Author: Vaishnavi.M, The Tamil Nadu Dr. Ambedkar Law University
To the Point
The Electoral Bonds Scheme, launched by the Indian government in 2018, was projected as a step towards enhancing transparency in political donations by establishing a regulated channel through which individuals and corporations could financially support political parties. Intended to curb the circulation of unaccounted money in electoral campaigns, the scheme permitted donors to purchase bonds from the State Bank of India and anonymously transfer them to eligible political entities.
However, this mechanism soon became the focal point of a larger constitutional controversy, particularly regarding its implications for transparency, electoral fairness, and the right to information. Critics have highlighted that donor anonymity weakens public oversight, obstructs electoral accountability, and disproportionately advantages parties in power, thereby compromising the fundamental democratic principle of equal political competition. Civil society organisations and political challengers argued that this lack of disclosure infringes upon the electorate’s right to be informed, protected under Article 19(1)(a) of the Indian Constitution, which underpins the right to make reasoned political choices.
The scheme’s constitutionality was brought before the Supreme Court of India, which in 2024 delivered a landmark judgment invalidating the Electoral Bonds Scheme. The Court held that it infringed upon the fundamental right to information and distorted the electoral balance, thus failing the test of constitutional legitimacy. This ruling marked a defining moment in the evolving interface between campaign finance, democratic integrity, and constitutional governance in India reviving calls for urgent and transparent electoral finance reforms.
Use of legal jargon:
The Electoral Bonds Scheme significantly challenged key constitutional doctrines surrounding transparency, electoral integrity, and accountability in governance. Although framed as a regulatory measure for political donations, the scheme enabled anonymous contributions, thereby infringing on the Right to Information (RTI) a derivative of the freedom of expression under Article 19(1)(a) of the Constitution. The Supreme Court, particularly in Union of India v. Association for Democratic Reforms (2002), has affirmed that informed voter choice is intrinsic to democratic functioning.
By concealing the identities of donors, the scheme fostered an opaque environment conducive to a corruption nexus and undue influence, particularly benefitting ruling parties with privileged access to funding. The adoption of the scheme through the Finance Act, 2017, categorized as a Money Bill, raised structural concerns about the quasi-federal nature of India’s Constitution, as it bypassed Rajya Sabha scrutiny and led to amendments in unrelated statutes like the RBI Act, Income Tax Act, and Representation of the People Act.
The scheme’s differentiation between disclosed and anonymous political contributions lacked a rational nexus, thus failing the test of reasonable classification under Article 14. Additionally, the absence of statutory safeguards rendered the scheme manifestly arbitrary. Responding to multiple Public Interest Litigations (PILs), the Supreme Court in 2024 invoked the doctrine of proportionality to strike down the scheme, holding that the purported goal of eliminating black money could not outweigh the electorate’s fundamental right to political transparency. The verdict serves as a constitutional reminder that electoral reforms must always uphold the principles of openness, equality, and democratic participation.
The Proof :
Under the Electoral Bonds Scheme, individuals and entities were permitted to make political donations using bonds purchased from SBI-authorized branches. While this process was justified as a method to discourage cash-based, untraceable donations, it also allowed for complete anonymity of donors a feature that deeply compromised the principle of electoral transparency.
The government implemented the scheme through the Finance Act, 2017, introducing amendments to critical legislations such as the Reserve Bank of India Act, the Income Tax Act, and the Representation of the People Act. This legislative route, pursued as a Money Bill, circumvented bicameral review and raised questions about procedural propriety and democratic accountability.
This concealment of donor identity clashed directly with the fundamental right to know, protected under Article 19(1)(a) and reinforced in Union of India v. Association for Democratic Reforms (2002). In its 2024 verdict, the Supreme Court of India invalidated the Electoral Bonds Scheme, citing its incompatibility with democratic principles and its adverse impact on free and fair elections
Abstract
Political financing in India continues to operate in a regulatory and transparency vacuum. This article undertakes a critical examination of the Electoral Bonds Scheme, assessing its constitutional soundness and its broader impact on democratic governance. It explores significant judicial interpretations, the effects on voters’ informational rights, and the legislative method adopted for its enactment raising issues about the constitutional misuse of the Money Bill procedure and concerns over disenfranchising the electorate through covert funding routes.
Case Laws
Union of India v. Association for Democratic Reforms, (2002) 5 SCC 294
The Court ruled that voters have a constitutional right to know the backgrounds of candidates, considering it a facet of freedom of expression under Article 19(1)(a).
Lok Prahari v. Union of India, (2018) 4 SCC 699
The judgment stressed the necessity of financial disclosure in an electoral democracy and struck down policies promoting excessive secrecy.
K.S. Puttaswamy v. Union of India, (2017) 10 SCC 1
Although centered on privacy, the case underlined the significance of informational autonomy and upheld the doctrine of proportionality in evaluating state measures.
Association for Democratic Reforms v. Union of India, (2024 Judgment)
In this case, the Supreme Court declared the Electoral Bonds Scheme unconstitutional, holding that it violated Article 19(1)(a) and compromised the democratic process.
Rojer Mathew v. South Indian Bank Ltd., (2020) 6 SCC 1
The Court clarified the narrow scope of Money Bills, underscoring that such classification cannot be misused to pass substantive electoral reforms without Rajya Sabha oversight.
Conclusion
Although the Electoral Bonds Scheme was introduced with the intent to revolutionize political funding by reducing black money, its operational model ultimately eroded voter rights and diluted democratic transparency. The concealment of donor information, combined with procedural irregularities and disproportionate benefits to ruling parties, has drawn both judicial and public criticism. The Supreme Court’s unequivocal rejection of the scheme signals the need for urgent reform in political finance, grounded in constitutional morality, accountability, and electoral integrity. Moving forward, a transparent, fair, and legally sound mechanism is essential to uphold the sanctity of the democratic process.
FAQS
Q1. What are electoral bonds?
A: Electoral bonds are financial instruments introduced in 2018 that allow individuals and entities to make anonymous donations to political parties via the State Bank of India.
Q2. Why were they struck down by the Supreme Court?
A: The Electoral Bonds Scheme was declared unconstitutional for infringing upon the voter’s right to know under Article 19(1)(a) and for enabling unchecked, opaque political financing that compromised democratic principles.
