Author: Shubhi Gupta, Gautam Buddha University
ABSTRACT
The decision of Apex Court in the case of Association for Democratic Reforms v. Union of India marks a transformative moment in Indian electoral jurisprudence. The crux of the case revolved around the contentious electoral bonds scheme, implemented in 2018, which enabled anonymous political funding. The Court’s ruling struck down this scheme as unconstitutional, emphasizing the fundamental right to information, electoral transparency, and curbing the opacity surrounding political contributions. This article explores the legal reasoning behind the judgment, key statutory interpretations, precedent cases, and its broader implications for Indian democracy.
INTRODUCTION
In a vibrant democracy like India, transparency in political financing is indispensable. Yet, for years, the flow of money into political parties remained murky, raising concerns over undue influence, corruption, and lack of accountability. The Electoral Bonds Scheme, though introduced with the stated objective of curbing black money, faced severe criticism for cloaking donors’ identities and shielding political parties from public scrutiny.
The Association for Democratic Reforms (ADR), a prominent civil society organization committed to advocating for electoral reforms, challenged the constitutionality of the scheme. On February 15, 2024, a five-judge Constitution Bench of the Supreme Court delivered a landmark verdict, declaring the scheme unconstitutional and thereby reinforcing the constitutional right of voters to be informed.
USE OF LEGAL JARGON
Grasping the essence of the case requires familiarity with key legal concepts.:
Electoral Bonds: Bearer financial instruments introduced by the government through the Finance Act, 2017, allowing donors to anonymously contribute funds to political parties.
Right to Information (RTI): A fundamental right under Article 19(1)(a) as interpreted by the Supreme Court to include the right of voters to know the financial affairs of political parties.
Article 14: Which ensures equality before the law, was cited in the case to emphasize how the Electoral Bond Scheme enabled arbitrary and opaque practices, undermining fairness in the political funding process.
Doctrine of Manifest Arbitrariness: A judicial principle stating that laws can be struck down if they are capricious, unreasonable, and without adequate determining principle.
Proportionality Test: A standard used to assess the validity of state restrictions on fundamental rights, balancing governmental objectives with the extent of rights infringement.
KEY CONSTITUTIONAL QUESTIONS
1. Does the Electoral Bond Scheme infringe upon voters’ right to access information essential for making informed electoral choices?
2. Does it enable arbitrary and unequal political influence, violating Article 14?
3. Were the amendments that facilitated the Electoral Bond Scheme validly introduced as a Money Bill under Article 110 of the Constitution?
THE SUPREME COURT REASONING
1. Right to Information under Article 19(1)(a)
The Court emphasized that informed voting is a cornerstone of democracy. Building upon Union of India v. ADR (2002) and PUCL v. Union of India (2003), the Court held:
“Voters are entitled to be informed about where political parties receive their funding, as this knowledge is crucial for making free and informed electoral decisions.”
The anonymity provided by the scheme, especially to large corporate donors, was found to directly hinder this right.
2. Violation of Article 14 – Manifest Arbitrariness
The Court struck down provisions of the Companies Act that:
Removed the cap on corporate donations (previously 7.5% of average net profits),
Removed the requirement for companies to disclose information about their donors in their financial records.
It observed that this disproportionately favored corporations, enabling shell companies and foreign entities to influence elections, without accountability or oversight.
“Unlimited and anonymous funding to political parties from corporate entities is manifestly arbitrary and fails the test of reasonable classification’’
3. Abuse of Money Bill Procedure
Although the constitutional validity of passing the scheme-related amendments via Money Bill was discussed, the Court did not directly rule on this issue, leaving it to be addressed by a larger bench in light of Rojer Mathew v. South Indian Bank Ltd. (2019). However, the Court clearly acknowledged that using the Money Bill route to introduce substantive non-fiscal provisions undermines bicameral scrutiny.
RELIEF GRANTED
The Supreme Court issued the following binding directions:
Electoral Bond Scheme struck down as unconstitutional.
SBI directed to stop issuing Electoral Bonds immediately.
SBI required to disclose detailed information—including bond purchase data, purchaser identity, denominations, and redemption details—of all bonds purchased from April 12, 2019, onwards.
Election Commission of India directed to publish this data on its website by March 13, 2024.
Unencashed bonds to be returned and amounts refunded to the purchasers.
THE PROOF
The ADR challenged the scheme on multiple constitutional grounds, particularly emphasizing that it infringed the rights guaranteed under Articles 14 and 19(1)(a) of the Constitution. The arguments and findings unfolded across these crucial points:
1. Anonymity Undermining Transparency
The scheme allowed donors to purchase bonds from the State Bank of India (SBI) without revealing their identity. These bonds were then transferred to political parties, which could encash them within 15 days. Neither the public nor statutory authorities had access to the donor identities. ADR contended that this secrecy eroded voters’ rights to know the sources of political financing, a key aspect of informed voting.
