Author: Ashwina Venkatramanan, School of Excellence in Law, The Tamil Nadu Dr. Ambedkar Law University, Chennai
ABSTRACT
The Electoral Bonds Scheme, introduced in 2018 by the Government of India, was projected as a progressive reform in political funding aimed at curbing black money. However, it has drawn severe criticism for fostering opacity, undermining the citizens’ right to information, and facilitating unchecked corporate influence over political processes. This article critically analyzes the constitutional and legal validity of the Electoral Bonds Scheme through the lens of Article 19(1)(a), explores the legislative amendments that facilitated the scheme, and examines relevant judicial precedents and doctrinal interpretations. The analysis concludes that while the scheme may have been introduced with reformative intent, its structure and implementation present significant challenges to the democratic values of transparency and accountability.
TO THE POINT
The Electoral Bonds Scheme, introduced under the Finance Act of 2017, enables individuals, corporations, and other entities to donate to political parties by purchasing bonds through specified branches of the State Bank of India. These bonds can be donated to any eligible political party, which can redeem them within a 15-day window. Unlike conventional donations, the identity of the donor is not disclosed to the public, thus ensuring donor anonymity. Only parties registered under Section 29A of the Representation of the People Act, 1951 and having secured at least 1% of the vote in the previous general or state election are eligible to receive these bonds.
The scheme was introduced with the stated objective of bringing greater accountability and reducing the use of cash in election funding. However, critics argue that it achieves the opposite by institutionalizing secretive political donations, favouring the ruling party, and weakening the democratic process. The legislative path taken to implement the scheme using a Money Bill to amend unrelated laws which has also raised serious constitutional concerns.
USE OF LEGAL JARGON
From a constitutional perspective, several legal doctrines and principles come into play when evaluating the validity of the Electoral Bonds Scheme. The “Doctrine of Colourable Legislation” is relevant here, as the use of a Money Bill under Article 110 of the Constitution to pass amendments to laws like the Companies Act and Representation of the People Act is viewed by many legal scholars as a deliberate attempt to circumvent the role of the Rajya Sabha. Furthermore, the scheme is seen as undermining the Right to Information, a right that the judiciary has affirmed as being encompassed within the freedom of speech and expression guaranteed by Article 19(1)(a) of the Constitution. The scheme is also subject to the test of “Manifest Arbitrariness,” a principle adopted by the Supreme Court in Shayara Bano v. Union of India (2017), under which a law that is irrational or lacks fairness can be struck down under Article 14 of the Constitution.
In addition, a Public Interest Litigation (PIL) has been filed in the Supreme Court, utilizing its writ jurisdiction to contest the constitutional validity of the scheme. The principle of “Constitutional Morality,” which emphasizes adherence to democratic values beyond mere text, is also violated, as the scheme arguably undermines the fairness of elections. The “Doctrine of Proportionality” comes into question as well—whether the restriction on transparency and anonymity of donations is a proportionate means to achieve the objective of clean electoral funding.
THE PROOF
The legal basis of the Electoral Bonds Scheme lies in the amendments brought in through the Finance Act, 2017. These amendments affected four major statutes: the Representation of the People Act, 1951; the Companies Act, 2013; the Income Tax Act, 1961; and the Reserve Bank of India Act, 1934. Section 29C of the Representation of the People Act was amended to remove the requirement that political parties disclose the name of contributors who donate via electoral bonds. This mechanism has effectively masked the identities of those making political donations. Simultaneously, the Companies Act was amended to remove the 7.5% cap on corporate donations and eliminated the requirement for companies to disclose to whom the donations were made. This allows companies—including potentially shell companies—to donate unlimited amounts without transparency. The Income Tax Act was modified to provide tax exemption for donations made through electoral bonds, creating a financial incentive for this mode of funding. The RBI Act was amended to authorize the central government to direct any scheduled bank to issue electoral bonds, which led to SBI being the sole issuer, bypassing the regulatory role of the Reserve Bank of India. These amendments were passed as part of a Money Bill, thereby avoiding scrutiny from the Rajya Sabha, a move that has been widely criticized as constitutionally suspect.
