Author : Harshitha R, a student at Dayanand Sagar University.

In any democracy, election processes are as good as they are transparent when it comes to political financing. Citizens need to have information at their fingertips so that they can make informed choices on whom to vote for as party and as leaders. In India, with more than 900 million citizens eligible to vote, the stakes are particularly high. The launch of the Electoral Bonds Scheme in 2017 was originally framed as a reform to de-blingify political contributions and suck black money out of elections. But over time, it came under fire for facilitating transparency and enabling unbridled corporate control over politics.

The Supreme Court of India, on 15 February 2024, held the Electoral Bonds Scheme as unconstitutional, mainly on its encroachment into the basic right of citizens regarding information under Article 19(1)(a) of the Indian Constitution. The historic judgement led to intense nationwide debate around political funding, transparency, and democratic accountability. In terms of making the scheme violative of constitutional conventions, the ruling introduced a shift in paradigm towards the electoral financing paradigm in India with the purpose of reviving public trust and encouraging increased openness in the democratic process.

Plain application of constitutional interpretation and judicial review is what the Supreme Court ruling is. The Court applied the “proportionality test” to determine if the restrictions on the right to information imposed by the Electoral Bonds Scheme were reasonable. The test, one enunciated by the court in Modern Dental College and Research Centre v. State of Madhya Pradesh (2016), comprises an inquiry as to whether the restriction on basic rights is justified, necessary, and proportionate. The Bench presided over by Chief Justice D.Y. Chandrachud held the scheme also passed this test.

Additionally, the Court held three key legislations were amended with the aim of putting the scheme in place—namely:

Section 29C of the Representation of the People Act, 1951

Section 182 of the Companies Act, 2013, and

Section 13A of the Income Tax Act, 1961

were clearly arbitrary and contravened Article 14, which affords equality before the law. By facilitating donations anonymously, and especially by firms, such changes nullify the level playing field in politics.

The Electoral Bonds Scheme, launched in 2017 and operational in 2018, was initially conceived as a tool of political donation whereby individuals, organizations, or other legal persons would buy bonds of the State Bank of India (SBI) and gift them to political parties without disclosing their names. The bonds were of denominations between ₹1,000 and ₹1 crore and were returnable by qualified political parties within 15 days from the date of issue.

The government had justified the scheme as a tool to sanitize election funding, stating that the money would be routed through banking channels, thereby minimizing the use of black money. Critics, however, raised concern on a number of issues of concern:

Anonymity: The scheme allowed donors to remain anonymous to the public. The SBI and perhaps the government only knew this, while citizens remained unaware.

Corporate Donations: The 2017 amendment eliminated limits on corporate donations (previously capped at 7.5% of the last three years’ average net income), enabling even loss-making firms to give unlimited amounts.

Crony Capitalism: Uncertainty created space for quid-pro-quo deals between businesses and parties and therefore eroded democratic accountability.

The Association for Democratic Reforms (ADR) and the Communist Party of India (Marxist) were some of the petitioners who objected to the scheme in court. The Supreme Court’s unanimous ruling held that such an arrangement is contrary to the right of the voter to exercise an informed choice, which is part of the wider spectrum of Article 19(1)(a).

The Indian Supreme Court judgment on the Electoral Bonds Scheme is a milestone in Indian democracy. The scheme, first introduced to legalize and regularize political funding, had come to increasingly become a means to facilitate the sanctioning of untraced and anonymous political party funding. By applying the truism that transparency is the breath of life for democracy, the Court ruling not only demands scrutiny of historical donations but an end-to-end transformation of India’s regime of political funding.

The judgment is clear that democracy cannot flourish in the dark and that information cannot be outside the pale of the public in the issue of conducting free and fair elections. The judgment is a clarion call for revisiting and further fortifying the legal framework in the area of electoral transparency, corporate political finance, and the right of the voters.

Case Laws

A chain of pioneering judgments made up the Supreme Court judgment:

1. Union of India v. Association for Democratic Reforms (2002)

The Court held that the voters are also entitled to information about candidates who are filing nominations for contesting elections. These include criminal charges, educational background, and source of income. It was a landmark decision in establishing the right to information as part and parcel of an effective vote.

2. People’s Union for Civil Liberties v. Union of India (2003)

This case followed ADR’s precedent and reasserted the principle that right to vote entails the right to vote intelligently, and hence access to material information is a constitutional requirement.

3. KS Puttaswamy v. Union of India (2017)

In this judgment, the Supreme Court asserted the right to privacy as a constitutional right. It also recognized that this right can be limited in the public interest. In this matter, the “proportionality test” was initiated. This case was widely cited in the Electoral Bonds judgment.

4. Modern Dental College and Research Centre v. State of Madhya Pradesh (2016)

This ruling set precedent for the doctrine of proportionality to be applied to constitutional rights—requiring the restriction to be necessary and least restrictive on the fundamental right in question.

Conclusion

The Supreme Court ruling holding the Electoral Bonds Scheme to be unconstitutional is not only a legal win—it is a democratic milestone. It restores a fundamental aspect of the electoral process: the citizen’s right to information. By dismantling an arrangement that permitted secret, potentially quid-pro-quo political funding, the Court has forced the country to reconsider political transparency, corporate responsibility, and voter power.

But even as this move is a good one in the right direction, it is not the last stop. India requires a specific legal framework to regulate political donations—one that will promote public accountability, impose sensible checks on corporate funding, and insist on robust disclosure for every political party. The voters themselves must remain awake so that election reforms are not legalistic fares but living instruments of an effervescent democracy.

FAQ

Q1. What is Electoral Bonds Scheme?

A: It was a monetary instrument brought out in 2017 to enable persons and businesses to contribute to parties anonymously by buying bonds from State Bank of India.

Q2. Why was it held as unconstitutional?

A: The Supreme Court held that the scheme infringed on the right to information under Article 19(1)(a) by providing for secret and anonymous political funding.

Q3. What is next after the judgment?

A: SBI has been instructed to discontinue selling electoral bonds and transfer documents of all historical transactions to the Election Commission, who shall be obligated to make disclosures available to the public for use.

Q4. Were any laws amended to facilitate the Electoral Bonds Scheme?

A: Yes. The Representation of the People Act, the Companies Act, and the Income Tax Act were the principal statutes amended to allow for anonymous giving and the abolition of caps on donations by corporations.

Q5. Is this decision intended to be interpreted that political funding is now going to be fully transparent?

A: Not yet. The move is a step in the direction of transparency, but far-reaching electoral finance reforms are necessary to bring long-term accountability.

Sources

1. https://indianexpress.com/article/india/supreme-court-electoral-bonds-9162593/
   
2. https://www.drishtiias.com/daily-updates/daily-news-analysis/supreme-court-invalidates-electoral-bonds-scheme
   
3. https://www.drishtiias.com/daily-updates/daily-news-editorials/sc-strikes-down-electoral-bonds-scheme-1
   
4. https://www.forbesindia.com/article/news/supreme-court-finds-electoral-bonds-scheme-unconstitutional-orders-sbi-to-stop-issuing-them/91451/1
   
5. https://indianexpress.com/article/explained/explained-law/supreme-court-electoral-bonds-verdict-9163729/