The striking down of the Centre’s 2018 electoral bond (EB) scheme by the Constitution bench on Thursday highlights an array of important jurisprudential principles, besides signifying the emphasis the top court places on protection of voters’ right to know and the principles of political equality in a democracy.

Interestingly, the ruling may be the first significant legal setback for the current central government, which has up until now been able to successfully defend a number of its key decisions, such as demonetisation, the revocation of Jammu & Kashmir’s special status, changes to the Prevention of Money Laundering Act, and a new law permitting the extension of the terms of Central Bureau of Investigation and Enforcement Directorate directors.

A closer examination of the 232-page judgment by the Constitution bench details the legal principles considered by the court.

Voters’ right to know in a democratic polity under Article 19(1)(a)The Supreme Court judgment on Thursday held that the right to information about a candidate contesting elections is also applicable to political parties.

The judgment privileges the right to information of the voter, referring to the jurisprudential voyage of the Supreme Court on the subject since 1960s. While the first phase of the jurisprudence on the right to information in India focussed on the close relationship between right and open governance, the court noted, the second phase pursued a rather expansive approach by recognising the importance of information to form views on social, cultural and political issues, and participate in and contribute to discussions.

“Thus, in the second phase, the court went beyond viewing the purpose of freedom of speech and expression through the lens of holding the government accountable, by recognising the inherent value in effective participation of the citizenry in democracy. This court recognised that effective participation in democratic governance is not just a means to an end but is an end in itself,” held the bench.

Adopting the broad interpretation of Article 19(1)(a), the top court noted that citizens’ right to know cannot be limited to information about the functioning of public offices but must also extend to participatory democracy in other forms.

It referred to the apex court’s previous judgments in the cases of Association for Democratic Reforms (ADR) in 2002 and PUCL in 2003, mandating the disclosure of criminal antecedents and assets of the candidates to signify that the voters have a right to the disclosure of information which is “essential” for choosing a candidate.

On these parameters, the bench went on to note that a political party ought to be considered as a relevant “political unit” in the electoral process because voters cast their votes based on two considerations — the capability of the candidate as a representative and the ideology of the political party.

“Thus, the observations of this Court in PUCL and ADR cases on the right to information about a candidate contesting elections is also applicable to political parties. The issue whether information about the funding received by political parties is essential for an informed voter must be answered in the context of the core tenets of electoral democracy,” said the bench.

It proceeded to reject the Centre’s contention that even the political parties could not know the donors’ details, holding that the scheme is “not foolproof” but has sufficient gaps enabling political parties to know the particulars of the contributions made to them.

“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… the information about funding to a political party is essential for a voter to exercise their freedom to vote in an effective manner. The scheme and the impugned provisions to the extent that they infringe upon the right to information of the voter by anonymising contributions through electoral bonds are violative of Article 19(1)(a),” it thus held.

Deep association between money and politics: By guaranteeing the principle of “one person one vote” and by mandating reservation of seats for Scheduled Castes and Scheduled Tribes in Parliament and state assemblies, the bench said, the Constitution has strived to guarantee that electoral democracy in India is premised on the principle of political equality.

“However, political inequality continues to persist in spite of the constitutional guarantees. One of the factors which contribute to the inequality is the difference in the ability of persons to influence political decisions because of economic inequality. In a politically equal society, the citizens must have an equal voice to influence the political process,” said the court.

The court noted that the EB scheme does not distinguish between campaign funding and electoral funding and therefore, 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.

“Economic inequality leads to differing levels of political engagement because of the deep association between money and politics. At a primary level, political contributions give a ‘seat at the table’ to the contributor. That is, it enhances access to legislators. This access also translates into influence over policymaking. 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,” cautioned the bench.

The money contributed through EBs cannot only influence electoral outcomes but also policies particularly because contributions are not merely limited to the campaign or pre-campaign period, said the court, adding quid pro quo arrangements could be in the form of introducing a policy change, or granting a license to the contributor.

“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,” held the bench.

