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  • Kartik Kalra

All Companies Speak the Same? Electoral Bonds and Corporate Free Speech

Kartik Kalra*



This month, the Supreme Court delivered its judgment in the Electoral Bonds Case, holding the Electoral Bonds Scheme (“EBS/Scheme”) – an electoral funding scheme having at its core the corporate donor’s protection – unconstitutional, violating, inter alia, citizens’ constitutional right to know, as well as the electoral process’ sanctity. The Scheme comprised three central features, all of which were decried by the Court as being contrary to democratic norms – the corporate donor’s anonymity; the vesting of unlimited discretion on Directors to authorize donations; and the removal of the profitability threshold that hitherto controlled its maximum quantum (¶143, 175, 214, Chandrachud, CJ.). During arguments, the state sought to invoke the American Supreme Court’s decision in Citizens United v. Federal Election Commission, arguing that EBS facilitated corporate free speech, for it enabled corporations to speak through their donations in favour of political parties fearlessly and unrestrictedly (¶40), a contention the Court has – without adjudicating exactly on the issue of corporate electoral finance from the perspective of free speech – held illegitimate.

In this article, I discuss EBS from the perspective of corporate free speech, arguing that the kind of corporate speech authorized by EBS is such that it operates substantially contrary to theoretical justifications for offering it protection (constitutional or otherwise), noting the Court’s general approval with corporate electoral financing being devoid of speech-related value. Case-law in India, as well as literature on the subject, has developed for corporate speech two primary justifications – first, the “shareholder unity” rationale, which locates the value of corporate speech in shareholders incorporating to strengthen their social – as well as political – power; and second, the “listeners’ rights” rationale, which locates its value in the gain that the general public acquires in enabling the corporation to speak. Both these justifications, I propose, are wholly vitiated by the EBS, with the Court generally concurring with this proposition, finding the corporate donor’s protection – especially in the manner the EBS does it – an illegitimate, unconstitutional aim.


Martin Redish proposes that an assessment of the reasons causing persons to incorporate would show the “numerous ways in which [its] expression…fulfils the values…of free speech”. The primary reason for this, he noted, was because the shareholders constituted – and consequently joined – the company in pursuit of their “personal self-realization”. Tocqueville noted that persons associate, and form a corporation, for a wide number of purposes – “serious, futile, general or restrictive, enormous or diminutive”. The advantage of associating through a corporation, he proposed, was that persons who would otherwise be powerless were able to amass significant power – social and economic – through their unity (581).

Such justifications for corporate speech, which are premised in shareholder unity, have found favour in Indian case-law, with the Supreme Court having held previously that when the company speaks, it speaks as the shareholders’ collective voice. In Bennett Coleman v. Union of India, for example, a case involving a challenge to newsprint-related restrictions, the Supreme Court held locus to complain of the rights-infringement to be present with shareholders, remarking that “shareholders speak through their editors”, who, in turn, spoke through the newspapers, which were the companies suffering rights-infringement (¶22).

If the corporation’s speech was premised on its shareholders, their wholesale exclusion from the manner of the right’s exercise would indicate abuse – the very stakeholders from whom a right is derived would stand wholly excluded from its exercise. This is the reason accountability mechanisms concerning political donations have been widely supported in literature, policy proposals, and state practice. Such mechanisms could be of many kinds – the Companies Act, 1956, mandated shareholder meetings to approve of political donations; the unamended Companies Act, 2013, u/s 182(3), inserted a cap of 7.5% of a company’s three-year average net profits as the maximum quantum of donations, as well as requiring divulging of this information in annual “profit and loss” statements; and a spree of scholarly suggestions aim to constrain Directors’ discretion in political donations. Bebchuk and Jackson have proposed shareholder vetoes, disclosure requirements, and an enlarged role of independent directors as policy measures, whereas Udit Bhatia has mooted worker-unions’ consent in authorizing donation decisions.

EBS, however, removed the obligation to share donation-related information with shareholders, alienating them from corporate speech having its roots in their rights. Section 182(3) of the Companies Act, 2013 was amended to remove the requirement of including information of political contributions in corporations’ annual “profit and loss” statements, making information of political donations confidential. Shareholders, therefore, spoke through the corporation but had no knowledge of the contents of their speech. Further, EBS removed the cap of 7.5% of three-year average net profits, enabling companies to donate all that they desire, unconstrained by profitability requirements. Lastly, even loss-making companies, i.e., companies that did not possess profits to donate, were made eligible to make corporate donations. This meant that shareholders’ financial concerns were no longer accounted for, and the company could use the entirety of its resources – including its share capital – for political purposes. EBS, therefore, substantially undermined shareholders’ rights and participation in the donating decision.

The Supreme Court, in the instant case, has gone one step beyond decrying shareholders’ exclusion, holding that electoral funding by corporations overall contains little value worthy of constitutional protection. It notes that EBS, and its attendant amendments, had the tendency of equating individuals and corporations for the purpose of political funding. While individuals’ contributions were entitled to privacy protections owing to such contributions being reflective of their political affiliation (an aspect of expressive thought), a corporation was not entitled to privacy protections of its donations, for they were generally intended to influence state policies, and were not products of genuine political expression (¶167, Chandrachud, CJ.). In this regard, the Court invokes Steven, J.’s dissent in Citizens United, holding that “the distinction between corporate and human speakers is significant”, necessitating a separate regime that does not extend an individual’s constitutional protections to the corporation (¶212, Chandrachud, CJ.). It also noted that a cap on a company’s maximum quantum of donations – irrespective of its exact composition – would be essential to prevent abuse, and that the mandate in favour of unlimited corporate donations – through the removal of the 7.5% of three-year average net profits requirement – was “manifestly arbitrary” (¶215-6, Chandrachud, CJ.).

