Author: Amrendra Kumar Yadav, Faculty of Law Campus- COCAS, Patliputra University, Patna
Abstract
Electoral bonds were introduced in India in 2018 as a new way of funding political parties while keeping donor identities secret. The government claimed that this system would reduce black money in elections and make political donations more transparent. However, many critics argue that it actually makes political funding more secretive, giving an unfair advantage to the ruling party and allowing corporate influence in politics. This article explains what electoral bonds are, their legal and constitutional aspects, key court cases, and their impact on democracy. The recent Supreme Court judgment has questioned the transparency of this system, highlighting the need for reforms in political funding.
Introduction
Elections require huge amounts of money, and political funding has always been a controversial issue in India. To address concerns about black money in elections, the Indian government introduced the electoral bond scheme in 2018. This system allows individuals and companies to donate money to political parties without revealing their identities.
While the government argues that this prevents illegal cash donations, many critics believe it reduces transparency. The issue has been challenged in the Supreme Court, which has questioned whether the scheme is fair and democratic. This article explains the legal and constitutional aspects of electoral bonds and their impact on Indian democracy.
What Are Electoral Bonds?
Electoral bonds are a way for people and companies to donate money to political parties in a confidential manner. These bonds are sold by the State Bank of India (SBI) in different denominations, and anyone can buy them and give them to a political party. The party can then redeem the bond for money. The key feature of electoral bonds is that the donor’s identity remains anonymous.
Legal Provisions and Changes
To introduce electoral bonds, the government made changes to several laws:
Representation of the People Act, 1951 – Removed the requirement for political parties to disclose donations received through electoral bonds.
Companies Act, 2013 – Allowed companies to donate unlimited amounts to political parties, removing previous restrictions.
Income Tax Act, 1961 – Exempted political parties from disclosing donations made through electoral bonds.
Foreign Contribution (Regulation) Act, 2010 – Allowed foreign companies operating in India to donate via electoral bonds.
These changes raised concerns about corporate and foreign influence in Indian elections.
Why Is the Electoral Bond Scheme Controversial?
Lack of Transparency – Since donor identities are hidden, the public cannot know who is funding which party.
Favoring the Ruling Party – Critics argue that the government can track donors through SBI, giving an advantage to the ruling party.
Corporate and Foreign Influence – Large businesses and even foreign companies can influence elections by making huge donations.
Risk of Black Money – While the scheme was introduced to reduce black money, it could allow money laundering since there is no proper tracking of donors.
Supreme Court Cases and Judgments
Several petitions were filed in the Supreme Court challenging the electoral bond scheme. The main case was filed by the Association for Democratic Reforms (ADR), which argued that voters have the right to know who is funding political parties.
Supreme Court’s Interim Orders
In 2021, the Court asked for details on how many electoral bonds were bought and redeemed.
In 2023, the Court raised concerns about the secrecy in political funding and sought more details from the Election Commission and the Reserve Bank of India.
Election Commission’s View
The Election Commission of India (ECI) stated that electoral bonds promote secrecy in political donations and are against free and fair elections.
Final Supreme Court Judgment (2024)
The Supreme Court ruled that the electoral bond scheme violates the right to information under Article 19(1)(a) of the Constitution.
The Court struck down the provisions allowing anonymous political donations and directed the government to create a more transparent system.
Government’s Justification
The government defended the scheme with the following arguments:
Prevents Black Money – Since bonds can be bought only through banks, it stops the use of cash donations.
Protects Donor Identity – Anonymity prevents political parties from targeting donors based on their contributions.
Legalizing Political Donations – The scheme allows donations to be made through proper banking channels.
However, the Supreme Court found these reasons insufficient and ruled against the scheme.
Impact on Democracy
Secretive Funding – Without public knowledge of donors, political influence remains hidden.
Unequal Playing Field – The ruling party benefits the most, as donors may prefer to support those in power.
Foreign and Corporate Control – Large businesses and foreign entities could shape policies by donating large amounts.
Conclusion
Electoral bonds were introduced to improve political funding transparency, but they ended up reducing it. The Supreme Court’s decision to strike down the scheme emphasizes the need for a fair and open political funding system. Moving forward, India must develop better ways to ensure transparency while protecting donor rights and maintaining electoral integrity.
FAQS
Q1. What are electoral bonds?
Electoral bonds are financial instruments that allow individuals and companies to donate money to political parties while keeping their identities secret.
Q2. Why is the electoral bond scheme controversial?
The scheme has been criticized for reducing transparency in political donations, favoring the ruling party, and allowing unlimited corporate and foreign funding.
Q3. What did the Supreme Court say about electoral bonds?
The Court ruled that the scheme violates the right to information and struck down the provisions allowing anonymous donations.
Q4. How do electoral bonds affect democracy?
They allow hidden funding, which can lead to corporate and foreign influence in elections, harming free and fair democracy.
Q5. What alternatives can ensure transparency in political funding?
Public funding of elections, stricter disclosure rules, and independent monitoring of political donations can improve transparency.
References
Association for Democratic Reforms v. Union of India, (2021, 2023, 2024) Supreme Court of India Judgments.
Finance Act, 2017.
Representation of the People Act, 1951.
Companies Act, 2013.
Election Commission of India Reports on Electoral Bonds.
Supreme Court Verdict on Electoral Bonds, 2024.
Legal Commentaries on Political Financing and Transparency in India.
