Author: Palak Mishra
College: Haveli Institute of Legal Studies and Research, Silvassa
LinkedIn Profile: https://www.linkedin.com/in/palak-m-0b7ab4371?utm_source=share_via&utm_content=profile&utm_medium=member_android
Abstract
When a citizen steps into a polling booth, the choice appears simple: select a candidate, consider the promises made and cast a vote. However, behind every election lies a wider process that influences how political parties operate, campaign and connect with voters. One important aspect of this process is political funding, which raised a significant constitutional question before the Supreme Court of India: whether voters also have the right to know about the financial contributions received by political parties.
This question became central to the constitutional challenge concerning the Electoral Bonds Scheme, introduced in 2018 as a mechanism for making political donations through formal banking channels. The issue before the Court was not whether political parties require financial resources, but whether the legal framework regulating such contributions maintained an appropriate balance between electoral transparency and donor confidentiality.
In Association for Democratic Reforms & Anr. v. Union of India & Ors., 2024 INSC 113, the Supreme Court examined the relationship between political funding, the voter’s right to information and the constitutional principles underlying free and fair elections. The Court considered whether non-disclosure of donor information under the Electoral Bonds framework affected the ability of voters to make informed electoral choices.
The judgment became an important development in the continuing constitutional discussion on transparency, accountability and informed participation in a democracy. This article explores the legal background of the Electoral Bonds Scheme, the constitutional questions involved and the judicial decisions that shaped the understanding of electoral transparency and the right to information in India.
To the Point
The act of casting a vote is only one part of the electoral process. Before making an electoral choice, citizens are influenced by election campaigns, political debates, public promises and communication by political parties. These activities require financial resources, making political funding an important element of the democratic process.
The existence of political donations itself was not the primary constitutional concern before the Supreme Court. The central question was whether information relating to financial contributions received by political parties should be available to voters so that they can make an informed electoral choice.
The Electoral Bonds Scheme, introduced in 2018, brought this issue into focus. The scheme created a formal mechanism through which eligible individuals and entities could make political contributions through authorised banking channels. The scheme was introduced with the stated objective of encouraging donations through regulated financial systems and reducing reliance on unaccounted sources of political funding.
However, concerns were raised regarding the confidentiality of donor information and its impact on electoral transparency. The challenge before the Supreme Court involved examining whether withholding information about political contributions affected the voter’s right to information and whether such confidentiality could be constitutionally justified.
The petitioners argued that the right to information, derived from Article 19(1)(a) of the Constitution, includes access to information necessary for meaningful democratic participation. They contended that information regarding political funding was relevant for voters to evaluate the possible influence of financial contributions on the democratic process.
The Union of India defended the scheme by emphasising that formal banking channels would promote transparency in the process of donation collection and that maintaining donor confidentiality could encourage more individuals and entities to contribute through a regulated mechanism.
The Supreme Court therefore examined the constitutional balance between electoral transparency, the voter’s right to information and the confidentiality of political donors. The Court considered whether non-disclosure of political contributions was consistent with the principles of free and fair elections and meaningful participation in a democracy.
Legal Jargon
1. Right to Information derived from Article 19(1)(a) of the Constitution
The judicially recognised right of citizens to receive information necessary for meaningful democratic participation. The Supreme Court has held that the freedom of speech and expression under Article 19(1)(a) includes the right to receive information required for making informed decisions in a democracy.
2. Constitutional Validity
The examination of whether a law, scheme or government action is consistent with the provisions and principles of the Constitution.
3. Judicial Review
The power of constitutional courts to examine whether legislative or executive actions comply with constitutional provisions and to provide appropriate remedies where constitutional limits are violated.
4. Electoral Transparency
The principle that relevant information connected with elections should be available to citizens to enable informed participation in the democratic process.
5. Free and Fair Elections
A constitutional principle requiring elections to be conducted in a manner that allows genuine, meaningful and equal participation of citizens.
6. Proportionality Principle
A legal test used by courts to examine whether a restriction on a fundamental right is justified and whether there exists a proper balance between the objective of a measure and its impact on constitutional rights.
