(Electoral Bonds, Political Funding, Constitutional Validity, Article 19(1)(a), Transparency, Democracy, Supreme Court.)
Author: Beena Gaur LL. B student from Hari Sahay law college Talkandala, Gorakhpur
LinkedIn Profile: https://www.linkedin.com/in/beena-gaur-b91469343
Abstract
The Electoral Bonds Scheme, introduced through the Finance Act of 2017 and operationalised in January 2018, was presented by the Government of India as a clean, transparent alternative to unregulated cash donations in political financing. However, what followed was a prolonged and contentious legal battle that ultimately ended in a landmark constitutional verdict. On February 15, 2024, a five-judge Constitution Bench of the Supreme Court of India, in Association for Democratic Reforms & Anr. v. Union of India & Ors., unanimously struck down the Electoral Bonds Scheme as unconstitutional. The Court held that the Scheme violated the voters’ fundamental right to information under Article 19(1)(a) of the Constitution and could not be justified as a reasonable restriction. This article seeks to analyse the scheme’s structure, the constitutional questions it raised, the arguments placed before the Court, and the significance of the eventual judgment — all of which reflect the deeply intertwined relationship between money, democracy, and the rule of law in India.
To the Point
Before getting into the legal weeds, let me lay down the basics plainly. India has always had a problem with black money in elections. Political parties were known to receive enormous sums in cash — untraceable, untaxed, and completely outside the public eye. The government’s stated response to this was the Electoral Bond: a bearer instrument, purchased from the State Bank of India (SBI), that could be donated to a political party anonymously.
On the surface, it looked like a reform. Donors moved from cash to banking channels. But here was the catch — while the government could know exactly who bought each bond (because SBI maintains records), the general public could not. This selective transparency — where the ruling party potentially had access to donor information through state machinery while voters remained in the dark — became the heart of the constitutional challenge.
In short: the scheme anonymised political donations from the public but not from the State. And that, the Supreme Court eventually held, was constitutionally impermissible.
Background and Structure of the Scheme
The Electoral Bonds Scheme was notified on January 2, 2018, under the provisions of the Finance Act, 2017. To make the scheme operational, the government amended several key statutes — including the Representation of the People Act, 1951 (RPA), the Reserve Bank of India Act, 1934, the Income Tax Act, 1961, and the Companies Act, 2013 — through the Finance Act, 2017, which was itself passed as a Money Bill under Article 110 of the Constitution.
The key features of the scheme were as follows:
* Electoral Bonds could be purchased by any Indian citizen or company incorporated in India from authorised branches of the State Bank of India.
* The bonds were available in denominations of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh, and ₹1 crore.
* Bonds were valid for fifteen days from the date of issue and had to be deposited in the verified account of a registered political party.
* The donor’s name was not printed on the bond, ensuring anonymity vis-à-vis the public and the recipient party.
* There was no cap on the amount a corporation could donate, and the earlier requirement under Section 182 of the Companies Act — restricting donations to 7.5% of average net profits of the preceding three years — was removed.
* Political parties receiving electoral bonds were exempted from disclosing donor details under Section 29C of the RPA.
These amendments, viewed collectively, created a system where political financing was deliberately shielded from public scrutiny — a design choice that sat uncomfortably with the constitutional framework of a deliberative democracy.
Constitutional Issues Raised: The Legal Jargon Unpacked
The petition before the Supreme Court raised several inter-connected constitutional questions:
1. Violation of Article 19(1)(a) — Right to Information
The foundational argument was that the right to vote — a constitutional right under Article 326 — is meaningless without the right to an informed vote. The Supreme Court, in Union of India v. Association for Democratic Reforms (2002), had already held that voters have a fundamental right under Article 19(1)(a) to know about the antecedents of candidates. The petitioners extended this logic: if the electorate has a right to know about candidates, they equally have a right to know who finances political parties. Anonymous donations obstruct this informational right.
2. Doctrine of Proportionality and Reasonable Restrictions
The government argued that donor anonymity was a reasonable restriction under Article 19(2) — justified on the grounds of protecting donors from political victimisation and curbing black money. The Court applied the proportionality doctrine — asking whether the restriction was necessary, whether it was the least restrictive means, and whether the benefits outweighed the costs. The Court found the scheme failed this test. Donor anonymity, even if protective in theory, was disproportionate to its actual constitutional cost.
3. Quid Pro Quo and the Nexus Between Donations and Policy
One of the most damning constitutional concerns was the possibility of a quid pro quo — a Latin term meaning “something for something.” Since corporate entities could donate unlimited sums and the government was aware of donor identities (through SBI records), there existed a structural possibility that large donations could translate into favourable regulatory, contractual, or policy treatment. This, the Court noted, raised grave concerns about corruption and captured democracy — a constitutional value embedded in the Preamble’s promise of a “sovereign, socialist, secular, democratic republic.”
4. Money Bill Misuse — Article 110
The amendments were introduced via the Finance Act, 2017, certified as a Money Bill, which means the Rajya Sabha (upper house) had no power to reject them. Critics argued this was a colourable exercise of legislative power — using the Money Bill procedure to bypass Parliamentary scrutiny on matters that were not genuinely fiscal in nature. While the Supreme Court did not definitively strike down this ground in its 2024 judgment, the question was noted as a significant constitutional concern requiring further examination.
The Proof: Data, Facts, and Findings
Facts do not lie, and in the case of Electoral Bonds, they were particularly telling:
* As per data released pursuant to Supreme Court orders, over ₹16,518 crore worth of electoral bonds were sold between March 2018 and January 2024.
* The ruling Bharatiya Janata Party (BJP) received the largest share — approximately 47% of total bonds encashed.
