Author: Swati Singh
College: Haveli Institute of Legal Studies and Research, Silvassa
Linkedin Profile: https://www.linkedin.com/in/swati-singhlaw?utm_source=share_via&utm_content=profile&utm_medium=member_android
To the Point
Political funding is an important part of every democratic system because political parties need financial resources to participate in elections, organise campaigns, communicate with voters, and carry out their day-to-day activities. Without adequate funding, political parties cannot effectively present their policies or compete in elections. At the same time, the source of these funds should be transparent and lawful so that public confidence in the democratic process is maintained.
In India, political funding has remained a subject of debate for many years. Concerns have often been raised about the use of black money, anonymous donations, and the possibility of influential individuals or companies affecting government decisions through financial contributions. Such concerns have led to demands for a more transparent and accountable system of political finance.
To address these issues, the Government introduced the Electoral Bond Scheme in 2018. The scheme allowed individuals and companies to donate money to eligible political parties through Electoral Bonds purchased from the State Bank of India (SBI). The purpose was to encourage donations through formal banking channels and reduce the circulation of unaccounted cash during elections.
However, because the identity of donors was kept confidential from the public, the scheme attracted widespread criticism.
Many experts, civil society organisations, and election reform groups argued that voters have a right to know who finances political parties. They believed that secrecy in political donations could reduce transparency and affect informed voting. In 2024, the Supreme Court of India declared the Electoral Bond Scheme unconstitutional, observing that transparency in political funding is closely connected with the citizens’ Right to Know under Article 19(1)(a) of the Constitution.
The issue of political funding continues to play an important role in strengthening democratic governance. A transparent funding system promotes accountability, builds public trust, and helps ensure that elections remain free, fair, and consistent with constitutional values.
Use of Legal Jargon
1. Political Funding
Political funding refers to the financial assistance received by political parties from lawful sources such as individuals, companies, associations, or other permitted entities. These funds are used for election campaigns, organisational expenses, public outreach, and other political activities. Proper regulation of political funding is necessary to maintain transparency and fairness in elections.
2. Electoral Bonds
Electoral Bonds were financial instruments introduced by the Government of India in 2018 to facilitate political donations through authorised banking channels. Eligible donors could purchase these bonds from the State Bank of India and donate them to registered political parties. Although the transactions were made through banks, the identity of the donor remained confidential from the general public.
3. Transparency
Transparency means openness in decision-making and public administration. In political funding, it refers to the disclosure of information relating to political donations so that citizens can understand who financially supports political parties and make informed electoral decisions.
4. Right to Know
The Right to Know forms part of the fundamental right to freedom of speech and expression under Article 19(1)(a) of the Constitution of India. It allows citizens to receive information that is necessary for meaningful participation in a democratic society, including information relating to political funding.
5. Electoral Integrity
Electoral integrity refers to conducting elections honestly, fairly, and in accordance with constitutional and legal principles. A transparent political funding system helps protect electoral integrity by reducing the possibility of hidden financial influence.
6. Accountability
Accountability means that political parties and public authorities remain answerable for their decisions and actions. In matters of political funding, accountability requires compliance with election laws and financial transparency wherever required by law.
7. Judicial Review
Judicial review is the constitutional power of the Supreme Court and High Courts to examine whether laws or government actions are consistent with the Constitution. Using this power, the Supreme Court reviewed the Electoral Bond Scheme and declared it unconstitutional in 2024.
The Proof
Political funding is an essential requirement for the successful functioning of any democratic system. Every political party needs financial resources to contest elections, organise public meetings, spread awareness about its policies, and manage its organisational structure. However, the process of collecting and spending these funds should always be transparent and accountable. A funding system that lacks openness can create doubts regarding fairness, public accountability, and the influence of money on political decision-making.
For several years, concerns have been raised in India regarding the use of unaccounted money and anonymous donations in elections. To address these concerns, the Government introduced the Electoral Bond Scheme in 2018. Under this scheme, eligible individuals and companies could purchase Electoral Bonds from the State Bank of India (SBI) and donate them to recognised political parties. Since the transactions were made through the banking system, the scheme aimed to reduce cash donations and promote formal financial transactions.
Although the scheme was introduced with the objective of improving political funding, it soon became the subject of widespread public debate. One of the major concerns was that the names of donors were not disclosed to the public. While the banking authorities maintained records of the transactions, ordinary citizens had no access to information regarding who was financially supporting political parties. This lack of public disclosure raised questions about transparency and democratic accountability.
Several organisations, legal experts, and election reform groups argued that voters have a constitutional right to know the financial sources of political parties. They believed that such information helps citizens understand whether financial contributions could influence government policies or public decision-making. In a democratic country, informed voting depends not only on knowing the background of candidates but also on understanding the financial support behind political parties.
These concerns ultimately reached the Supreme Court of India through a series of constitutional challenges. In the landmark case of Association for Democratic Reforms & Another v. Union of India (2024), the Supreme Court examined the constitutional validity of the Electoral Bond Scheme. The Court observed that the citizens’ Right to Know, protected under Article 19(1)(a) of the Constitution, extends to information relating to political funding. It held that transparency is an important feature of free and fair elections and that complete anonymity of political donations weakens democratic accountability.
The Supreme Court therefore declared the Electoral Bond Scheme unconstitutional and directed the disclosure of electoral bond transaction details. The judgment reaffirmed that democracy functions best when citizens have access to relevant information that enables them to make informed electoral choices. It also highlighted that transparency strengthens public trust, promotes accountability, and protects the constitutional values on which India’s democratic system is built.
