Author : Hitesh Dhamat, National Law University Tripura
To the Point
The integrity of India’s democratic process hinges on free and fair elections, as mandated by Article 324 of the Constitution, which vests the Election Commission of India (ECI) with the superintendence, direction, and control of elections. However, the pervasive role of money in politics threatens this ideal. Campaign financing in India operates under a complex legal framework, including the Representation of the People Act, 1951 (RPA), the Companies Act, 2013, and the Income Tax Act, 1961. Despite these regulations, loopholes such as opaque funding mechanisms, excessive campaign expenditures, and the misuse of corporate donations create an uneven playing field.
The introduction of electoral bonds in 2018 aimed to formalize political donations but has instead raised concerns about anonymity and accountability. Donors can contribute unlimited sums through bonds without disclosing their identity, potentially enabling corporate influence and quid pro quo arrangements. The RPA caps candidate expenditure (e.g., ₹95 lakh for Lok Sabha elections in larger states as of 2025), but political parties face no such limits, leading to extravagant campaigns. Moreover, unreported cash transactions and “black money” continue to fuel electoral malpractices, including vote-buying and voter inducement, prohibited under Section 123 of the RPA as corrupt practices.
Electoral reforms are urgently needed to address these issues. Key proposals include mandating full disclosure of funding sources, lowering donation caps, strengthening ECI oversight, and leveraging technology for real-time expenditure tracking. Comparative models, such as public funding in Scandinavian countries or strict disclosure norms in the United States, offer valuable lessons. Without robust reforms, the democratic principle of equal representation risks being subsumed by financial clout.
Use of Legal Jargon
The legal framework governing electoral funding in India is rooted in the Constitution of India, the Representation of the People Act, 1951, and allied statutes. The ECI, acting in loco parentis to the electoral process, exercises plenary powers under Article 324 to ensure free and fair elections. However, the mens rea behind unregulated donations often escapes scrutiny due to statutory lacunae. For instance, the Electoral Bonds Scheme, 2018, introduced via amendments to the Finance Act, 2017, permits anonymous contributions, raising concerns about ultra vires violations of the right to information under Article 19(1)(a). Furthermore, the absence of expenditure ceilings for political parties under the RPA creates a de facto inequality, contravening the principle of aequitas sequitur legem (equity follows the law). Judicial interventions, invoking stare decisis, have sought to balance transparency with donor privacy, but the ratio decidendi in key cases underscores the need for legislative reform to prevent mala fide influences in elections.
The Proof
Electoral Bonds Data: According to disclosures mandated by the Supreme Court in 2024, electoral bonds accounted for over ₹12,000 crore in political donations between 2018 and 2024, with 60% of funds flowing to the ruling party. The anonymity of donors has sparked debates over potential corporate lobbying.
ECI Reports: The ECI’s 2023 report highlighted that 70% of political party funding comes from “unknown sources,” including cash and in-kind contributions, undermining transparency.
Global Comparisons: Countries like Sweden provide public funding proportional to votes received, reducing reliance on private donations. India’s per capita campaign spending is among the highest in developing nations, with Lok Sabha elections costing an estimated ₹60,000 crore in 2019.
Statutory Provisions: Section 77 of the RPA mandates candidate expenditure reporting, but political parties are exempt under Section 13A of the Income Tax Act, 1961, from disclosing donation details below ₹20,000, facilitating untracked cash flows.
Voter Inducement Cases: The ECI reported over 1,000 cases of voter inducement in the 2024 Lok Sabha elections, with seizures of cash and goods worth ₹9,000 crore, indicating widespread misuse of money.
Abstract
The influence of money in Indian politics has long been a contentious issue, undermining the democratic process by fostering inequality in electoral competition and eroding public trust. This article examines the legal framework governing campaign financing in India, focusing on the Representation of the People Act, 1951, electoral bonds, and related regulations. It analyzes the challenges posed by unregulated money, including corruption and voter manipulation, and evaluates judicial precedents shaping electoral reforms. The article proposes reforms to enhance transparency, accountability, and fairness in political funding, drawing on case law and global best practices.
Case Laws
Common Cause v. Union of India (1996)The Supreme Court held that transparency in political funding is essential for free and fair elections, directing political parties to submit audited accounts to the ECI. This case established the principle that voters have a right to know the financial backing of candidates and parties.
Association for Democratic Reforms v. Union of India (2002)The Court mandated disclosure of candidates’ assets, liabilities, and criminal records, reinforcing the right to information under Article 19(1)(a). The ruling emphasized that informed voter choice is central to democracy.
Subramanian Swamy v. Union of India (2016)The Court upheld the ECI’s authority to deregister political parties for financial irregularities, though it noted the lack of explicit statutory power, highlighting a legislative gap.
Electoral Bonds Case (Association for Democratic Reforms v. Union of India, 2024)The Supreme Court struck down the Electoral Bonds Scheme as unconstitutional, citing violations of Article 19(1)(a) due to donor anonymity. The Court ordered the disclosure of bond purchasers’ identities, reinforcing transparency as a democratic cornerstone.
Kanwar Lal Gupta v. Amar Nath Chawla (1975)The Court ruled that candidate expenditure limits under the RPA must include third-party spending in their favor, aiming to curb indirect financial influence.
Conclusion
The unchecked flow of money in Indian politics undermines the democratic ethos enshrined in the Constitution. While the RPA and ECI regulations provide a framework, loopholes like anonymous donations and unregulated party spending perpetuate inequities. The Supreme Court’s interventions, particularly in the 2024 Electoral Bonds case, have underscored the need for transparency and accountability. To strengthen India’s electoral system, reforms must include:
Mandatory Disclosure: Require full disclosure of all donations, including small contributions, with real-time reporting to the ECI.
Expenditure Caps for Parties: Introduce spending limits for political parties, aligned with candidate caps under the RPA.
Public Funding: Explore partial public funding to reduce reliance on private donations, ensuring a level playing field.
Digital Oversight: Leverage blockchain or AI-based tools for real-time tracking of campaign expenditures.
Strengthened ECI Powers: Grant the ECI statutory authority to penalize violations swiftly, including deregistration of non-compliant parties.
These reforms, inspired by global models and judicial precedents, can restore public trust and ensure that elections reflect the will of the people, not the power of money.
FAQS
What are electoral bonds, and why were they controversial?Electoral bonds were anonymous financial instruments introduced in 2018 for political donations. Their anonymity raised concerns about undisclosed corporate influence and potential corruption, leading to their invalidation by the Supreme Court in 2024.
How does the ECI regulate campaign financing?The ECI enforces expenditure limits for candidates under Section 77 of the RPA and monitors corrupt practices under Section 123. However, it lacks direct authority over political party funding, limiting its regulatory scope.
What is the legal limit for candidate election spending?As of 2025, the ECI sets a cap of ₹95 lakh for Lok Sabha candidates in larger states and ₹75 lakh in smaller states, adjustable based on constituency size and inflation.
Can political parties accept foreign donations?No, the Foreign Contribution (Regulation) Act, 2010, prohibits political parties from accepting foreign donations to prevent external influence in elections.
What role does the judiciary play in electoral reforms?The judiciary, through landmark rulings like the 2024 Electoral Bonds case, ensures transparency and fairness in elections by interpreting constitutional provisions and striking down laws that violate democratic principles.