* Bonds were heavily concentrated in ₹1 crore denomination — suggesting large-scale corporate donations rather than grassroots funding.
* Several major donors had received government contracts, regulatory clearances, or other state benefits proximate in time to their donations — raising significant concerns of reciprocal arrangements.
* The scheme saw a disproportionate spike in bond purchases before state elections — a pattern that pointed to strategic, politically motivated donation behaviour.
* No donor names were voluntarily disclosed by any political party under the scheme, underscoring that the anonymity was not incidental but structural.
This factual matrix was placed before the Constitution Bench and formed a significant part of the evidentiary foundation for the Court’s ultimate conclusion.
Case Laws and Precedents
1. Association for Democratic Reforms & Anr. v. Union of India & Ors. (2024) — The Primary Judgment
The five-judge Constitution Bench, comprising Chief Justice D.Y. Chandrachud and Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala, and Manoj Misra, delivered a unanimous verdict on February 15, 2024. The Court held:
* The Electoral Bonds Scheme violates Article 19(1)(a) of the Constitution as it infringes upon voters’ right to information about political funding.
* The removal of the cap on corporate donations and the disclosure exemptions is unconstitutional.
* The scheme is not saved by Article 19(2) as the restrictions are disproportionate and not the least invasive means.
* SBI was directed to immediately stop issuing electoral bonds and to submit all records of bond purchases to the Election Commission of India (ECI), which was in turn directed to publish the information on its official website.
2. Union of India v. Association for Democratic Reforms (2002)
This earlier judgment is the foundational precedent on voters’ right to information. A three-judge bench held that voters have a fundamental right under Article 19(1)(a) to know the criminal antecedents, financial background, and educational qualifications of candidates. The 2024 judgment extended this principle to political financing, reasoning that if we must know who our candidates are, we must equally know who funds the parties those candidates represent.
3. People’s Union for Civil Liberties (PUCL) v. Union of India (2003)
This case upheld the right of voters to receive meaningful information as part of exercising their franchise. The Court emphasised that democracy is not merely about the act of voting but about informed participation in governance. This judgment reinforced the constitutional obligation of the State to ensure that electoral choices are made on adequate information.
4. Indira Nehru Gandhi v. Raj Narain (1975)
Although this case dealt with electoral malpractice in a different context, it established the foundational principle that free and fair elections are a basic feature of the Constitution — and therefore immune from legislative abridgement. Any statutory or executive mechanism that structurally undermines the integrity of elections must withstand the highest constitutional scrutiny.
Conclusion
The Electoral Bonds Scheme was, in many ways, a classic example of a policy that looked like reform but functioned as concealment. It replaced visible cash corruption with invisible digital opacity — and in doing so, it created a system structurally tilted in favour of incumbency and corporate capture.
The Supreme Court’s judgment in Association for Democratic Reforms (2024) is not merely a legal ruling — it is a constitutional affirmation that democracy cannot survive in the dark. When voters are denied knowledge of who funds the parties that seek to govern them, the foundational compact of representative government is fractured. The Court rightly identified that the right to information in electoral matters is not a peripheral luxury; it is the oxygen of democratic accountability.
As a law student studying constitutional law, this case taught me something beyond the doctrines — it showed that the Constitution is a living instrument, capable of checking executive overreach even when clothed in the language of reform. It also left open important questions that must now be answered by Parliament: How do we design a political funding system that is both transparent and genuinely protective of donors? How do we prevent corporate money from hollowing out democratic processes?
The judgment is a beginning, not an end. India’s electoral finance system remains deeply in need of comprehensive, constitutionally sound reform. Until that happens, the ghost of anonymous funding will continue to haunt our democracy.
“India should adopt a transparent political funding framework requiring mandatory disclosure of substantial donations while simultaneously protecting donors from political retaliation. Such a model would balance transparency with legitimate privacy concerns.”
Frequently Asked Questions (FAQ)
Q1. What exactly was an Electoral Bond?
An electoral bond was a bearer instrument — similar to a bank draft — that could be purchased from the State Bank of India by any individual or corporate entity and donated to a registered political party. It did not carry the donor’s name, making the donation anonymous from the public’s perspective.
Q2. Why did the Supreme Court strike it down?
The Court struck it down primarily because it violated the voters’ fundamental right to information under Article 19(1)(a). The scheme prevented citizens from knowing who was funding political parties, which is essential information for making an informed electoral choice. The Court also found that the justifications offered by the government — preventing black money and protecting donors — did not outweigh the constitutional harm caused by the opacity.
Q3. Was the scheme completely anonymous?
Not entirely. The State Bank of India maintained complete records of all bond purchases. This means the government — through its control over SBI — had the potential ability to know which entities donated and how much, while the general public had no such access. This selective opacity was one of the most criticised aspects of the scheme.
Q4. Does this judgment affect political parties currently in power?
The judgment directed the disclosure of all electoral bond transactions. Following the order, the Election Commission of India published donor-party data on its website. While the ruling does not retroactively penalise any party, it brought unprecedented transparency to six years of political funding that had been deliberately hidden from public view.
Q5. What should replace the Electoral Bonds Scheme?
Legal scholars and constitutional experts have suggested a State Funding of Elections model, where political parties receive public money based on electoral performance, eliminating the need for private donations altogether. Others advocate a transparent small-donor model with mandatory disclosure above a modest threshold. Whatever the solution, it must satisfy the twin constitutional imperatives: transparency for voters and genuine protection for donors against state victimisation.
References
• Supreme Court of India, Association for Democratic Reforms v. Union of India (2024).
• Election Commission of India Disclosure Data, March 2024.
• Constitution of India, Article 19(1)(a).
• Law Commission Reports on Electoral Reforms.