Ultimately, political funding should balance the financial needs of political parties with the constitutional principles of openness, fairness, and accountability. A transparent system of political finance not only strengthens electoral integrity but also reinforces public confidence in democratic institutions and the rule of law.
Abstract
Political funding is a vital part of the democratic process because political parties require financial resources to contest elections, conduct campaigns, communicate with voters, and carry out organisational activities. At the same time, the process of collecting and spending political funds should be transparent and accountable so that public confidence in elections is maintained. A transparent funding system helps prevent corruption, promotes fairness, and ensures that democratic institutions function effectively.
The introduction of the Electoral Bond Scheme, 2018 marked a significant change in India’s political funding system. The scheme was introduced to encourage donations through formal banking channels and reduce the use of unaccounted cash in elections. However, the confidentiality of donor identities raised serious concerns regarding transparency and the citizens’ Right to Know under Article 19(1)(a) of the Constitution of India.
This article examines the concept of political funding, the objectives of the Electoral Bond Scheme, and the constitutional issues that emerged after its implementation. It also discusses the landmark judgment of the Supreme Court in Association for Democratic Reforms & Another v. Union of India (2024), which declared the scheme unconstitutional for violating the principles of transparency and democratic accountability.
The article further highlights the importance of electoral transparency, informed voting, and responsible political financing. It concludes that a democratic system can remain strong only when political funding is governed by openness, accountability, and constitutional values. A transparent political finance framework ultimately strengthens public trust and protects the integrity of elections.
Case Laws
1. Association for Democratic Reforms v. Union of India (2002)
This landmark judgment recognised that every voter has the Right to Know important information about candidates contesting elections. The Supreme Court directed that candidates must disclose details regarding their criminal background, educational qualifications, and financial assets. The Court held that access to such information is part of the freedom of speech and expression guaranteed under Article 19(1)(a) of the Constitution. The judgment strengthened electoral transparency and empowered citizens to make informed choices.
2. People’s Union for Civil Liberties (PUCL) v. Union of India (2003)
In this case, the Supreme Court reaffirmed that informed voting is an essential feature of democracy. It observed that voters cannot exercise their democratic rights effectively unless they have access to relevant information about elections and candidates. The Court once again recognised that the Right to Know forms part of the fundamental rights guaranteed under Article 19(1)(a) and plays an important role in ensuring free and fair elections.
3. Association for Democratic Reforms & Another v. Union of India (2024)
This judgment marked a major development in India’s electoral law. The Supreme Court declared the Electoral Bond Scheme, 2018 unconstitutional, holding that complete secrecy regarding political donations violated the citizens’ Right to Know. The Court observed that transparency in political funding enables voters to understand the financial support received by political parties and helps them make informed electoral decisions. It also directed the disclosure of Electoral Bond transaction details to promote openness and democratic accountability.
4. Kuldip Nayar v. Union of India (2006)
Although the dispute mainly related to elections to the Rajya Sabha, the Supreme Court discussed the broader importance of maintaining the integrity of the electoral process. The Court observed that election laws should strengthen democratic principles, public confidence, and constitutional governance. The judgment continues to be referred to while discussing transparency, accountability, and fairness in India’s electoral system.
Conclusion
Political funding is an essential part of a democratic system, but it should always be regulated through transparency, accountability, and fairness. While the Electoral Bond Scheme was introduced to promote donations through formal banking channels, the confidentiality of donor identities raised important constitutional concerns regarding the citizens’ Right to Know and electoral transparency. The Supreme Court’s decision to strike down the scheme reaffirmed that openness in political funding is necessary for protecting democratic values and ensuring informed voting.
A transparent political funding system helps reduce the possibility of corruption, strengthens public confidence, and promotes responsible governance. Citizens have the right to know how political parties receive financial support, as this information enables them to make informed electoral choices and enhances accountability in public life.
In conclusion, India must continue to strengthen its political funding framework by ensuring greater transparency, effective legal oversight, and balanced reforms that protect both democratic principles and the legitimate financial needs of political parties. A fair and transparent system of political finance will contribute to stronger democratic institutions, free and fair elections, and greater public trust in the electoral process.
FAQs
Q1. What is political funding?
Political funding refers to the financial support received by political parties from individuals, companies, or other lawful sources to meet expenses related to elections, campaigns, administration, and other political activities.
Q2. What were Electoral Bonds?
Electoral Bonds were financial instruments introduced by the Government of India in 2018 that allowed eligible individuals and organisations to donate money to political parties through authorised banks while keeping the donor’s identity confidential from the public.
Q3. Why did the Supreme Court declare the Electoral Bond Scheme unconstitutional?
The Supreme Court, in Association for Democratic Reforms & Another v. Union of India (2024), held that the scheme violated the citizens’ Right to Know under Article 19(1)(a) because it permitted anonymous political donations and reduced transparency in political funding.
Q4. Why is transparency important in political funding?
Transparency allows citizens to know the financial sources of political parties, promotes accountability, reduces the possibility of corruption or undue influence, and strengthens public confidence in the democratic process.
Q5. What reforms can improve political funding in India?
Political funding can be improved by ensuring greater disclosure of donations, strengthening financial regulation, enforcing election laws effectively, and introducing reforms that promote transparency, accountability, and fairness while protecting democratic values.