Even 70 years after independence the country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections... Political parties continue to receive most of their funds through anonymous donations which are shown in cash... Donors have also expressed reluctance in donating by cheque and other transparent methods as it would disclose their identity and entail adverse consequences... I therefore propose the following system as an effort to cleanse the system of funding of political parties... This reform would bring greater transparency and accountability in the political funding while preventing future generations of black money.
— Arun Jaitley, introducing the Electoral Bonds scheme
The Former Union Finance Minister had in 2017 claimed that he was introducing a system which would bring "greater transparency and accountability" in political funding. Fast forward 7 years later, the Supreme Court holds the same system "unconstitutional" citing it to be lacking transparency and being a potential haven for black money. This tale unfolds a narrative of secrecy and intrigue surrounding our protagonist, "The name's Bond, Electoral Bond".
Imagine attending a carnival where various parties have set up stalls— BJP, Congress, TMC, DMK, etc., each one showcasing their political offerings. Instead of using real money to get these offerings directly, you're required to acquire special coupons called Electoral Bonds. These bonds can only be purchased from an authorized counter called SBI using your real money. Once you have these electoral bonds, you can use them to get stuff from the party stalls. These party stalls can later encash these bonds from the SBI counter, drawing from the funds you originally used to purchase those bonds.
In sweet and simple terms, this is what the Electoral Bonds scheme does. Electoral Bonds act as an intermediary currency within the political carnival, ensuring donations to political parties while maintaining privacy and anonymity for you, i.e., the donor, as nobody other than the State Bank of India (SBI) and the party you donated would know your identity.
On 15 February 2024, the Supreme Court unanimously decided to strike down the Electoral Bonds scheme, declaring it "unconstitutional", along with various provisions of the Finance Act and the Companies Act giving effect to the said scheme. The primary ground for such a judgement was that the scheme violated citizens' right to cast an informed vote. It is pertinent to note that the court has not declared the said scheme unconstitutional to the extent of Electoral Bonds up to ₹10,000, the reason being Electoral Bonds up to the tune of ₹10,000 has not been construed to fall within the four corners of 'quid pro quo', for simple understanding, 'corruption'.
The Supreme Court, therefore, directed the SBI to carry out, inter alia, the following exercises:
219. In view of our discussion above, the following directions are issued:
b. SBI shall submit details of the Electoral Bonds purchased since the interim order of this Court dated 12 April 2019 till date to the ECI. The details shall include the date of purchase of each Electoral Bond, the name of the purchaser of the bond and the denomination of the Electoral Bond purchased;
c. SBI shall submit the details of political parties which have received contributions through Electoral Bonds since the interim order of this Court dated 12 April 2019 till date to the ECI. SBI must disclose details of each Electoral Bond encashed by political parties which shall include the date of encashment and the denomination of the Electoral Bond;
— Association for Democratic Reforms & Anr. Versus Union of India & Ors., 2024 INSC 113
A plain reading of the above clauses (b) and (c) of para 219 of the judgement would show that there are two independent and distinct documents that the SBI has been directed to disclose. Be it noted, that the first document is incomplete without being matched with the second one, and vice-versa. The whole purpose of the Electoral Bonds case and its landmark verdict thereof has been to search out and establish the link between big corporations and political parties as to whether the pockets of political parties have been filled to secure favours, making it indispensable to ascertain: Who has paid whom?
The directions of the Supreme Court given under clauses (b) and (c) did not require the SBI to correlate the two sets of data. So the SBI would naturally not waste its time in doing so, right? Interestingly, the SBI filed an application just two days before the deadline for disclosure of the Electoral Bonds data, seeking time till 30 June 2024 (by that time the General Elections would be over) for it to comply with the judgement. And the reason they cited was that the matching of the two sets of data is a "time consuming exercise". The court, however, dismissed the application on 11 March 2024 saying, "We have not told you to do the matching exercise, we have asked you for a plain disclosure".