2. Corporate Contributions Without Limits
The scheme permitted corporations to make unlimited donations, even allowing shell companies to contribute. Earlier, the Companies Act limited political contributions to 7.5% of a company’s average net profits from the past three financial years. This amendment through the Finance Act was seen as a gateway for money laundering and policy manipulation.
3. Violation of Constitutional Rights
The Supreme Court held that the scheme violated:
• Article 19(1)(a) by limiting the public’s access to vital electoral funding information.
• Article 14 by creating arbitrary classifications and failing to ensure fairness in the democratic process.
4. Failure of the Proportionality Test
The government argued that the scheme was necessary to curb black money. However, the Court observed that anonymity is not a proportional response to this objective. Instead, it facilitates opacity and undermines electoral fairness.
5. Misuse of the Finance Act Route
The scheme was introduced via a Money Bill, enabling it to circumvent scrutiny by the Rajya Sabha, the upper house of Parliament. The Court reiterated concerns raised earlier in the Rojer Mathew case and emphasized that changes with profound electoral implications cannot be cloaked under the guise of a Money Bill.
CASE LAWS
The 2024 judgment referenced and was influenced by several key precedents and constitutional principles:
1. Union of India v. Association for Democratic Reforms (2002)
In this landmark judgment, the Supreme Court held that voters have a fundamental right to know the background of electoral candidates, including their criminal antecedents, assets, liabilities, and educational qualifications. The Court interpreted Article 19(1)(a)—the right to freedom of speech and expression—to include the right to receive information, particularly when it relates to the exercise of voting rights. The Court also directed the Election Commission to secure such disclosures through appropriate means, laying the groundwork for greater electoral transparency and accountability.
2. People’s Union for Civil Liberties (PUCL) v. Union of India (2003)
This case reaffirmed and built upon the principles laid down in Association for Democratic Reforms. The Supreme Court upheld the constitutional validity of the Election Commission’s orders requiring disclosure of candidates’ background information. It emphasized that transparency in the electoral process is a necessary condition for meaningful participation in a democracy.
3. K.S. Puttaswamy v. Union of India (2017)
A nine-judge bench of the Supreme Court unanimously ruled that the right to privacy is an essential fundamental right safeguarded by Article 21 of the Indian Constitution.
Significantly, the judgment established the proportionality doctrine as the benchmark to evaluate the constitutionality of limitations on fundamental rights. This four-pronged test includes:
1. Legality – existence of a valid law;
2. Legitimate aim – the law should pursue a valid and lawful goal aligned with public interest;
3. Proportionality – the action taken must be reasonably aligned with and suitable for achieving the stated objective.
4. The least restrictive means – the chosen action must impair the fundamental right as little as possible while still achieving the intended goal.
In the 2024 Electoral Bonds judgment, the Court applied this test and held that the scheme failed particularly on the least restrictive means and proportionality criteria, as it allowed unlimited anonymous funding, impairing the voters’ right to information and skewing electoral fairness.
4. Indira Jaising v. Supreme Court of India (2017)
This case originated from a petition requesting more openness in the process of selecting senior advocates by the supreme court. The Court held that opacity in public decision-making violates constitutional values, particularly the right to equality under Article 14. While the case concerned judicial appointments, the broader principle emphasized that transparency is indispensable in all forms of governance.
CONCLUSION
The conclusions drawn by the Supreme Court in this case of Association for Democratic Reforms v. Union of India (2024) is a resounding affirmation of India’s democratic ideals. By dismantling the cloak of secrecy surrounding political funding, the Court has elevated the principle of electoral transparency to a constitutional imperative.
The judgment serves as a wake-up call for reform in campaign financing laws. It underscores the judiciary’s role in preserving constitutional morality and ensuring that electoral processes remain free from the undue influence of unchecked capital.
While the government may explore alternative models for transparent political funding, any such reforms must now align with the principles laid down in this case — accountability, openness, and equity in electoral competition.
FAQS
Q1: What are Electoral Bonds?
A: Electoral Bonds were financial instruments introduced by the Government of India in 2018 to enable anonymous donations to political parties. They could be purchased by individuals or corporations through the State Bank of India.
Q2: Why were Electoral Bonds challenged?
A: They were challenged for violating the rights of citizens to access information about political funding and for encouraging unchecked, anonymous corporate donations, which could potentially foster corruption and policy manipulation.
Q3: What was the Supreme Court’s main reasoning in striking down the scheme?
A: The Court held that the scheme violated:
Article 19(1)(a) (Right to Information),
Article 14 (Right to Equality),
And failed the Proportionality Test, as the objective of curbing black money did not justify suppressing voters’ right to know.
Q4: What happens after the scheme is struck down?
A: The Court directed:
Disclosure of all past donations made via Electoral Bonds.
The state bank of India was required to provide information to the election commission.
Political parties to return to pre-2018 norms of contribution disclosure.
Q5: How does this judgment impact future political funding?
A: It sets a precedent requiring all future funding mechanisms to ensure transparency, public accountability, and non-discriminatory access to political finance information.
