Author : Shubham,B.A LL.B, Chandigarh University
LinkedIn Profile: https://www.linkedin.com/in/shubham-choudhary-113736289?utm_source=share_via&utm_content=profile&utm_medium=member_android
TO THE POINT
The Electoral Bond Judgment delivered on 15 February 2024 is one of the most significant constitutional decisions concerning electoral transparency and political funding in India. In Association for Democratic Reforms & Another v. Union of India & Others, the Supreme Court examined the constitutional validity of the Electoral Bond Scheme, 2018, which enabled individuals and companies to make political contributions through banking instruments without public disclosure of the donor’s identity. The petitioners challenged the scheme under Article 32 of the Constitution, arguing that it violated citizens’ right to information and undermined democratic accountability.
A five-judge Constitution Bench comprising Chief Justice D.Y. Chandrachud, Justice Sanjiv Khanna, Justice B.R. Gavai, Justice J.B. Pardiwala, and Justice Manoj Misra unanimously held the scheme unconstitutional. The Court concluded that while political donations are a legitimate feature of a democratic system, anonymous political funding prevents voters from making informed electoral choices. Consequently, the Electoral Bond Scheme and related amendments introduced through the Finance Act, 2017 were struck down for violating constitutional principles of transparency, equality, and participatory democracy.
USE OF LEGAL JARGON
India functions as a representative democracy where elections play a crucial role in ensuring political accountability. Free and fair elections enable citizens to choose their representatives and participate in governance through democratic means. Since political parties require financial resources to contest elections, the regulation of political funding has always been an important aspect of electoral governance.
The Electoral Bond Scheme was introduced through the Finance Act, 2017 and formally notified by the Central Government on 2 January 2018 under Section 31(3) of the Reserve Bank of India Act, 1934. Electoral Bonds were interest-free banking instruments issued by the State Bank of India. These bonds functioned similarly to promissory notes and could be purchased by individuals, companies, associations, or other eligible entities. The purchaser could subsequently donate the bond to a registered political party, which could redeem it through a designated bank account verified by the Election Commission of India.
Under Clause 2(a) of the Electoral Bond Scheme, donor identities were not disclosed to the public. Bonds could be purchased in various denominations ranging from ₹1,000 to ₹1 crore and remained valid for fifteen days from the date of issuance. Only political parties registered under Section 29A of the Representation of the People Act, 1951 and having secured at least one percent of votes in the previous general election or legislative assembly election were eligible to receive such donations.
The Union Government defended the scheme on the ground that it sought to reduce the use of unaccounted cash and curb black money in political funding. According to the Government, routing donations through formal banking channels would promote cleaner electoral finance and protect donors from possible political victimisation. Donor anonymity was also presented as an aspect of the right to privacy.
Despite these objectives, the scheme attracted constitutional scrutiny. The principal issue before the Supreme Court was whether anonymous political funding violated the voters’ Right to Information under Article 19(1)(a) of the Constitution. The Court observed that political contributions often have a direct bearing on public policy and governmental decision-making. Therefore, information regarding the source of political funding becomes essential for citizens seeking to make informed electoral choices.
The Court emphasised that freedom of speech and expression under Article 19(1)(a) extends beyond the mere right to express opinions. It also includes the right to receive information necessary for democratic participation. If voters remain unaware of the financial interests supporting political parties, they cannot effectively evaluate potential influences on governance and policymaking.
The judgment also examined several statutory amendments introduced through the Finance Act, 2017. Prior to these amendments, Section 29C of the Representation of the People Act, 1951 required political parties to disclose donations exceeding ₹20,000. This disclosure requirement promoted transparency and enabled public scrutiny of political finance. However, contributions received through Electoral Bonds were exempted from such disclosure obligations. The Court held that this exemption substantially weakened the public’s right to know about political funding.
Similarly, Section 182 of the Companies Act, 2013 originally imposed a ceiling on corporate donations by limiting contributions to 7.5 percent of a company’s average profits over the preceding three financial years. Corporate donors were also required to disclose political contributions in their financial statements. The Finance Act, 2017 removed both the cap and disclosure requirements. As a result, even newly incorporated or loss-making companies could make unlimited political donations. The Court expressed concern that such changes could facilitate the creation of shell companies and enable disproportionate corporate influence in the electoral process.
The Court further examined Section 13A of the Income Tax Act, 1961. Before the amendment, political parties were required to maintain records of contributions exceeding ₹20,000. Electoral Bond contributions were subsequently exempted from these record-keeping obligations. The Court observed that transparency and accountability become difficult to achieve when substantial political donations remain outside meaningful public scrutiny.