Now, SBI’s stalling tactics may not have worked but in this regard, it would be pertinent to note that the court in its 11 March order stated, "The ECI was directed to collate the information to be submitted by the SBI…". But that’s not true, the 15 February judgement hasn’t explicitly asked either the SBI or the ECI to collate the two sets of information, it simply mentioned, "The ECI shall publish the information shared by the SBI on its official website within one week of the receipt of the Information…". It was only by virtue of the 11 March order that the court said the ECI shall compile the information to be submitted to it by the SBI. It would therefore follow that the Supreme Court came to realise its mistake committed in the original judgement, although by not making explicit that it made a mistake.
A question would arise for consideration at this juncture: Whether a court by a subsequent order can change the effect of its earlier judgement? It is well settled that a court cannot modify its judgement by passing a subsequent order unless it is dealing with a review application filed by one of the parties. But here, the court has not changed its reasoning involved in the judgement. The court appears to have added a new direction to its original judgement. There can be no doubt that the said matching exercise needs to be conducted to ascertain, 'who has paid whom', which would lead to the revelation of whether there has been any quid pro quo.
To bring forth a controversial but new chapter to the story, on 12 March 2024 the Chairman of the Bar Council of India and the President of the Supreme Court Bar Association, Shri AC Aggarwala wrote to the President of Bharat seeking a "Presidential Reference" under Article 143 of the Constitution and that she request the Supreme Court to stay the implementation of the said judgement and order. He essentially presented two arguments— The first being that the Supreme Court may not be correct in striking down the Electoral Bonds scheme, for which he placed reliance on the "majesty of the Parliament" in making laws; and the second being that even if it is accepted that the Supreme Court was right in striking down the said scheme, it should have given 'prospective effect' to its judgement, for which he has relied on Article 142 of the Constitution.
The timing of the letter makes one suspicious of its intent. It was neither written immediately after the passing of the 15 February judgement nor immediately after the filing of the application for extension of time by the SBI. He wrote to the President of Bharat after the Supreme Court rejected SBI’s extension application. It may therefore be convincingly speculated if not argued that the letter was used as one of the last resorts when the government of the day failed in its attempts not to disclose the secrets of Aladdin’s lamp.
Criticism from various quarters visited the letter. But in all fairness, it should be mentioned that Shri Aggarwala in a TV interview has conceded that he welcomed the judgement to the extent it quashed the Electoral Bonds scheme. He however argued that the court should have given prospective effect to its judgement.
It may be noted that a pertinent point has been implicitly raised by the letter insofar as it questions the non-exercise of the powers under Article 142 by the Supreme Court in not giving its 15 February judgement a 'prospective effect'. Critics argued that the remedy for addressing a grievance against the judgement is to file a review petition and not the letter. However, it has to be noted that a review petition would not be maintainable since the grievance is the court's failure to exercise its power under Article 142, and the exercise of this Article lies at the discretion of the court. Article 142 enables the apex court to pass any order for doing 'complete justice', without violating any statutory provisions. The court would not have entertained such a review petition since it reviews its decision only when it has committed an unconscionable error.
It therefore needs to be considered whether a curative petition could have been the option. In the ordinary course, the court may entertain a curative petition when the parties have exhausted a remedy of filing a review petition against the judgement and the judgement needs to be cured if it has caused injustice to a party.
The grievance against the Supreme Court judgement is that the operation of the judgement should have been prospective in nature, meaning thereby that the purchase and encashment of the Electoral Bonds before the 15 February 2024 judgement should have remained unaffected and undisclosed. It should be noted that while corruption is to be condemned, lobbying with the government and financing a political party to help it secure power cannot be said to be an unconstitutional practice. Thus, it is not wrong to argue that the past donations via Electoral Bonds should have been protected by the Supreme Court.
The doctrine of 'prospective overruling' says that a judgment affecting past transactions takes effect from the date of the judgment itself. It would have operation only in the future and not carry any retrospective effect on any past decisions. This doctrine stems from the understanding that the operation of a judgment is similar to that of a law, as outlined in Article 13(2) which declares a post-constitutional law inconsistent with the Constitution as void. While the Article specifies that such a law enacted after the Constitution's adoption becomes void from its inception, it does not retroactively invalidate judgments made prior to such void declaration. The said doctrine is premised on the logic that when a law is not stayed by the court and transactions therefore thereunder have been made, the said transactions have been made under the presumption that the law is constitutional for that time.
