in 2003.24 The section requires each political party to file a report for all contributions over Rs.20,000/- to the Election Commission of India.25 The report is required to be filed before the due date of filing income tax returns of the financial year under the Income Tax Act, 1961. Failure to submit a report disentitles a political party from a....
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.... 29A of the Representation of the People Act, 1951, and has secured not less than 1% of the votes polled in the last general election to the House of People or the Legislative Assembly, can receive a Bond.45 The eligible political party can encash the Bond through their bank account in the authorised bank.46 The Bonds are made available for purchase for a period of 10 days every quarter, in the months of January, April, July and October, as may be specified by the Central Government.47 They are also made available for an additional period of 30 days, as specified by the central government in a year where general elections to the House of People are held.48 The Bonds are not eligible for trading,49 and commission, brokerage or other charges are not chargeable/payable for issuance of a Bond.50 The value of the Bond is considered as income by way of voluntary contributions to eligible political parties for the purposes of tax exemption under Section 13A of the Income Tax Act, 1961.51 13. In the afore-mentioned writ petitions filed under Article 32 of the Constitution of India,52 the petitioners are seeking a declaration that the Scheme a....
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....urt while exercising the power of judicial review cannot be put in a straitjacket. 17. On the question of burden of proof, I respectfully agree with the observations made by the Hon'ble Chief Justice, that once the petitioners are able to prima facie establish a breach of a fundamental right, then the onus is on the State to show that the right limiting measure pursues a proper purpose, has rational nexus with that purpose, the means adopted were necessary for achieving that purpose, and lastly proper balance has been incorporated. 18. The doctrine of presumption of constitutionality has its limitations when we apply the test of proportionality. In a way the structured proportionality places an obligation on the State at a higher level, as it is a polycentric examination, both empirical and normative. While the courts do not pass a value judgment on contested questions of policy, and give weight and deference to the government decision by acknowledging the legislature's expertise to determine complex factual issues, the proportionality test is not based on preconceived notion or presumption. The standard of proof is a civil standard or a balance of probabilities; R. v. Oakes,....
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....democracy. Section 77 of the Representation of the People Act, 1951, requires monetary limits to be prescribed for expenditures incurred by candidates.65 As political parties are at the helm of the electoral process, including its finances, the argument that the right of the voter does not extend to knowing the funding of political parties and is restricted to antecedents of candidates, will lead to an incongruity. I, respectfully, agree with Hon'ble the Chief Justice, that denying voters the right to know the details of funding of political parties would lead to a dichotomous situation. The funding of political parties cannot be treated differently from that of the candidates who contest elections. See observations of this court in Kanwar Lal Gupta v. Amar Nath Chawla & Ors., (1975) 3 SCC 646 22. Democratic legitimacy is drawn not only from representative democracy but also through the maintenance of an efficient participatory democracy. In the absence of fair and effective participation of all stakeholders, the notion of representation in a democracy would be rendered hollow. In a democratic set-up, public participation is meant to fulfil three functions; the epistemic functio....
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....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 fundamental rights. It is applied to strike an appropriate balance between the fundamental right and the pursued purpose and objective of the restriction. 25. The test of proportionality comprises four steps:74 (i) The first step is to examine whether the act/measure restricting the fundamental right has a legitimate aim (legitimate aim/purpose). (ii) The second step is to examine whether the restriction has rational connection with the aim (rational connection). (iii) The third step is to examine whether there should have been a less restrictive alternate measure that is equally effective (minimal impairment/necessity test). (iv) The last stage is to strike an appropriate balance between the fundamental right and the pursued public purpose (balancing act). 26. In Modern Dental College & Research Centre and Others v. State of Madhya Pradesh and Others, (2016) 7 SCC 353 this Court had applied proportionality in its four-part doctrinal form In Gujarat Mazdo....
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....entre 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 Anuradha Bhasin v. Union of India and Others, (2020) 3 SCC 637 with the observation that the principle of proportionality is inherently embedded in the Constitution under the doctrine of reasonable restriction. This means that limitations imposed on a right should not be arbitrary or of excessive nature beyond what is required in the interest of public. This judgment thereupon references works of scholars/jurists who have argued that if the necessity prong of the proportionality test is applied strictly, legislations and policies, no matter how well intended, would fail the proportionality test even if any other slightly less drastic measure exists.80 Thereupon, the Court accepted the suggestion in favour of a moderate interpretation of the necessity test. Necessity involves a process of reasoning designed to ensure that only measures with a strong relationship to the objective they seek to achieve can justify an invasion of fundamental ri....
