Author: Nandini Shekhawat, Nirma University, Ahmedabad
To the Point
On February 15, 2024, a five-judge Constitution Bench of the Supreme Court of India unanimously struck down the Electoral Bond Scheme (EBS), 2018 as unconstitutional — delivering one of the most consequential verdicts in Indian electoral law in decades. Introduced by the Union Government through the Finance Act, 2017, the scheme permitted anonymous donations to political parties through bonds purchased from the State Bank of India (SBI), with no disclosure obligation on either the donor or the recipient party. Proponents argued it would cleanse political funding by channelling donations through the banking system. Critics countered that anonymity shielded corporate donors from public scrutiny while exposing them to potential quid pro quo arrangements with ruling parties. The Supreme Court, in Association for Democratic Reforms v. Union of India (2024), held that the scheme violated voters’ right to information under Article 19(1)(a) of the Constitution and could not be saved by any proportionality analysis. The verdict compelled SBI to disclose all bond data to the Election Commission of India (ECI), triggering India’s most significant political finance transparency moment since the Representation of the People Act, 1951.
Use of Legal Jargon
The Electoral Bond verdict engages a dense intersection of constitutional, electoral, and corporate law concepts:
• Right to Information under Article 19(1)(a) — The Supreme Court has consistently expanded freedom of speech and expression to encompass the voter’s right to know about candidates and political parties. In Union of India v. Association for Democratic Reforms (2002), the Court held that voters possess a fundamental right to information about the antecedents of those seeking their votes. The EBS, by mandating anonymity, directly curtailed this right.
• Doctrine of Proportionality — A constitutional standard requiring that any restriction on a fundamental right must be proportionate to the legitimate aim pursued. The Court applied this doctrine and found that the EBS’s blanket anonymity was neither the least restrictive means nor proportionate to its stated objective of curbing black money in political funding.
• Quid Pro Quo — A Latin term meaning “something for something,” used in constitutional and anti-corruption contexts to describe the exchange of political donations for regulatory or policy favours. The Court noted that anonymous donations from corporations especially those with pending regulatory matters before the government created structural conditions for quid pro quo arrangements.
• Electoral Trusts & Disclosure Obligations — Prior to the EBS, the Electoral Trust scheme (2013) mandated disclosure of donor identities. The EBS departed from this norm by introducing selective anonymity bonds disclosed donor identity to SBI and the recipient party but not to the public or the ECI.
• Amendment to Section 182, Companies Act, 2013 — The Finance Act, 2017 removed the pre-existing cap on corporate political donations (previously capped at 7.5% of average net profits over three years) and eliminated the requirement to disclose party-wise donations in company accounts. The Court held this amendment enabled unlimited, opaque corporate influence over electoral outcomes.
• Article 19(2) — The constitutional provision listing permissible restrictions on free speech. The government argued the EBS served the public interest of curbing black money a restriction arguably falling within Article 19(2). The Court rejected this, finding the measure disproportionate and capable of being achieved through less rights-restrictive alternatives.
• Writ of Mandamus — A judicial direction commanding a public authority to perform a duty. The Court issued directions in the nature of mandamus compelling SBI to immediately cease issuing bonds and to submit all transactional data to the ECI for public disclosure.
• Severability — The constitutional principle that courts may strike down only the offending portion of a statute while retaining the rest. The Court applied severability to invalidate the EBS-related amendments to the Representation of the People Act, the Companies Act, and the Income Tax Act without disturbing the parent statutes in their entirety.
The Proof
The evidentiary record supporting the Court’s findings was compelling and multidimensional:
• Scale of Funds Raised — Between March 2018 and January 2024, electoral bonds worth approximately ₹16,518 crores were purchased and redeemed. The Bharatiya Janata Party (BJP) received the largest share approximately ₹6,566 crores followed by the All India Trinamool Congress and the Indian National Congress. The concentration of donations to the ruling party at the Centre reinforced concerns about disproportionate access and influence.
• SBI Disclosure Data (Post-Verdict) — Following the Court’s mandamus, SBI submitted bond data to the ECI, which published it in March 2024. The data revealed that several major corporate donors — including infrastructure conglomerates and pharmaceutical companies had purchased bonds shortly after receiving government contracts, regulatory clearances, or during periods of ED/CBI scrutiny. While direct causation was not judicially established, the temporal correlation was widely documented and debated.
• Removal of Corporate Donation Cap — Prior to 2017, a company could donate a maximum of 7.5% of its average net profits over three years to political parties. The Finance Act, 2017 abolished this cap entirely — permitting even loss-making companies and newly incorporated entities to donate unlimited sums. This amendment, the Court found, fundamentally altered the character of corporate political funding from a regulated activity to an unregulated one.
• Association for Democratic Reforms (ADR) Research — ADR’s pre-verdict analysis found that over 50% of total electoral bond purchases were in denominations of ₹1 crore or above, overwhelmingly purchased by large corporations rather than individual citizens contradicting the government’s assertion that the scheme was designed for small, transparent donations.
• Election Commission’s Own Stand — The ECI, in an affidavit submitted during the litigation, stated that it had previously advocated against anonymity in political donations and expressed reservations about the EBS when it was proposed — a significant admission from the constitutional body charged with superintending free and fair elections.
• Global Comparative Evidence — Jurisdictions including the United Kingdom, Germany, and the United States mandate varying degrees of political donation disclosure. The US Federal Election Commission’s public disclosure framework, upheld in Buckley v. Valeo (1976) subject to later modifications, treats donor transparency as foundational to electoral integrity a position the Indian Supreme Court effectively aligned with in its 2024 verdict.