We believe that a curative petition would have been an appropriate remedy since a substantial question of law has been implicitly raised by the said letter about when the Supreme Court should give its judgement prospective effect and when retrospective effect. In other words, the letter raises a question of when prospective overruling should be applied by the court. It may be argued by some that the application of the doctrine of prospective overruling depends on the facts of the case and therefore, in which cases the said doctrine is to be applied cannot be stated by the court. It therefore may be argued that no question of law has been raised by the letter. We are however reminded of the decision of the apex court in I.C. Golak Nath v. State of Punjab, 1967 AIR 1643, 1967 SCR (2) 762 wherein the apex court has indicated a situation where the said doctrine may be applied.
53. We have arrived at two conclusions, namely, (1) the Parliament has no power to amend Part III of the Constitution so as to take away or abridge the fundamental rights; and (2) this is a fit case to invoke and apply the doctrine of prospective overruling. What then is the effect of our conclusion on the instant case? Having regard to the history of the amendments, their impact on the social and economic affairs of our country and the chaotic situation that may be brought about by the sudden withdrawal at this stage of the amendments from the Constitution, we think that considerable judicial restraint is called for. We, therefore, declare that our decision will not affect the validity of the Constitution (Seventeenth Amendment) Act, 1964, or other amendments made to the Constitution taking away or abridging the fundamental rights. We further declare that in future the Parliament will have no power to amend Part III of the Constitution so as to take away or abridge the fundamental rights. In this case we do not propose to express our opinion on the question of the scope of the amendability of the provisions of the Constitution other than the fundamental rights, as it does not arise for consideration before us. Nor are we called upon to express our opinion on the question regarding the scope of the amendability of Part III of the Constitution otherwise than by taking away or abridging the fundamental rights. We will not also indicate our view one way or other whether any of the Acts questioned can be sustained under the provisions of the Constitution without the aid of Articles 31-A, 31-B and the 9th Schedule.
—I.C. Golak Nath v. State of Punjab, 1967 AIR 1643, 1967 SCR (2) 762
Therefore, the apex court has illustrated when a judgement has cascading implications on the economic element of the country, the judgement may be given a prospective effect. This is particularly pertinent in light of the judgement passed in the Electoral Bonds case where the affiliation valves of the corporate entities are at stake. It may be argued that had the court really intended to give its judgement a complete economic effect, it could have directed political parties to pay back the donations they received since it has observed that the Electoral Bonds scheme was to legitimise black money. Hence, the court’s omission of giving such a direction shows that it understood the economic ramifications of such a direction. However, on appreciation of the other side of the coin, it may also be argued that corporate entities have donated money earned from legitimate sources and possibly that is why the court has not given the direction of repayment on the ground that there is no unimpeachable evidence before it that the one donated was, in fact, 100% black money.
Furthermore, the disclosure of 'who donated whom' also carries substantial social implications. Public and media scrutiny would and is leading to a severe backlash against such corporations thereby giving them a bad name based on who their political Prabhus are. In light of this, it can be argued that the court could have chosen not to direct the disclosure of corporate relations with political parties because the court’s conclusion of the existence of a quid pro quo is a safe assumption which might not be the case in every single donation. It may be argued that the disclosure of the same, which has in fact, been directed by the court will lead to speculations of a corporation being in cahoots with a political party leading to adverse consequences only because it has made donations to that party. Therefore it appears that the disclosure/nondisclosure in the present case is a double-edged sword, directing either of the two would have their own consequences. This case therefore had called for striking a balance between the two and is a classic case where the judiciary could have laid down its illustrative contours of judicial restraint which it has chosen not to. With optimism and anticipation, we have to await the unfolding consequences of this judgement which are pretty evident at this point itself.
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