The opaque nature of the scheme is evident in the data made public by the Election Commission. Between 2018 and 2023, political parties received over ₹12,000 crores through electoral bonds. Reports suggest that a disproportionate share of more than 60% was received by the ruling party, raising concerns about the use of state power to access donor information and exert undue influence.
CASE LAWS
The constitutional challenges to the Electoral Bonds Scheme are grounded in a well-established jurisprudence around transparency and electoral integrity. In ASSOCIATION FOR DEMOCRATIC REFORMS V. UNION OF INDIA (2002), the Supreme Court recognized the right of citizens to know the antecedents of electoral candidates as an extension of the freedom of speech and expression under Article 19(1)(a).
This was reiterated in PEOPLE’S UNION FOR CIVIL LIBERTIES (PUCL) V. UNION OF INDIA (2003), where the Court held that the right to information was integral to free and fair elections.
The challenge to the Electoral Bonds Scheme was brought in CENTRE FOR PUBLIC INTEREST LITIGATION (CPIL) V. UNION OF INDIA, alongside other PILs filed by NGOs like ADR and Common Cause. A Constitution Bench of the Supreme Court unanimously declared the scheme unconstitutional in 2024, holding that it violated principles from prior cases such as ADR and PUCL by undermining voters’ right to know funding sources and enabling unregulated corporate influence over elections.
In K.S. PUTTASWAMY V. UNION OF INDIA (2017), the Supreme Court recognized the right to informational privacy as a fundamental right, strengthening the case for public access to information about political funding.
Additionally, in MOHINDER SINGH GILL V. CHIEF ELECTION COMMISSIONER (1978), the Court emphasized the importance of free and fair elections as part of the basic structure of the Constitution. This jurisprudence makes it clear that any measure that compromises electoral transparency must withstand the highest level of constitutional scrutiny.
CONCLUSION
The Electoral Bonds Scheme, while ostensibly introduced to clean up political funding, suffers from several structural flaws that undermine its stated objectives. The legal framework enables large-scale, anonymous, and potentially quid pro quo donations that favour the ruling party, distort electoral competition, and erode public trust. By shielding the identity of donors and recipients, the scheme negates the democratic principle of accountability. Its passage through the controversial route of a Money Bill further illustrates the need for institutional checks on legislative overreach.
The Supreme Court’s pending judgment on the scheme is of immense significance. A decision striking down the scheme, or at least its opaque elements, would reaffirm the constitutional commitment to transparency, equality, and fair electoral practices. Until then, the scheme continues to operate in legal limbo, raising fundamental questions about the future of electoral integrity in India.
FAQS
1. What are electoral bonds?
Electoral bonds are financial instruments introduced in India that allow individuals and corporations to donate money anonymously to political parties via designated branches of the State Bank of India.
2. Why is the Electoral Bonds Scheme controversial?
The scheme is controversial because it permits anonymous donations, lacks transparency, potentially benefits the ruling party disproportionately, and may encourage quid pro quo arrangements between donors and political parties.
3. Which laws were amended to implement the scheme?
The scheme was implemented through amendments to the Representation of the People Act, Companies Act, Income Tax Act, and Reserve Bank of India Act, all bundled into the Finance Act, 2017.
4. Is the scheme under judicial scrutiny?
Yes, the constitutional validity of the scheme is currently under challenge before the Supreme Court of India. The final judgment has not yet been delivered.
5. Does the scheme apply to all political parties?
No, only political parties registered under Section 29A of the Representation of the People Act and that have secured at least 1% of votes in the most recent general or state elections are eligible to receive electoral bonds.
REFERENCES
Election Commission of India, Electoral Bond Scheme Reports (2018–2023), available at Judicial References | Election Commission of India
Reserve Bank of India. Amendments to the RBI Act for Electoral Bonds, available at https://www.rbi.org.in/
LiveLaw “Supreme Court Hears Challenge to Electoral Bonds Scheme,”
available at Electoral Bonds Scheme | Supreme Court To Hear The Batch of Petitions Challenging the Scheme
Law Commission of India, 255th Report on Electoral Reforms, March 2015, available at Law Commission of India Submits its Report on Electoral Reforms to the Ministry of Law & Justice