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....imate 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 assessing the necessity of the measure, the courts consider whether a less intrusive alternative is available to achieve the same ends, aiming for minimal impairment. As elaborated above, this Court Anuradha Bhasin (supra), relying on suggestions given by some jurists,83 emphasised the need to employ a moderate interpretation of the necessity prong. To conclude its findings on the necessity prong, this Court is inter alia required to undertake an overall comparison between the measure and its feasible alternatives.84 32. We will now delve into the fourth prong, the balancing stage, in some detail. This stage has been a matter of debate amongst jurists and courts. Some jurists believe that balancing is ambiguous and value-based.85 This stems from the premise of rule-based legal adjudication, where courts determine entitlements rather than balancing interests. However, proportionality is a standard-based ....
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....nality 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 constitutional adjudication. 35. Findings of empirical legal studies provide a more solid foundation for normative reasoning93 and enhance understanding of the relationship between means and ends.94 In our view, proportionality analyses would be more accurate when empirical inquiries on causal relations between a legislative measure under review and the ends of such a measure are considered. It also leads to better and more democratic governance. While one cannot jump from "is" to "ought", to reach an "ought" conclusion, one has to rely on accurate knowledge of "is", for "is" and "ought" to be united.95 While we emphasise the need of addressing the quantitative/empirical deficit for a contextual and holistic balancing analysis, the pitfalls of selective data sharing must be kept in mind. After all, if a measure becomes a target, it ceases to be a good measure.96 36. To avoid this judgment f....
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....iality 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 when white money is converted into black money." While introducing the Finance Act of 2017, the then Finance Minister had elucidated that the main purpose of the Scheme was to curb the flow of black money in electoral finance.99 This, it is stated, could be achieved only if information about political donations and the donor were kept confidential.100 It was believed that this would incentivise donations to political parties through banking channels. 38. I am of the opinion that retribution, victimisation or retaliation cannot by any stretch be treated as a legitimate aim. This will not satisfy the legitimate purpose prong of the proportionality test. Neither is the Scheme nor the amendments to the Finance Act, 2017, rationally connected to the fulfilment of that purpose, namely, to counter retribution, victimisation or retaliation in political donations. In our opinion, it will a....
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.... 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 donors being revealed exists in another manner. Under the Scheme, political parties in power may have asymmetric access to information with the authorised bank. They also retain the ability to use their power and authority of investigation to compel the revelation of Bond related information. Ibid Thus, the entire objective of the Scheme is contradictory and inconsistent. 43. Further, it is the case of the Union of India that parties in power at the Centre and State are the recipients of the highest amounts of donations through Bonds. If that is the case, the argument of retribution, victimisation and retaliation is tempered and loses much of its force. In Brown v. Socialist Workers Comm., 459 U.S. 87 (1982), the Supreme Court of the United States of America held that disclosure laws requiring the reporting of names and addresses of every campaign contributor could be waiv....
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....idence 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 also under the PMLA. Such offences when committed by political parties in power can never see the light of the day if secrecy and anonymity of the donor is maintained. 48. In view of the aforesaid observations, the argument raised by the petitioners that there is no rational connection between the measure and the purpose, which is also illegitimate, has merit and should be accepted. 49. On the question of alternative measures, that is the necessity prong of the proportionality test, it is accepted that post the amendments brought about by the Finance Act, 2017, political parties cannot receive donations in cash for amounts above Rs.2,000/-. However, political parties do not have to record the details and particulars of donations received for amounts less than Rs.20,000/-.113 Therefore, the reduction of the upper limit of cash donations from Rs.20,000/- to Rs....
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....ampbell 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 that the single proportionality test and the principle of reasonableness are applied to determine whether a private right claim offers sufficient justification for the interference with the fundamental rights. However, this test may not apply when two fundamental rights are at conflict and one has to balance the application of one right and restriction of the other. 53. In Campbell (supra), Baroness Hale has suggested a three-step approach to balance conflicting fundamental rights, when two rights are in play. The first step is to analyse the comparative importance of the fundamental rights being claimed in the particular case. In the second step, the court should consider the justification for interfering with or restricting each of these rights. The third step requires the application of a proportionality standard to both these rights. 54. In a s....
