Data PrivacyBalancing Right to Information against Data Privacy: Electoral Bonds Judgement

The Supreme Court, in the case of Association for Democratic Reforms & Anr. Versus Union of India & Ors. Writ Petition (C) No. 880 of 2017 held that the electoral bond scheme, facilitating anonymous political donations, violates the fundamental right to information under Article 19(1)(a) of the Constitution of India (“the Constitution”).

In this case analysis, we particularly go into the issues and the findings of the Supreme Court with regard to the Right to privacy of corporate donors.

FACTS

The Electoral Bond Scheme 2018 (“Scheme”), was notified by the Ministry of Finance (“MoF”) on January 2^nd, 2018, which allowed for the purchase of bearer bonds by citizens and entities incorporated or established in India. These bonds could only be encashed by eligible political parties meeting certain criteria, including registration under Section 29A of The Representation of the People Act, 1951 (RP Act) and securing at least one percent of votes polled in the last general election. The Scheme outlines various features such as KYC requirements, denominations, validity period, and periodic availability for purchase.

The Association for Democratic Reforms (“Petitioners”), a non-profit public policy and political reform think-tank filed a Writ Petition under Article 32 of the Constitution against the central government (“Respondents”), challenging the constitutionality of the Scheme and associated provisions of the Finance Act, 2017 (Finance Act), which included amendments to the Reserve Bank of India Act, 1934 (“RBI Act”), RP Act, Information Technology Act, 2000 (IT Act) and the Companies Act, 2013 (“Companies Act”).

The Petitioners argued that these provisions infringed upon the sanctity of the electoral process and sought a declaration of unconstitutionality. The Supreme Court, recognizing the weighty issues raised, directed political parties to submit details of contributions received through electoral bonds to the Election Commission of India (ECI). Despite the rejection of interim relief, the Petitioners pressed their challenge, including the contention regarding the Finance Act’s classification as a Money Bill under Article 110 of the Constitution.

The Petitioners sought a declaration that the Scheme and associated amendments are unconstitutional, particularly emphasizing their impact on electoral transparency and the classification of Money Bills.

ISSUES BEFORE THE SUPREME COURT

Issues taken up by the Supreme Court in respect of Right to Privacy:

1. Whether the fundamental right to informational privacy recognized by this Court in Justice KS Puttaswamy v. Union of India (2017) 10 SCC 1 (“Puttaswamy”), includes information about a citizen’s political affiliation?

2. If the above is answered in the affirmative, whether financial contribution to a political party is a facet of political affiliation?

CONTENTIONS OF THE PARTIES

The Petitioners argued that equating political contributions with expression of political preference through voting is flawed because it conflates money with speech.

The Petitioners also argued that informational privacy does not extend to political contributions because they are, by their very nature, public acts which influence public policy.

The Petitioners claim that shareholders’ rights are violated by the non-disclosure of information regarding political donations made by companies. Furthermore, the Petitioners argued that the Scheme disrupts democracy by creating an unequal playing field between ruling parties and others, thereby interfering with free and fair elections.

The Petitioners further highlighted the skewing of elections by permitting unlimited contributions from corporate entities while removing the requirement for disclosure, compromising the fairness of the electoral process. They stressed on the importance of voters’ freedom to make informed decisions, asserting that withholding information about political funding undermines this freedom.

The Petitioners also rejected the argument for judicial restraint, stating that matters related to the electoral process are distinct from economic policy matters.

The Petitioners challenged the presumption of constitutionality for laws altering the electoral process, arguing that it would be contradictory to assume validity for laws shaping the conditions under which legislatures are elected. The Petitioners also contended against corporate funding, stating that it violated the Constitution as corporate entities are not entitled to rights under Article 19(1)(a) of the Constitution.

Moving forward, the Petitioners expressed their concerns about the unrestricted use of funds contributed through the Scheme, potentially diverting them from electoral campaigns.

Furthermore, the Petitioners contended that the Scheme severed the link between elections and democracy by prioritizing the interests of contributors over those of voters. Finally, the Petitioners highlighted the information asymmetry created by the Scheme, where political donations remained undisclosed to voters but were known to the Central Government, leading to a bias towards the ruling party in receiving donations.

On the contrary, the Respondent argued that there is a vital role of political parties in a democratic society, asserting their entitlement to support, including financial contributions.

The Respondent highlighted the legitimacy of the Scheme, emphasizing its facilitation of transparent fund transfers through established banking channels, which mitigates the risks associated with unregulated cash transactions. Moreover, the Respondents contended that the Scheme ensures the confidentiality of contributions, fostering the influx of clean money into political parties. The Respondent contented against a generalized right to know about political funding, suggesting that the purpose of such transparency is to empower voters to make informed choices during elections.