An important aspect of the judgment was the application of the proportionality test. The proportionality doctrine requires courts to determine whether a restriction affecting fundamental rights pursues a legitimate objective, whether the measure adopted is suitable to achieve that objective, whether less restrictive alternatives are available, and whether an appropriate balance exists between competing interests.
The Government argued that combating black money and protecting donor privacy constituted legitimate state objectives. The Court accepted that preventing illicit funding is a legitimate governmental concern. However, it concluded that the Electoral Bond Scheme was not the least restrictive means available to achieve this objective. Alternative mechanisms, including existing banking and disclosure frameworks, could have promoted transparency while addressing concerns relating to political finance.
The Court also addressed what may be described as a conflict between two constitutional interests: donor privacy and voter information. This balancing exercise resembled a form of double proportionality analysis. While recognising privacy as a constitutionally protected right, the Court held that transparency in political funding assumes greater significance because electoral choices directly affect democratic governance. Consequently, the voters’ right to know outweighed the claim of complete anonymity in political contributions.
The Court further observed that electoral transparency is closely connected with the concept of participatory democracy. In a constitutional democracy, citizens are not merely voters who cast ballots once every few years; they are active participants in the governance process. Access to information regarding political funding enables voters to assess whether financial contributions may influence public policies or governmental decisions. The Court noted that transparency strengthens public confidence in democratic institutions and reduces the possibility of undue influence over elected representatives. Therefore, electoral funding cannot be treated as a purely private transaction when it has the potential to affect public governance and democratic accountability.
Another significant concern identified by the Court was the possibility of quid pro quo arrangements. Secret political donations create an environment in which financial contributors may expect favourable governmental treatment in return for financial support. Such arrangements undermine democratic integrity and create opportunities for undue influence in public decision-making.
The judgment also highlighted that unrestricted corporate funding may distort political competition by allowing economically powerful entities to exercise disproportionate influence over the electoral process. Such influence creates an uneven playing field where financial strength may overshadow political representation and public interest. The Court emphasised that electoral laws should promote fairness and equal opportunity among political parties rather than facilitate concentration of financial power in favour of a select few.
The judgment also reflects broader constitutional values embodied in Article 14 and the Basic Structure Doctrine. Unlimited and anonymous corporate donations have the potential to create unequal political influence, thereby affecting electoral fairness. The principles of democracy, free and fair elections, accountability, and the rule of law form part of the constitutional framework that Parliament cannot dilute through ordinary legislation.
THE PROOF
The Supreme Court’s decision reinforces the principle that electoral transparency is indispensable to democratic governance. The Court clarified that the Constitution does not prohibit political donations. Instead, it requires that political funding mechanisms remain consistent with democratic accountability and constitutional values.
The judgment demonstrates that secrecy in political finance can adversely affect citizens’ ability to evaluate political actors and governmental policies. By restoring disclosure obligations and accountability mechanisms, the Court sought to strengthen informed voting and public participation.
The decision further establishes that privacy rights cannot be invoked to completely shield political funding from public scrutiny when such secrecy directly impacts democratic processes. Through the application of proportionality analysis, the Court reaffirmed that constitutional rights must be balanced in a manner that preserves transparency, fairness, and public trust in elections.
Another significant contribution of the judgment is its recognition that transparency serves as a safeguard against corruption and undue political influence. By directing disclosure of electoral bond transactions, the Court ensured that citizens, researchers, journalists, and oversight institutions could scrutinise political funding patterns. This enhanced level of accountability contributes to cleaner electoral practices and strengthens public trust in democratic institutions.
ABSTRACT
The Supreme Court of India, in Association for Democratic Reforms & Another v. Union of India & Others (2024), declared the Electoral Bond Scheme unconstitutional. The petitioners challenged the scheme under Article 32 of the Constitution, arguing that anonymous political funding violated the voters’ right to information and undermined democratic accountability. The Court examined amendments introduced through the Finance Act, 2017 affecting the Representation of the People Act, the Companies Act, and the Income Tax Act. It found that these amendments substantially reduced transparency by removing disclosure requirements and permitting anonymous political contributions.
Applying the proportionality doctrine, the Court held that although combating black money is a legitimate state objective, the scheme imposed a disproportionate burden on citizens’ constitutional right to receive information regarding political funding. The judgment reaffirmed that transparency in electoral finance is essential for participatory democracy and informed voting. Consequently, the Electoral Bond Scheme and related amendments were struck down as unconstitutional.
