Unveiling the Privacy Dilemma: Unpacking the Supreme Court's Electoral

Bonds Judgment & its Retroactive Ramifications for Donors

On 15 February 2024, a five-judge constitution bench of the Supreme Court delivered its highly-
anticipated judgment in the electoral bonds case which unanimously struck down the Electoral
Bonds Scheme as unconstitutional. In this Unique & Historic judgment, Apex Court unanimously
held that anonymous electoral bonds are violative of the voter’s right to information enshrined
under article 19(1)(a) of the Constitution. CJI said that "Information about funding of political
parties is essential for the effective exercise of the choice of voting".

This decision, though lauded by the public, possesses some legal intricacies that inadvertently
inflicts harm & creates unintended consequences for some individuals or entities.

The heart of the judgment says that “SBI shall submit details of the Electoral Bonds purchased
from 12 April 2019 till date, to the Election Commission of India (ECI) within three weeks. The
details shall include the date of purchase of each bond, the name of the purchaser and the
denomination of the bond purchased. The ECI shall publish this information on its official website
within one week from the receipt of the information.”1

In this landmark judgment, a few issues remained unanswered and ignorant from the donor’s
perspective. It underscores a critical ethical and legal dilemma regarding the retrospective
application of the Supreme Court's judgment on the Electoral Bonds Scheme. Donors who
contributed funds through electoral bonds did so under the belief that their identities would remain
confidential, as was established by law at the time. However, with the scheme being declared
unconstitutional and the subsequent order for donor details to be disclosed, these donors find
themselves in a precarious situation.

The retrospective nature of the court's decision raises concerns about the fairness and justice of
holding donors accountable for actions that were lawful when they were committed. These
individuals acted in good faith, adhering to the existing legal framework governing political
donations. To now subject them to potential repercussions for actions that were permissible under
the law at the time could be perceived as unjust and punitive.

1
Association for Democratic Reforms & Anr. v. Union of India & Ors., 2024.

Electronic copy available at: https://ssrn.com/abstract=4742040

The Supreme Court's judgment addressed critical issues regarding political funding transparency
and donor anonymity. However, several key concerns remained unaddressed during the court
proceedings, raising questions about the completeness and comprehensiveness of the decision-
making process. Here are some of the key issues that were overlooked or ignored by the court:

1. The doctrine of Prospective Overruling:

The primary question that emerges is whether the established legal framework allows the Supreme
Court to retroactively apply its judgment in this instance.

The doctrine of ‘prospective overruling’, states that the “law declared by the Court applies only to
future cases, and its applicability to cases that have reached finality is preserved because repeal
would otherwise cause hardship to those who had relied on it." 2

In case of Babaji Kondaji3, the Supreme Court emphasized that prospective operation is the rule,
while retrospective operation is the exception.

The US Supreme Court in Great Northern Railway Case4, adopted the doctrine of prospective
overruling & stated that by overturning a previous statute or judgment, it has the authority to give
its decision prospective effect. The Court's argument for adopting this doctrine is that no party
should suffer as a result of the Court's change in legislation or posture, i.e., if a judgment is granted
retrospective effect, all transactions that took place under the prior law would be void. To avoid
such an impact on previous transactions, a court's orders must be given prospective effect.

The US Court at Hughes in Chicot County Drainage Case5 held that actions/transactions that
took place under legislation that have been found unconstitutional should not be affected by such
unconstitutionality. By issuing a new judicial ruling in this regard, the previous transactions cannot
be modified or erased.

In situations where individuals or entities, such as donors, have acted in good faith and in
accordance with the law as it stood at the time, retroactively penalizing or imposing consequences
on them can indeed raise concerns about fairness and justice.

2
Sarwan Kumar v. Madan Lal Aggarwal, AIR 2003.
3 Babaji Kondaji Garad v. Nasik Merchants Co-operative Bank Ltd., 2009.
4
Great Northern Railway vs. Sunburst Oil and Refinery Co., 1932.
5
Chicot County Drainage District vs. Baxter State Bank, 1940.

Electronic copy available at: https://ssrn.com/abstract=4742040

 2. Ex-post Facto Laws:

Another crucial argument is that the constitution of India provides procedural safeguards and
protection against ex-post facto laws. Article 20 prohibits the legislature from enacting
retrospective criminal laws & the same concept is applicable to the judiciary as well when it is
declaring law through any judicial pronouncement.

In Kedarnath v. State of West Bengal6, the SC held that when an act is declared as a criminal
offence by the legislature and provides a penalty such declarations are always prospective and
cannot be applied retrospective as per provisions of article 20.

In Baijnath Kedia v. State of Bihar7, the Supreme Court held that penal provisions cannot be
applied retrospectively unless the statute expressly or by necessary implication provides for
retrospective operation. The court emphasized that individuals should not be subjected to penal
consequences for actions that were not punishable under the law at the time of their occurrence.

Retrospective application of a judgment may be justified if it is necessary to remedy past injustices

or ensure accountability. In the impugned judgment, the Court said that ‘right to know’ will help
the voters to exercise their rights freely and effectively, which is true for the future elections but
transactions with respect to which voters have already exercised their rights during previous
elections which cannot be remedied, altered or corrected, so disclosure of information with respect
to previous transactions is not necessary.