In defense of the Scheme, the Respondent pointed to its pivotal role in transitioning away from a predominantly cash-based donation system, which was susceptible to the influence of black money. The Respondent asserted that by safeguarding the privacy and political affiliations of donors, the Scheme encouraged the influx of clean funds, free from apprehensions of retribution.

Furthermore, the Respondent highlighted various regulatory safeguards embedded within the Scheme, including eligibility criteria for recipient political parties, Know Your Customer (“KYC”) norms for bond buyers, and the requirement for all transactions to occur through banking channels. These measures, as the Respondent argued, effectively curbed the circulation of black money and ensured the integrity of the electoral process.

Emphasizing the balance between the right to information of the general public against the right to privacy of the donees, the Respondent stated that donating money to a political party is a form of political self-expression. The Respondent asserted that maintaining anonymity in political donations is crucial for enabling free and uninhibited political choices.

The Respondent also contended that the state has a positive obligation to safeguard the privacy of its citizens especially the right to privacy of political preference. The Respondent highlighted that the corporate entities have the right to purchase electoral bonds without having to disclose their preference of political party

The Respondent advocated for judicial restraint in reviewing economic policy matters, acknowledging the legislature’s prerogative in such domains. Upholding the presumption of constitutionality, the Respondent stressed upon the accountability of legislators and their access to pertinent information for policymaking. In essence, the Union of India contended that the Scheme serves legitimate state interests, promotes transparency, and safeguards donor privacy, thereby enhancing the electoral process and strengthening democratic governance.

DECISION AND FINDINGS

In the present case, the Supreme Court invalidated the Scheme, which facilitates anonymous political donations, deeming it unconstitutional. The ruling emphasized that the Scheme violated the right to information guaranteed under Article 19(1)(a) of the Constitution. The Supreme Court highlighted the crucial role of the right to information in fostering participatory democracy and Government accountability, asserting its intrinsic value beyond just facilitating freedom of speech and expression.

The Supreme Court re-iterated the definition and need for privacy as discussed in Puttaswamy. The right to privacy includes the freedom from unwanted stimuli, and the protection against intrusive observation into intimate decisions and autonomy with respect to personal choices.

Thus, the Supreme Court agreed that freedom of political expression cannot be exercised freely in the absence of privacy of political affiliation. Importantly, the Supreme Court dismantled the arguments of the Respondents by drawing a distinction between individual donors and corporate donors, stating that huge political donations by corporations should not be measured with the same yardstick for privacy as another section of the population.

Furthermore, the Supreme Court rejected the Respondent’s argument that the scheme was necessary to curb black money in electoral financing, finding it disproportionate to encroach upon fundamental rights. Instead, the Supreme Court suggested alternative, less restrictive measures, such as imposing a cap on anonymous donations or promoting Electoral Trusts, as more balanced approaches.

Addressing concerns about donor privacy, the Supreme Court distinguished between genuine political support and contributions made as quid pro quo measures to influence policies. It concluded that while the right to privacy of political affiliation extends to genuine expressions of support, it does not encompass contributions aimed at securing favors or influencing political decisions.

Moreover, the Supreme Court highlighted the inherent advantage the scheme provided to the ruling party, potentially leading to quid pro quo arrangements due to the close connection between money and politics.

Overall, the judgment establishes the importance of transparency and accountability in political funding, striking down the Scheme as incompatible with these principles and the fundamental right to information.

AMLEGALS REMARKS

This case highlights the Supreme Court’s commitment to upholding democratic principles, particularly transparency and accountability in political funding. The Supreme Court has separately gone into balancing donor privacy against the right to information while striking down the Scheme. This underscores the primacy given to the fundamental right to information under Article 19(1)(a) of the Constitution in ensuring Government accountability and the integrity of the electoral process.

By invalidating the Scheme, the Supreme Court sent a clear message about the importance of citizens’ access to information, especially concerning matters as crucial as political funding, which directly impacts the functioning of democracy.

Furthermore, in suggesting alternative measures that could achieve the Government’s objectives without unduly infringing upon citizens’ rights, the Court showcased its commitment to upholding constitutional values while also acknowledging the complexities involved in regulating political financing. This landmark decision sets a precedent for future cases involving electoral reform and underscores the judiciary’s role in safeguarding the foundational principles of democracy.

– Team AMLEGALS assisted by Ms. Shristi Dwivedi

For any queries or feedback feel free to reach out to mridusha.guha@amlegals.com or jason.james@amlegals.com