Author : Tanisha
College: Bharat College Of Law, Kurukshetra University
TO THE POINT
Political funding is an essential part of the electoral process because political parties require financial resources to conduct campaigns, organize programmes and communicate their policies to citizens. However, political donations must also be transparent because undisclosed financial contributions can create opportunities for corruption, undue influence and lack of accountability.
The Electoral Bonds Scheme was introduced by the Government of India in 2018 with the stated objective of bringing greater transparency into political funding and reducing the use of unaccounted money. Electoral Bonds were interest-free banking instruments that could be purchased from authorised branches of the State Bank of India and donated to eligible political parties.
The major controversy surrounding the scheme was the anonymity of donors. Although the political party receiving the donation could identify the donor, this information was not publicly disclosed. Consequently, citizens could not know who was financially supporting political parties.
The constitutional validity of the Electoral Bonds Scheme was challenged before the Supreme Court. In Association for Democratic Reforms v. Union of India (2024), the Supreme Court unanimously struck down the scheme and held that voters have a right to information regarding political funding.
The judgment represents an important development in Indian constitutional law because it connects political transparency with the fundamental right to freedom of speech and expression under Article 19(1)(a) of the Constitution.
USE OF LEGAL JARGON
Electoral Bonds: Financial instruments introduced for making donations to political parties through banking channels.
Political Funding: Financial contributions received by political parties for carrying out their political and electoral activities.
Right to Information: The constitutional right of citizens to obtain information necessary for meaningful participation in a democracy.
Constitutional Validity: The compatibility of a law or governmental scheme with the provisions and principles of the Constitution.
Judicial Review: The power of constitutional courts to examine whether legislative or executive actions comply with the Constitution.
Anonymity: The condition in which the identity of the person making a donation is not publicly disclosed.
Proportionality: A constitutional principle requiring that a restriction on a fundamental right must have a legitimate purpose and must not go beyond what is necessary to achieve that purpose.
Manifest Arbitrariness: A principle under which legislation may be invalidated when it is unreasonable, irrational or lacks an adequate determining principle.
Democratic Accountability: The responsibility of political institutions to remain answerable to citizens for their actions and decisions.
THE PROOF
The Electoral Bonds Scheme was introduced through amendments made by the Finance Act, 2017, and the scheme became operational in 2018. Under the scheme, eligible individuals and entities could purchase electoral bonds through authorised banking channels and donate them to political parties satisfying the statutory requirements.
The scheme was defended on the ground that donations would be made through formal banking channels rather than cash. Supporters argued that this could reduce the use of black money and encourage legitimate political contributions.
However, several provisions created serious concerns regarding transparency.
First, the identity of donors was not made available to the general public. This meant that ordinary voters were unable to determine the sources from which political parties were receiving substantial financial contributions.
Second, amendments to the Companies Act, 2013 removed the earlier restriction that limited corporate political contributions to a prescribed percentage of a company’s average net profits. This raised concerns about unlimited corporate funding and the possibility of political influence by large business entities.
Third, amendments to the Representation of the People Act, 1951 permitted political parties to receive electoral-bond donations without publicly disclosing the identity of the donors.
The constitutional challenge therefore involved an important question: Can political donations remain anonymous when citizens have a legitimate interest in knowing the financial sources of political parties?
The Supreme Court answered this question in the negative.
In its judgment delivered on 15 February 2024, the Constitution Bench of the Supreme Court declared the Electoral Bonds Scheme unconstitutional. The Court held that information concerning political funding was relevant to the exercise of the citizens’ right to vote and therefore fell within the scope of Article 19(1)(a).
The Court also held that unlimited corporate funding to political parties was arbitrary and could adversely affect the principle of one person, one vote, because political influence could become disproportionately dependent upon financial resources.
The judgment consequently directed the State Bank of India to stop issuing electoral bonds and to disclose relevant information concerning the bonds to the Election Commission of India, subject to the directions of the Court.
The case demonstrates that political finance is not merely an economic issue. It has a direct connection with constitutional democracy, electoral fairness and citizens’ right to information.
ABSTRACT
The Electoral Bonds Scheme represented one of the most significant attempts to reform political funding in India. Introduced in 2018, the scheme permitted political donations through banking instruments while maintaining donor anonymity from the public. Although the scheme was presented as a mechanism for promoting legitimate and cashless political contributions, concerns arose regarding transparency, corporate influence and democratic accountability.