The court may also consider the reliance interests of individuals or entities who acted in accordance
with the invalidated law before the Supreme Court's judgment. If disclosing donors' names
retroactively would unfairly prejudice their interests, the court might exercise discretion in
deciding whether to order such disclosure.

The court may weigh the public interest in transparency and accountability against other competing
interests when determining whether to order the disclosure of donors' names retroactively. If there
are compelling reasons to disclose the information in the public interest, the court may be more
inclined to do so.

6
Kedarnath v. State of West Bengal, AIR 1954.
7
Baijnath Kedia v. State of Bihar, 1969.

Electronic copy available at: https://ssrn.com/abstract=4742040

 3. Doctrine of Legitimate Expectations:

Donors who contributed funds in accordance with the law had legitimate expectations that their
actions were lawful and would not result in adverse consequences.

In Vineet Narain Case8 Supreme Court held that retroactively altering the legal landscape may
violate these legitimate expectations and undermine confidence in the legal system. In Union of
India v. Raghubir Singh9, the Supreme Court emphasized the principle of legitimate expectation
and held that individuals have a legitimate expectation that authorities will act in accordance with
established policies and procedures. Any departure from these expectations must be justified on
grounds of public interest and fairness.

In State of Punjab v. Amar Nath Goyal10 the Supreme Court declared certain provisions of the
Punjab Preemption Act, 1913, unconstitutional as they violated article 14 of the Constitution.
However, in order to protect legitimate expectations of individuals, the court refused to extend the
declaration of unconstitutionality retrospectively. It held that the declaration of unconstitutionality
would operate prospectively, meaning it would only apply to transactions occurring after the date
of the judgment. The court emphasized the need to balance the interests of justice and fairness with
legal certainty and the rule of law.

This case illustrates the Supreme Court's approach to balancing competing interests when
declaring a law unconstitutional and deciding on the extent of its retrospective application. While
the court may invalidate a law for violating constitutional principles, it may limit the retrospective
effect of its judgment to protect the rights and interests of individuals who acted in good faith
under the law before its nullification.

In Attorney-General of Hong Kong v. Ng Yuen Shiu11 Hong Kong court held that government
authorities are bound by their promises or representations made to individuals or groups, provided
that the expectations are legitimate and have been induced by clear, unambiguous, and unequivocal
representations.

8
Vineet Narain & Ors. V. Union of India & Anr, AIR 1998.
9
Union of India v. Raghubir Singh, 1989.
10
State of Punjab v. Amar Nath Goyal, 2005.
11
Attorney-General of Hong Kong v. Ng Yuen Shiu, 1983.

Electronic copy available at: https://ssrn.com/abstract=4742040

 4. Unreasonable procrastination:

When the Electoral Bonds Scheme was enacted in 2017, the then Reserve Bank of India (RBI)
Governor Mr. Urjit Patel wrote a letter to the Election Commission of India expressing concerns
that it could lead to instances like money laundering. The ECI, in its affidavit to the court on 27
March 2019, raised apprehension over the scheme. It said the scheme allowed unlimited corporate
funding, which would have a serious impact on transparency in funding of political parties.

The petitioner, ADR, had pressed for a stay on the scheme during the arguments on interim order.
However, this request was turned down by the bench.
Despite the court noting the issue requires detailed deliberations, the matter has not got listed for
final arguments.

The ADR filed additional documents in November 2019 to show the government went ahead with
electoral bonds, despite opposition from the RBI, ECI and the Law Ministry. On the basis of “fresh
evidence”, the ADR insisted on a stay on the scheme during the last hearing held on 20 January
2020. But the plea was again rejected and, instead, the court asked the Center and ECI to file their
responses within two weeks. In this way, the Supreme Court rejected the plea to stay the scheme
twice. This inaction by the Supreme Court contributed to unnecessary delay and oversight.

In 2019, the court allowed something which already appeared to be opaque, it allowed it to run for
the two election cycles (almost for four and half years). The court refused to stay something which
was known even by its creators to be opacity personified. Now, the crucial point is that if institution
like the Supreme Court did not find this scheme to be prima facie violative of fundamental rights,
how can it be expected from other people or entities? Political parties have already enjoyed the
benefit of the scheme for many years and now only the Donors will have to suffer due to a
disclosure order of the supreme court made in an impugned judgment.

For more than half a decade, the Supreme Court maintained a conspicuous silence on the legality
of EBS, leaving individuals & entities uncertain about its constitutionality. After years of
dormancy, the Court finally addressed the issue and declared the law unconstitutional, sending
ripples through the lives of those individuals & entities who had previously adhered to it. This

Electronic copy available at: https://ssrn.com/abstract=4742040

long-awaited verdict not only rectified a legal ambiguity but also underscored the profound impact
of judicial decisions on the actions and rights of those subject to the law's sway.

In light of these considerations, if the Supreme Court were to consider ordering the disclosure of
donors' names retroactively, it would need to carefully weigh the interests of justice, fairness, and
the rule of law against the public interest in transparency and accountability. The court may also
explore alternative measures to achieve transparency in political funding without unfairly
penalizing donors who acted in good faith and in accordance with the law at the time.

Electronic copy available at: https://ssrn.com/abstract=4742040