Can’t equate companies and individuals for the purposes of political contributions: Ruing the “pernicious effect of money on the integrity of the electoral process in India”, the Constitution bench struck down the law that allowed companies to make contribute unlimited amounts to any political party, regardless of the fact whether they make profits.

“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 daylight,” it pointed out.

While the government argued that the statutory cap on funding was removed to discourage the creation of shell companies, the court found no justification in framing a scheme that not only removed the existing cap of 7.5% of the average net profits in the previous three financial years but also removed the distinction between a profit-making and a loss-making company for the purposes of making donations.

“The amendment to Section 182 (in the Companies Act) by permitting unlimited corporate contributions (including by shell companies) authorises unrestrained influence of companies on the electoral process. This is violative of the principle of free and fair elections and political equality captured in the value of ‘one person one vote’,” it held.

Finding favour with the old regime, the bench said that classification between loss-making companies and profit-making companies for the purpose of political contributions was 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 income tax benefits,” it said.

The bench further junked the Centre’s endeavour to put a company on part with an individual for the purposes of electoral funding because there are no ceilings on an individual to make donations.

“The ability of a company to influence the electoral process through political contributions is much higher when compared to that of an individual. A company has a much graver influence on the political process, both in terms of the quantum of money contributed to political parties and the purpose of making such contributions. Contributions made by individuals have a degree of support or affiliation to a political association. However, contributions made by companies are purely business transactions, made with the intent of securing benefits in return,” it underlined.

Terming the impugned provision “manifestly arbitrary”, the court said that the law cannot treat political contributions by companies and individuals alike because of the variance in the degree of harm on free and fair elections. “Companies and individuals cannot be equated for the purpose of political contributions,” it declared.

Fundamental right to informational privacy includes citizen’s political affiliation: One of the major takeaways of the judgment is on the right to privacy. Breaking new ground, the Constitution bench on Thursday declared that the fundamental right to informational privacy, as recognised by the Supreme Court in the nine-judge bench judgment in KS Puttaswamy case (2017) includes information about a citizen’s political affiliation.

According to the court, the right to privacy judgment did not limit privacy to private actions and decisions such as the choice of a life partner, procreation and sexuality or protection from direct State intrusion. Privacy takes within its fold decisions which also have a “public component” like political affiliation, it added.

“The freedom of political expression cannot be exercised freely in the absence of privacy of political affiliation. Information about a person’s political beliefs can be used by the State at a political level, to suppress dissent, and at a personal level, to discriminate by denying employment or subjecting them to trolls. The lack of privacy of political affiliation would also disproportionately affect those whose political views do not match the views of the mainstream,” it noted.

The bench said the lack of privacy of political affiliation would be “catastrophic” in so far as exercising electoral franchise is concerned, which must remain free from undue influence of all kinds.

“Information about a person’s political affiliation can be used to disenfranchise voters through voter surveillance. Voter databases which are developed through surveillance identify voting patterns of the electors and attempt to interfere with their opinions based on the information,” warned the court, adding it could also be used to engage in gerrymandering — the practice by which constituencies are delimited based on the electoral preference of the voters.

Rendering a new paradigm to the right to privacy, the five-judge bench declared that the Constitution guarantees the right to informational privacy of political affiliation since it is imperative to protect the freedom of political affiliation and exercise of electoral franchise.

In the context of EB scheme, the court went on to hold that informational privacy would extend to financial contributions to political parties, noting it is the duty of the Constitution to protect such information when the law permits political contributions as an expression of political affiliation and support.

“It is true that contributions made as quid pro quo transactions are not an expression of political support. However, to not grant the umbrella of informational privacy to political contributions only because a portion of the contributions is made for other reasons would be impermissible. The Constitution does not turn a blind eye merely because of the possibilities of misuse,” it added.

Going further, the bench tested the EB scheme on the anvils of balancing the right to information and the right to informational privacy. Here, the scheme failed on account of anonymity of the contributor being intrinsic to it. The court noted that the scheme “completely tilts the balance in favour of the purpose of informational privacy and abrogates informational interests”, thereby failing the test of proportionality by not being the least restrictive means to balance the fundamental rights.