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....ill 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 principle can be extended to any restriction on fundamental rights which must be reasonable to the identified degree of harm. If the restriction is unreasonable, unjust or arbitrary, then the law should be struck down. Further, it is for the legislature to identify the degree of harm. I have referred to the said observation in the context that there appears to be a divergent opinion in K.S. Puttaswamy (9-J) (Privacy) (supra) as to whether right of privacy is an essential component for effective fulfilment of all fundamental rights or can be held to be a part or a component of Article 21 and Article 19(1)(a) of the Constitution. 57. When we apply the fourth prong, that is the balancing prong of proportionality, I have no hesitation or doubt, given the findings recorded above, that the Scheme falls foul and negates and overwhelmingly dis....
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.... 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. We have already commented on pressure groups that exert such persuasion, within the boundaries of law. However, when money is exchanged as quid pro quo then the line between persuasion and corruption gets blurred. 61. It is in this context that the High Court of Australia in Jeffery Raymond McCloy and Others v. State of New South Wales and Another (2015) HCA 34, observes that corruption can be of different kinds. When a wealthy donor makes contribution to a political party in return of a benefit, it is described as quid pro quo corruption. More subtle corruption arises when those in power decide issues not on merits or the desires of their constituencies, but according to the wishes and desires of those who make large contributions. This kind of corruption is described as 'clientelism'. This can arise from the de....
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....ndly, 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 means of gathering data necessary to detect violations of contribution limitations. 64. In Nixon, Attorney General of Missouri, et al v. Shrink Missouri Government PAC et al, 528 U.S. 377 (2000). the Supreme Court of the United States observes that large contributions given to secure a political quid pro quo undermines the system of representative democracy. It stems public awareness of the opportunities for abuse inherent in a regime of large contributions. This effects the integrity of the electoral process not only in the form of corruption or quid pro quo arrangements, but also extending to the broader threat of the beneficiary being too compliant with the wishes of large contributors. 65. Recently, a five judge Constitution Bench of this Court in Anoop Baranwal v. Union of India (2023) 6 SCC 1....
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....f 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 noting the candidate-party dichotomy in the regulations under Section 77 of the Representation of the People Act, 1951, the Law Commission of India recommends to require candidates to maintain an account of contributions received from their political party (not in cash) or any other permissible donor. 67. At this stage, we would like to refer to the data as available on the website of the ECI and the data submitted by the petitioners for a limited purpose and objective to support our reasoning while applying balancing. We have not stricto sensu applied proportionality as the data is not sufficient for us. I also clarify that we have not opened the sealed envelope given by the ECI pursuant to the directions of this Court dated 02.11.2023. 68. An analysis of the annual audit repor....
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....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, but I would not, without certainty, base my analysis on these figures. However, we do have data of denomination/sale of Bonds, as submitted by the petitioners, during the 27 phases from March 2018 to July 2023, which is as under: DENOMINATION WISE SALE OF EB DURING 27 PHASES (MARCH, 2018-JULY, 2023) Denomination ....
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.... 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 to be unconstitutional. Similarly, Section 31(3) of the RBI Act 1934, along with the Explanation enacted by the Finance Act 2017, has to be struck down as unconstitutional, as it permits issuance of Bonds payable to a bearer on demand by such person. 75. The pe....
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....ach 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, respectfully agree and also conclude that: (i) the Scheme is unconstitutional and is accordingly struck down; (ii) proviso to Section 29C(1) of the Representation of the People Act, Section 182(3) of the Companies Act, 2013, and Section 1....
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....ms 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 have also summarized other traditional standards of review like the means-ends test and Wednesbury unreasonableness for contextual clarity. In the last column we have capture....
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....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 standards of human rights protection, allowing even the most intensive infringements of civil liberties to be conveniently balanced out of existence when the....
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....here 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 not account for diverse factual scenarios. Calibrated Scrutiny (evolved means-ends test) The essential elements of the approach....
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.... 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 have arrived at it. Associated Provincial Picture Houses Ltd v. Wednesbury Corporation158 The test is sim....
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....) 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 Scheme. 42 Pa....
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....ity in K.S. Puttaswamy (Aadhaar) (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, '....
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....itical contributions made. 102 Paragraph 4 of the Scheme. 103 In 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 Kin....
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....Duncker & Humblot, 1976. Annexure Foot Note 141 See Robert Alexy, A Theory of Constitutional Rights (Julian 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 B....