The constitutional validity of the scheme was challenged before the Supreme Court of India. In Association for Democratic Reforms v. Union of India (2024), the Supreme Court held that the anonymity provided by the scheme violated citizens’ right to information under Article 19(1)(a) of the Constitution. The Court further invalidated the removal of restrictions on corporate political contributions.
This article examines the constitutional implications of anonymous political funding, the importance of transparency in elections, and the role of judicial review in protecting democratic principles. It argues that political funding mechanisms must balance legitimate donor privacy with the public’s constitutional right to know information that materially affects electoral choices.
CASE LAWS
1. Association for Democratic Reforms v. Union of India (2024)
This is the leading judgment concerning electoral bonds. A Constitution Bench of the Supreme Court unanimously struck down the Electoral Bonds Scheme.
The Court recognised that voters require relevant information about political parties and their sources of funding to make informed electoral choices. Political funding was therefore connected with the citizens’ right to information under Article 19(1)(a).
The Court also found the amendments permitting unlimited corporate political contributions to be unconstitutional. The judgment emphasised that unrestricted corporate funding could create a possibility of political influence based upon financial strength.
2. Union of India v. Association for Democratic Reforms (2002)
The Supreme Court held that voters have a right to obtain important information concerning candidates contesting elections. The judgment established that the voter’s right to information is an important component of Article 19(1)(a).
This principle later became significant in determining whether voters should also have access to information concerning political funding.
3. People’s Union for Civil Liberties v. Union of India (2003)
The Supreme Court reaffirmed that the right to obtain information concerning electoral candidates forms part of the freedom of speech and expression. The Court recognised that an informed electorate is necessary for meaningful democratic participation.
The principles established in this case strengthened the constitutional foundation for transparency in electoral matters.
4. K.S. Puttaswamy v. Union of India (2017)
The Supreme Court recognised privacy as a fundamental right under Article 21. The judgment is relevant to political funding because donor privacy can be considered a legitimate interest.
However, privacy is not an absolute right. It must be balanced against other constitutional interests. In the electoral bonds case, the Supreme Court considered whether donor anonymity could override the voters’ right to information about political funding.
CONCLUSION
Political funding and electoral transparency are closely connected with the functioning of a constitutional democracy. While political parties require financial support to perform their democratic functions, the process through which they receive such support must remain accountable and transparent.
The Electoral Bonds Scheme attempted to formalise political donations through banking channels. However, its anonymity provisions created significant constitutional concerns because citizens were prevented from knowing the sources of political funding.
The Supreme Court’s decision in Association for Democratic Reforms v. Union of India (2024) reaffirmed that democracy cannot function effectively without an informed electorate. The judgment strengthened the principle that citizens have a legitimate constitutional interest in information that may influence their electoral choices.
At the same time, political funding reforms should not discourage legitimate donations or unnecessarily compromise individual privacy. The future framework must therefore establish a balanced mechanism that ensures transparency, accountability and protection against misuse of political influence.
A strong democracy requires not only free elections but also fair, transparent and accountable electoral financing. Political funding reforms must ultimately serve the interests of voters and democratic institutions rather than allowing financial power to determine political influence.
FAQ
Q1. What were Electoral Bonds?
Electoral Bonds were banking instruments introduced in 2018 for making donations to eligible political parties.
Q2. Why were Electoral Bonds introduced?
They were introduced with the stated objective of making political donations more formal, cashless and traceable through the banking system.
Q3. Why was the Electoral Bonds Scheme controversial?
The primary controversy concerned donor anonymity and the lack of public disclosure regarding the sources of political funding.
Q4. Which fundamental right was involved in the Electoral Bonds case?
The Supreme Court primarily considered Article 19(1)(a), which protects freedom of speech and expression and includes the right to information in appropriate circumstances.
Q5. Which case struck down the Electoral Bonds Scheme?
The scheme was struck down by the Supreme Court in Association for Democratic Reforms v. Union of India (2024).
Q6. What was the Supreme Court’s major concern?
The Court found that citizens’ right to information concerning political funding was adversely affected by the anonymity provided under the scheme.
Q7. Why is transparency important in political funding?
Transparency helps voters make informed decisions and promotes accountability in democratic institutions.
Q8. Does donor privacy have any constitutional importance?
Yes. Privacy is recognised as a fundamental right, but it must be balanced against competing constitutional rights and legitimate public interests.
Q9. What is the significance of the Electoral Bonds judgment?
The judgment reinforced transparency in political funding and recognised the importance of an informed electorate in a constitutional democracy.
Q10. What should future political funding reforms focus on?
Future reforms should aim to balance donor privacy, transparency, accountability, electoral fairness and prevention of illicit political funding.