The Court, therefore, found privacy protections unavailable to corporations funding political parties, finding that the values inherent in human expression absent from corporate funding, imputing to it a general policy-influencing motive. This, in a way, amounts to a rejection of corporate electoral finance constituting “speech” in the first place, for it implies the overall inapplicability of speech-related protections to a company’s funding of political parties. Simultaneously, however, even if corporate funding was deemed speech, the Court’s consistent invocation of the abuse inherent in EBS – given its removal of shareholder accountability and donations’ quantum limitations – implied that it did not correspond to notions of responsible speech, factors essential to enable its existence as speech. Given the risks that unlimited and unaccountable donations posed to democratic values, the Court chose to prioritize citizens’ right to know and the electoral process’ fairness in striking down EBS (¶163, 168-9, Chandrachud, CJ.).


The second justification for corporate speech concerns its intrinsic value, which arises from the corporation’s expertise in matters concerning the economy. Redish, for example, notes that the corporation is a major stakeholder in the state’s economic success, and possesses information of value, whose expression must be deemed as valuable as speech of human origin. A corporation’s views on inflation or unemployment, for example, may be of assistance to the polity, and its communication must, accordingly, be deemed valuable.

This justification has also been accepted in Indian case-law – in Tata Press Ltd. v. MTNL, the Supreme Court held “commercial speech” to constitute constitutionally-protected speech, for “the public at large has a right to receive the commercial speech”, locating the corporation’s right to speak in advantages gained by the listener (¶24). The Court noted that the listener would, on many occasions, have a “deeper interest” in obtaining information communicated by the corporation than the corporation itself, justifying such constitutional protection’s conferral (¶24). This justification has been affirmed in case-law concerning advertisements, which have been offered constitutional protection because the “public at large” benefits through them (¶10), and because they “inform the consumers of the existence of various goods and services” (¶24).

At the core of protecting speech, however, lies a belief in the possibility of its multiplicity and diversity, as well as expectations of an institutional design that enables the coexistence of various kinds of speech, irrespective of its content. Case-law protecting advertisements is premised on the possibility of various participants speaking through ads, all of whom speak differently to inform the public about their products. The “marketplace” theory of free speech, a key theory employed by courts in striking down speech-restrictive legislation, therefore, seeks to secure various kinds of speech, such that a free and unhindered public discourse can be secured.

EBS, however, comprises an institutional design that marks an affront to the listener-based justification, as well as its marketplace-based underpinnings, in two ways – first, it prevents the emergence of any “listener” through the installation of anonymity requirements, for none knows what has been spoken by the company; and second, even if the subsequent utilization of funds by the party is deemed the company’s speech, EBS prevents the emergence of a true marketplace, for it induces all companies to speak the same.

While information of donations is hidden from the public through non-reporting requirements (both on the corporation and the political party), information of donations is made exclusively available to the State Bank of India (a state-owned bank), of which the Government of India is a majority shareholder, and on whose directions its Board, statutorily, is required to function. In this way, the incumbent may obtain information of companies donating to political parties opposed to them, which acts as a constant disincentive for companies to donate to any party but the incumbent.

This induces all parties to speak – through their donations – in the same manner, which favours the political party in government. The Court labels this an “asymmetric access to information”, for a state-owned bank possesses information of donations to all, and the state – comprised by the political party in power – can extract this information through mechanisms the EBS sanctions (¶42, Khanna, J.). EBS, therefore, was unable to fulfil even the one objective of donor privacy it held so dear. In addition, the Court notes the specific advantages the incumbent party possesses under the EBS, both reaped in reality since EBS’s inception, as well as those inherent to the Scheme (¶43, 68-9, Khanna, J.).

Due to its institutional design that discourages the coexistence of multiple kinds of speech – in favour of various parties – constituting a marketplace, EBS departed from the marketplace-based logic lying at the core of the listeners’-rights rationale. The Court’s observations on the advantages the incumbent party is bound to reap through the Scheme, as well as its notice of the huge disparities in donation amounts between parties in, and without power, indicates its disbelief towards EBS’s ability to secure a level-playing field for all contestants. In other words, the EBS’s failure to constitute a true marketplace for electoral donations – where a possibility of all competitors emerging victorious subsists – was a factor before the Court not to accord protection to EBS-based corporate finance, and to prioritize other constitutionally-relevant interests, such as the electoral process’ fairness, and citizens’ right to know.


On this basis, therefore, I submit that EBS – in its marginalization of the shareholders’ role, its elimination of the “listener”, and its institutional design discouraging the emergence of a true marketplace, – marks a substantial departure from theoretical justifications for corporate speech. The Supreme Court, in its judgment in the Electoral Bonds case, has held corporate electoral finance, especially in the manner facilitated by EBS, to be devoid of any constitutional value worthy of protection, given its removal of accountability mechanisms, limitations on donations, and its systemic inequality that necessarily favours the incumbent. EBS’s incompatibility with the two justifications accepted in Indian case-law for enabling corporate speech, which concern shareholder unity and listeners’ rights, served as a factor before the Court in finding the EBS unconstitutional based on its incompatibility with citizens’ right to know and electoral sanctity. An inclusive mode of electoral finance, which provides sufficient space for shareholder participation and preserves the speech-based value of donations, would be essential to correspond to why the company is entitled to speak.

*Kartik Kalra is a 3rd year BA.LLB (Hons.) student at the National Law School of India University, Bangalore

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