Author: Tinevimbo Chidhaya School Vishwakarma University
To the Point
In 2018, the Indian government launched a new way of political funding Electoral Bonds. The target was on the minimization of cash contributions, and the clean up of political donations. Nevertheless, there are grave reservations that have been expressed over the years by critics and courts. The big problem is that although the system will help minimize cash transactions, it will also enable donors to remain anonymous even among the people. This covertness questions the democratic process in terms of fairness, transparency and accountability in Indian democracy. In this article, it is possible to analyse how Electoral Bonds works, what are they, what judges said about them, and whether they are beneficial or dangerous to the democratic process.
Abstract
In a democratic nation governed by the rule of law, transparency in political financing is not merely desirable but it is necessity for upholding the integrity of electoral democracy. The Electoral Bond Scheme, introduced by the Government of India in 2018, was positioned as a tool to eliminate black money from electoral campaigns. Nonetheless, the introduction of this scheme has led to grave ethical, legal and constitutional concerns.
At the core of the controversy lies the anonymity of donors, which prevents citizens, watchdog institutions, and even opposition parties from knowing who is funding whom, and in what amounts. This concealment violates the right of to information which is stated under article 19 of the constitution that talks about the freedom of speech and expression under sub-section 1,a
The scheme’s legal architecture was made possible through amendments introduced by the Finance Act, 2017, passed as a money bill, thereby sidestepping the Rajya Sabha and avoiding full parliamentary scrutiny. Through changes in four key statutes that are the Representation of the People Act of 1951, the Companies Act of 2013, the Income Tax Act, 1961, and the RBI Act, 1934,the government enabled unlimited and anonymous donations from both individuals and corporations. Notably, the cap on corporate donations was removed, and companies were no longer required to disclose contributions to specific political parties in their annual reports.
These legal amendments not only weakened the framework of financial accountability but also tilted the balance of power in favor of the ruling party, which has received the lion’s share of donations. Civil society organizations, constitutional experts, and former Election Commissioners have all raised concerns about how such a funding system facilitates quid pro quo arrangements, compromises fair competition in elections, and erodes public trust in the democratic process.
Therefore the main aim of this article is to critically analyze the legal validity, constitutional implications, and practical impact of the Electoral Bond Scheme.Also it shall examine how this model of political financing conflicts with the principles of participatory governance, violates judicially recognized rights, and promotes a culture of corporate influence in politics. In doing so, the article highlights the need for judicial intervention and legislative reform to restore electoral transparency and safeguard democratic accountability.
Use of Legal Jargon
The Electoral Bond Scheme, while presented as a reform to reduce black money in politics, introduces several legal complexities involving key principles of constitutional and electoral law. At the heart of the issue is the conflict between anonymity granted to donors and the transparency required in democratic processes. The Scheme was said to be guarding the confidentiality of the sponsors. However, this must be balanced against the public’s right to information, which stems from Article 19(1)(a) of the Constitution, guaranteeing freedom of speech and expression. In legal terms, the public’s ability to make informed electoral choices falls under the scope of electoral transparency, a vital part of a free and fair democratic process.
Furthermore, changes were made to several laws to implement the scheme. The Representation of the People Act, 1951, which regulates elections and mandates disclosure of political donations, was amended to exempt disclosure of donations received through electoral bonds. The Companies Act, 2013 was altered to remove the cap on corporate donations and the requirement to disclose the names of political parties receiving the donations. This allowed even shell companies(companies without active business operations)to make unlimited contributions. Lastly, amendments to the Income Tax Act provided tax exemptions to donors and political parties, further shielding the funding process from scrutiny. These legal modifications reflect a deliberate weakening of institutional checks, undermining the spirit of accountability and open governance in political finance.
The Proof
The practical impact of the Electoral Bond Scheme revealed significant legal and ethical concerns, which eventually led to judicial intervention. First, the scheme’s design allowed political parties to receive massive donations through bonds purchased via the State Bank of India (SBI), without having to disclose the donor’s identity to the public. This was made possible by legal amendments that diluted existing provisions of the Representation of the People Act and Companies Act. For example, the removal of the cap on corporate donations (which was previously set at 7.5% of a company’s profits) enabled companies, including potentially unregulated or newly formed ones, to make large political contributions. Moreover, since these transactions were protected under banking confidentiality, only the State Bank of India and the central government had access to the full donor information, creating room for misuse.