7. Donor Confidentiality
The principle protecting information relating to the identity or details of political contributors from disclosure, subject to constitutional and legal requirements. In the context of electoral funding, donor confidentiality refers to the protection of contributor information and its balance with the need for transparency in a democratic system. However, such confidentiality cannot be treated as an absolute principle where it affects the voter’s right to information necessary for meaningful electoral participation.
The Proof
The Electoral Bonds Scheme was introduced in 2018 as a mechanism to facilitate political donations through a formal banking channel. The scheme was notified by the Central Government under the legal framework created through amendments introduced by the Finance Act, 2017, which modified provisions relating to political contributions and electoral funding.
Under the scheme, eligible individuals and entities could purchase electoral bonds from authorised branches of the State Bank of India and donate them to eligible political parties. Political parties could encash these bonds through their authorised bank accounts in accordance with the prescribed legal framework.
The introduction of the scheme was accompanied by amendments to provisions under laws including the Representation of the People Act, 1951, the Companies Act, 2013, the Income-tax Act, 1961 and the Reserve Bank of India Act, 1934. These amendments altered the legal framework governing political contributions, disclosure requirements and the regulation of electoral funding.
The Finance Act, 2017 amended the Reserve Bank of India Act, 1934 to enable the Central Government to authorise the issuance of Electoral Bonds notwithstanding the general restriction on the issuance of bearer instruments. It also amended the Companies Act, 2013, altering the legal framework governing corporate political contributions.
Apart from concerns regarding donor anonymity, the constitutional challenge also involved amendments to Section 182 of the Companies Act, 2013. These amendments removed the earlier cap limiting corporate political contributions to 7.5% of the company’s average net profits over the preceding three financial years and also removed the requirement to disclose the names of recipient political parties in the company’s profit and loss account. These changes raised concerns regarding the potential influence of corporate funding on the electoral process.
The challenge before the Supreme Court focused on whether the Electoral Bonds Scheme and related legal provisions were consistent with constitutional principles, particularly the voter’s right to information and electoral transparency. A major issue before the Court was whether donor confidentiality could justify restricting access to information about political contributions.
The petitioners argued that the right to information, derived from Article 19(1)(a) of the Constitution, includes access to information necessary for meaningful participation in democracy. They contended that knowledge of political contributions was important for voters to evaluate the influence of financial support on political parties.
The Union of India defended the scheme by emphasising the importance of encouraging political donations through formal banking channels. It argued that maintaining donor confidentiality could encourage individuals and entities to contribute through a regulated system rather than through unaccounted sources.
Case Laws
The constitutional understanding of transparency, the right to information and electoral participation developed gradually through a series of judicial decisions. These judgments created the legal foundation on which later constitutional questions relating to political funding and electoral bonds were examined.
1. State of Uttar Pradesh v. Raj Narain, (1975) 4 SCC 428
In State of Uttar Pradesh v. Raj Narain (1975), the Supreme Court recognised the importance of transparency and openness in a democratic system. The Court observed that citizens have a right to know about public acts and actions of public authorities, as excessive secrecy may affect democratic accountability.
Although the case did not directly concern political funding or electoral bonds, it contributed to the development of the constitutional principle that transparency is an essential element of democracy. The judgment later became part of the foundation for recognising the right to information under Article 19(1)(a) of the Constitution.
2. S.P. Gupta v. Union of India, 1981 Supp SCC 87
In S.P. Gupta v. Union of India (1981), the Supreme Court further developed the principle of transparency in public affairs. The judgment emphasised the importance of open governance and recognised that excessive secrecy in public administration may affect democratic accountability.
The principles developed in this case later became relevant in understanding the relationship between access to information and effective participation of citizens in democratic processes.
3. Union of India v. Association for Democratic Reforms, (2002) 5 SCC 294
A significant development in electoral transparency came through Union of India v. Association for Democratic Reforms,(2002). The Supreme Court examined whether voters have the right to access relevant information about candidates contesting elections, including information relating to criminal antecedents, educational qualifications and financial details.
The Court recognised that an informed voter is essential for meaningful democratic participation and held that the voter’s right to receive relevant information is connected with the freedom of speech and expression under Article 19(1)(a) of the Constitution.