CASE LAWS
1. Union of India v. Association for Democratic Reforms (2002)
This landmark decision recognised the voters’ right to obtain relevant information about electoral candidates. The Supreme Court directed disclosure of criminal antecedents, educational qualifications, assets, and liabilities of candidates contesting elections. The Electoral Bond Judgment relied upon this principle to emphasise that informed voting requires access to information affecting democratic decision-making.
2. People’s Union for Civil Liberties v. Union of India (2003)
The Court held that the Right to Information forms an integral part of the freedom of speech and expression guaranteed under Article 19(1)(a). The judgment reinforced the idea that democracy flourishes when citizens possess adequate information regarding electoral matters. This principle significantly influenced the Court’s reasoning in the Electoral Bond case.
3. K.S. Puttaswamy(retd.) v. Union of India (2017)
In Puttaswamy, the Supreme Court recognised privacy as a fundamental right and elaborated upon the proportionality doctrine. The Government relied on privacy arguments to defend donor anonymity under the Electoral Bond Scheme. However, the Court balanced privacy concerns against the voters’ right to information and concluded that electoral transparency deserved greater constitutional protection in the circumstances of the case.
4. Kesavananda Bharati v. State of Kerala (1973)
This historic judgment established the Basic Structure Doctrine and held that Parliament cannot alter the essential features of the Constitution. Democracy, rule of law, and constitutional governance were recognised as fundamental constitutional values. The Electoral Bond Judgment reflects these principles by safeguarding transparency and accountability in electoral processes.
5. Indira Nehru Gandhi v. Raj Narain (1975)
In Indira Nehru Gandhi v. Raj Narain, the Supreme Court emphasised the importance of free and fair elections in a democratic system. The Court observed that democracy is a basic feature of the Constitution and that electoral processes must remain fair, transparent, and free from arbitrary influence. Although the case did not directly concern political funding, its principles are relevant to the Electoral Bond Judgment because transparency in elections is closely linked with electoral fairness. The decision supports the view that democratic legitimacy depends upon maintaining public confidence in electoral institutions and processes.
CONCLUSION
The Electoral Bond Judgment represents a major development in India’s constitutional and electoral jurisprudence. By striking down the Electoral Bond Scheme and associated statutory amendments, the Supreme Court reaffirmed the importance of transparency in political funding. The decision recognises that democracy depends not only on the right to vote but also on the right to make informed electoral choices. The judgment reinforces the idea that democracy functions effectively only when citizens have access to meaningful information about political actors and their sources of funding. Furthermore, the ruling may encourage greater public scrutiny of political finance and promote trust in democratic institutions.
The judgment balances competing constitutional interests while prioritising public accountability in governance. It strengthens electoral integrity, promotes informed citizenship, and reinforces the constitutional commitment to free and fair elections. Ultimately, the decision serves as a reminder that democratic legitimacy thrives when political processes remain transparent and open to public scrutiny. The Electoral Bond Judgment also reflects the growing importance of constitutional morality in governance. Constitutional morality requires public institutions to act in a manner consistent with the values of transparency, accountability, and democratic participation. While a law may be enacted through a valid legislative procedure, it must also satisfy constitutional principles. The Supreme Court observed that secrecy in political funding can weaken democratic accountability and reduce public confidence in electoral institutions. Therefore, constitutional governance requires not only legal compliance but also adherence to democratic values that promote openness and responsible decision-making.
FAQS
1. What was the Electoral Bond Scheme?
The Electoral Bond Scheme was a political funding mechanism introduced in 2018 that allowed individuals and companies to purchase bonds from the State Bank of India and donate them to eligible political parties while keeping the donor’s identity confidential.
2. Why did the Supreme Court strike down the scheme?
The Court held that anonymous political funding violated the voters’ right to information under Article 19(1)(a) and undermined transparency, accountability, and informed democratic participation.
3. Did the Court prohibit political donations?
No. The Supreme Court did not prohibit political donations. It only invalidated a funding mechanism that allowed anonymous political contributions without adequate public disclosure.
4. What is the significance of the proportionality test in this case?
The proportionality test helped the Court determine whether the restrictions imposed on the voters’ right to information were justified. The Court concluded that the scheme was not the least restrictive method available to achieve the Government’s objectives.
5. What directions were issued by the Supreme Court after the judgment?
The Court directed the State Bank of India to stop issuing Electoral Bonds and provide details of bond purchases and redemptions to the Election Commission of India, which was required to make the information publicly available.
