SC flags lack of distinction between 'campaign and electoral funding'

Setting aside the January 2018 electoral bond scheme, the Supreme Court on Thursday flagged a lacuna in the current legal regime, which "does not distinguish between campaign funding and electoral funding".

The judgment authored by Chief Justice of India DY Chandrachud said "the money which is donated to political parties is not used by the political party only for the purposes of electoral campaign. Party donations are also used, for instance, to build offices for the political party and pay party workers".

Similarly, the judgment adds "the window for contributions is not open for a limited period only prior to the elections. Money can be contributed to political parties throughout the year and the contributed money can be spent by the political party for reasons other than just election campaigning".


It added "it is in light of the nexus between economic inequality and political inequality, and the legal regime in India regulating party financing that the essentiality of the information on political financing for an informed voter must be analysed".

Significantly, both the judgments - one authored by the CJI and other by justice Sanjiv Khanna - junked the claim of the Centre that the amendments made to various acts to usher in the electoral bond scheme dealt with economic policy and thus the scope of judicial review is limited in matters of economic policy.

Finding no force in the contentions, the judgment authored by the CJI said that the Centre "has itself classified the amendments as an electoral reform". To buttress its finding, the CJI referred to a correspondence between the finance ministry and RBI "on the apprehensions of the bond being used as an alternative currency that the bonds were introduced only to curb black money in the electoral process and protect informational privacy of financial contributors to political parties".

The judgment added that "money creates an exclusionary impact by reducing the democratic space for participation for both candidates and newer and smaller political parties. In a politically equal society, the citizens must have an equal voice to influence the political process".

Holding that the entire objective of the electoral bond scheme is "contradictory and inconsistent", justice Khanna in a separate judgment ruled that "the fear of reprisal and vindictiveness (against donors) does not evaporate" under the 2018 scheme.

Justice Khanna's judgment states that "retribution, victimisation or retaliation against any donor exercising their choice to donate to a political party is an abuse of law and power. This has to be checked and corrected. As it is a wrong, the wrong itself cannot be a justification or a purpose".

Elaborating, justice Khanna held "the argument, therefore, suffers on the grounds of inconsistency and coherence as it seeks to perpetuate and accept the wrong rather than deal with the malady and correct it. The inconsistency is also apparent as the change in law, by giving a cloak of secrecy, leads to severe restriction and curtailment of the collective's right to information and the right to know, which is a check and counters cases of retribution, victimisation and retaliation. Transparency, and not secrecy, is the cure and antidote".

The bench found no force in the argument raised by the Centre that details can be revealed when an order is passed by a court or when it is required for investigation pursuant to registration of a criminal case. Because, the SC judge elaborated, the Centre's argument "overlooks the fact that it is their stand that the identities of the contributors/donors should be concealed because of fear of retaliation, victimisation and reprisal. That fear would still exist as the identity of the purchaser of the bond can always be revealed upon registration of a criminal case or by an order/direction of the court. Thus, the fear of reprisal and vindictiveness does not evaporate".

Justice Khanna further held that "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".

The judgment further reads "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".