The judgment became a crucial foundation for later discussions on electoral transparency by establishing that access to relevant information enables citizens to make meaningful electoral choices.
4. People’s Union for Civil Liberties (PUCL) v. Union of India, (2003) 4 SCC 399
In People’s Union for Civil Liberties (PUCL) v. Union of India (2003), the Supreme Court reaffirmed the importance of providing voters with relevant information necessary to make an informed electoral choice.
The judgment strengthened the principle that transparency in elections is closely connected with the ability of citizens to participate effectively in a democracy. It further supported the constitutional understanding that the right to information of voters forms an important part of electoral participation.
5. Association for Democratic Reforms & Anr. v. Union of India & Ors., 2024 INSC 113
The Electoral Bonds judgment brought the constitutional debate on transparency into the field of political funding. In Association for Democratic Reforms v. Union of India (2024), a five-judge Constitution Bench of the Supreme Court examined the constitutional validity of the Electoral Bonds Scheme and related amendments concerning political contributions.
The Court considered issues relating to the voter’s right to information, electoral transparency, political funding and donor confidentiality. It examined whether non-disclosure of information regarding political contributions affected the voter’s ability to make an informed electoral choice.
The Court applied the proportionality principle and held that the restriction on the voter’s right to information was disproportionate to the objective of protecting donor anonymity.
The judgment represented an important stage in the continuing constitutional debate on balancing transparency, accountability and confidentiality within the electoral process.
Conclusion
The Electoral Bonds Scheme raised a constitutional question regarding the relationship between political funding and the voter’s right to information. The issue before the Supreme Court was not whether political parties require financial resources, but whether the framework governing such contributions maintained a proper balance between transparency, accountability and donor confidentiality.
In Association for Democratic Reforms & Anr. v. Union of India & Ors., 2024 INSC 113, the Supreme Court examined the scheme and related legal provisions in the context of constitutional principles governing elections. The Court held that the Electoral Bonds Scheme and the concerned amendments were unconstitutional after examining their impact on the voter’s right to information and electoral transparency.
The Court also directed the State Bank of India to stop issuing electoral bonds and disclose relevant information regarding bonds purchased and redeemed to the Election Commission of India for publication.
The judgment did not prohibit political parties from receiving contributions. Instead, it invalidated the specific legal framework governing electoral bonds after finding that the non-disclosure mechanism was inconsistent with the voter’s right to information and the constitutional requirement of transparency in elections.
The Electoral Bonds debate therefore remains an important example of how constitutional principles guide the regulation of democratic processes and the balance between transparency, confidentiality and meaningful participation in a democracy.
FAQ
1. What was the Electoral Bonds Scheme and why was it introduced?
The Electoral Bonds Scheme was introduced in 2018 to provide a formal banking channel for political contributions. It created a mechanism through which eligible individuals and entities could donate to political parties through authorised financial institutions.
2. What was the main controversy surrounding the Electoral Bonds Scheme?
The main controversy concerned the balance between transparency in political funding and donor confidentiality. The issue was whether voters should have access to information regarding political contributions received by political parties.
3. Why was the right to information important in this case?
The petitioners argued that information relating to political funding was necessary for voters to make informed electoral choices. The issue was examined in the context of the right to information derived from Article 19(1)(a) of the Constitution.
4. What did the Supreme Court examine in Association for Democratic Reforms v. Union of India (2024)?
In Association for Democratic Reforms v. Union of India (2024), the Supreme Court examined the constitutional validity of the Electoral Bonds Scheme and related legal provisions concerning political funding, transparency and donor confidentiality.
5. What was the Supreme Court’s decision on the Electoral Bonds Scheme?
The Supreme Court declared the Electoral Bonds Scheme and related amendments unconstitutional after examining their impact on the voter’s right to information and electoral transparency.
6. Did the judgment prohibit political donations to political parties?
No. The judgment did not prohibit political parties from receiving donations. It only invalidated the legal framework governing electoral bonds after finding it inconsistent with constitutional principles of transparency and the voter’s right to information.
7. Why is the Electoral Bonds judgment significant?
The judgment is significant because it strengthened the constitutional understanding of electoral transparency and recognised the importance of information, accountability and informed participation in a democracy.