Several institutions, including the Election Commission of India and the Reserve Bank of India, expressed concerns that the scheme could be misused for money laundering, quid pro quo arrangements, and might harm the integrity of electoral democracy. The lack of a transparent trail not only prevented citizens from knowing who was financing political campaigns but also created unequal access to influence, favoring the ruling party, which could track donations while the public could not. In response to public interest litigations and civil society activism, the Supreme Court in 2024 declared the Electoral Bond Scheme unconstitutional, citing it as a direct violation of the citizen’s right to information and the democratic principle of informed choice. The judgment highlighted that the scheme, in practice, favored secrecy over fairness, and therefore could not be sustained in a constitutionally governed electoral system.
Case Laws
1. Association for Democratic Reforms (ADR) v. Federation of India (2024)
In February 2024 the Supreme Court made a judgement that was abolishing the Electoral Bonds as they go against the law. The court ruled that such a scheme breached the right to information of the voters in the Article 19(1) (a) of the Constitution.It is also detrimental to have anonymity in political funding and that it goes against free and fair elections.It was invalid to amend laws such as the Companies Act and the RP Act as these affected democratic visibility.
2. People Union of Civil Liberties (PUCL) vs. Union of India (2003)
In the present one, the Supreme Court held that the right to vote incorporates the right to make an informed choice, which is in the freedom of expression. This decision assists in affirming the fact that citizens need to be aware of the financiers of political parties since it can affect their choices.
Conclusion
It has served to worsen a paradox as the Electoral Bond Scheme, which was proposed in the name of electoral reforms, has, in fact, deepened the opacity surrounding the issue of political funding. The scheme has embedded donor anonymity to the point of enacting it as an institutional rule, eliminated important policy checks of corporate and electoral legislation, and has enabled financial power that has a free reign in influencing democratic proceedings.
The government not only escaped debate on the key pieces of legislation, but also undermined the check of parliament whose ownership of the legislature process is paramount to a democratic process of law-making. This reform approach begs major constitutional questions of morality and observance of procedural fairness.The scheme favors the ruling party since the statistics on reports sent under seals by campaign financiers to the Election Commission reveals that the ruling party gets most of the bond based donations. This will result in a situation whereby there is an unfair electoral competition and smaller and opposition parties are disadvantaged at the expense of the so-called level playing field that represents free and fair elections.
Moreover, by lifting the limit of donation by the corporations, along with the anonymity of the donor, the grounds will be opened towards the quid pro quo deals, where the financial donation could result in favoritism in government regulation, contracts, or changes of government policies. This kind of nexus between business and politics is debased as the nature of governance loses its public face and there are chances that elections become a deal-based business.
Although the idea of the Electoral Bond scheme was to clean up political financing, the opposite happened in numerous regards. It welcomed corporate anonymous giving and potential corruption by giving the corporations the ability to influence the voting through anonymity. This ruling of the Supreme Court in 2024 was a major move to restore Indian elections to transparency. This is only the start though.
In order to have fair elections in future, India requires:
Better policies which will require disclosure of persons making political party donation to be mandatory.
An improved system that would enable the voters to monitor the political funding as it occurs.
FAQs (Frequently Asked Question)
1. Electoral bond What is an electoral bond?
It is a money source purchased to State Bank of India and given as a donation to a political group. The party is able to transfer it into cash though the name of the donor is not known to the community.
2. Who were the persons who were authorized to buy electoral bonds?
Any registered Indian citizen or company was free to purchase electoral bonds and give it to a registered political party.
3. What were the controversies behind electoral bonds?
They had been popular because of giving a political donation process anonymously and in unlimited amounts which meant that the knowledge of political funding was not as clear and publicized as before, and ensured the possibility of non-domestic and corporate donations.
4. How did the Supreme Court rule regarding them?
The Supreme Court declared the scheme unlawful as it violates the right of the people when voting to acquire information concerning the funding.
5. What reforms are suggested?
There should be transparency in political donations. It is expected that new regulations will be adopted with the parties being obliged to reveal the source and the amount of the donations publicly.