Abstract
The Electoral Bond Scheme, introduced through the Finance Act, 2017, represented a fundamental departure from India’s pre-existing political finance disclosure norms. By creating a mechanism for anonymous corporate donations to political parties, the scheme privileged donor confidentiality over voters’ constitutional right to know a trade-off the Supreme Court unanimously refused to validate in February 2024. In Association for Democratic Reforms v. Union of India, the Constitution Bench held that the scheme violated Article 19(1)(a), failed the proportionality test, and created structural conditions for undisclosed quid pro quo arrangements between corporate donors and recipient parties. This article examines the constitutional foundations of the verdict, the statutory amendments that enabled the scheme, the evidentiary record before the Court, and the legal and democratic implications of the judgment. It argues that the verdict, while landmark, exposes the absence of a comprehensive political finance law in India and that transparency without accompanying expenditure regulation and enforcement reform leaves India’s electoral democracy only partially served.
Case Laws
Case
Year
Key Legal Significance
Association for Democratic Reforms v. Union of India(Supreme Court of India)
2024
Struck down the Electoral Bond Scheme as unconstitutional; held it violated Article 19(1)(a); directed SBI to disclose all bond data to ECI; applied proportionality doctrine to political finance regulation.
Union of India v. Association for Democratic Reforms(Supreme Court of India)
2002
Established voters’ fundamental right to information about candidates under Article 19(1)(a); foundational precedent relied upon in the 2024 verdict.
PUCL v. Union of India(Supreme Court of India)
2003
Reinforced disclosure obligations in electoral contexts; held that free and fair elections require informed voters — a principle extended to political funding transparency in 2024.
Buckley v. Valeo (US Supreme Court)
1976
Held that political donation disclosure requirements serve a compelling governmental interest in electoral transparency; cited as comparative authority in Indian political finance discourse.
Common Cause v. Union of India (Supreme Court of India)
2017
Addressed political party accountability and ECI’s oversight powers; contributed to the judicial framework within which the EBS challenge was eventually adjudicated.
Mineral Area Development Authority v. Steel Authority of India (Supreme Court of India)
2024
Though primarily a fiscal federalism case, its concurrent emphasis on constitutional accountability of government action reinforced the broader judicial climate in which the EBS verdict was delivered.
Conclusion
The Supreme Court’s invalidation of the Electoral Bond Scheme is a landmark affirmation of the constitutional primacy of electoral transparency. By holding that voters’ right to know — protected under Article 19(1)(a) cannot be subordinated to donor anonymity, the Court drew a clear constitutional line: political finance is not a private commercial transaction; it is a matter of democratic public interest.
Yet the verdict, significant as it is, illuminates how much remains unaddressed. India still lacks a comprehensive political finance law that caps election expenditure by parties, mandates real-time donation disclosure, and establishes an independent enforcement mechanism with genuine investigative authority. The ECI, while vested with superintendence powers under Article 324, operates without statutory authority to audit party accounts or impose meaningful penalties for non-disclosure. The verdict removes one instrument of opacity it does not, by itself, construct the architecture of transparency that Indian electoral democracy requires.
The post-verdict disclosure of bond data, while unprecedented, also revealed the limits of retrospective transparency. By the time donors and recipients were identified, elections had been fought and won. The value of disclosure is prospective voters must know before they vote, not after. This demands legislative action: a statutory framework mandating real-time, publicly searchable disclosure of all political donations above a defined threshold, enforceable by an empowered and independent ECI.
The Electoral Bond verdict is the beginning of India’s political finance reckoning, not its conclusion. Parliament must now build on the constitutional foundations the Court has reaffirmed not to punish past conduct, but to ensure that the next election is fought on terms that voters can actually see and judge.
Frequently Asked Questions (FAQs)
Q1. What was the Electoral Bond Scheme?
The Electoral Bond Scheme, launched in 2018, was a mechanism that allowed individuals and corporations to purchase bonds from the State Bank of India and donate them anonymously to registered political parties. While the donor’s identity was known to SBI, it was not disclosed to the public or the Election Commission, effectively shielding political donations from public scrutiny.
Q2. Why did the Supreme Court strike it down?
The Supreme Court held that the scheme violated voters’ fundamental right to information under Article 19(1)(a) of the Constitution. The Court found that the blanket anonymity it afforded failed the proportionality test the stated objective of curbing black money could have been achieved through less rights-restrictive measures that preserved disclosure.
Q3. What was the significance of the SBI disclosure?
Following the verdict, the Court directed SBI to submit all bond transaction data to the Election Commission, which published it publicly in March 2024. The data revealed patterns of large corporate donations — including from entities under regulatory scrutiny raising serious questions about the relationship between political funding and government decision-making.
Q4. Did the verdict affect all political parties equally?
The verdict applied equally in law, but the disclosed data showed that the ruling party at the Centre the BJP received the largest share of electoral bond donations by a significant margin. This raised concerns about whether parties in power enjoy structural funding advantages under anonymous donation regimes.
Q5. What reforms are needed after this verdict?
Comprehensive reform requires: mandatory real-time disclosure of all donations above a statutory threshold; reinstatement of corporate donation caps; empowerment of the ECI to audit party accounts; and a standalone political finance statute replacing the current patchwork of amendments across the Companies Act, Income Tax Act, and Representation of the People Act.
Q6. Is India the only democracy to have faced this issue?
No. Political finance opacity is a global challenge. Several democracies including the United States, United Kingdom, and Germany have grappled with balancing donor privacy against public transparency. India’s 2024 verdict aligns it with the international consensus that electoral transparency is a democratic imperative, not a discretionary policy choice.
