Author: Sahajal Meena, Dharmashastra National Law University
To the Point
On February 15, 2024, India’s Supreme Court ruled unanimously that the electoral bonds program was illegal. The Court determined that the scheme’s secrecy infringed the choosers’ right to knowledge under Composition 19(1)(a). By allowing unlimited anonymous donations (especially by companies) and shielding the individualities of benefactors, the scheme eroded translucency and disposed the playing field. The verdict restores before legal limits on commercial backing and authorizations exposure of once bond purchasers, marking a decisive shift toward open political backing. This composition analyses the indigenous and legal logic of the judgement, its political and politic ramifications, and how it reshapes translucency in Indian choices.
Abstract
This composition discusses the Supreme Court’s February 2024 judgment to overturn India’s Electoral Bond Scheme. The scheme, introduced in 2017, had allowed individualities and pots to contribute to political parties via anonymous deliverer bonds. Pleaders argued it baffled choosers’ instructional rights, while the government defended it as bridling black plutocrat. The Court held the scheme violated abecedarian rights, especially the freedom of speech and information under Composition 19(1) (a). It also set up that removing commercial donation caps was arbitrary and traduced Composition 14. The Court ordered immediate conclusion of new bonds and impelled the State Bank of India (SBI) to expose all once bond purchases and encashments to the Election Commission, which must publish the data intimately. We dissect the indigenous doctrines and precedents underpinning this judgment, bandy its goods on political finance rules, and explore its broader counteraccusations for popular governance and India’s transnational standing. By restoring “sun” in crusade backing, the verdict underscores translucency and the namer’s right to know.
Use of Legal Jargon
The Electoral Bond Scheme (2018) was a government issued backing medium (under the Finance Act, 2017) allowing anonymous donations to parties. Basically, this made political backing a deliverer promissory note that could be purchased at SBI offices. crucial terms include the Representation of People Act, 1951 (the main election law under which Section 29C was amended), the Companies Act, 2013 (Section 182 on commercial political donations), and the Income Tax Act (Section 13A for party accounts).
The Constitution’s Article 19(1)(a) provides freedom of speech and expression, which is construed to include the right of the public to information. Composition 14 ensures equivalency before law and prohibits arbitrary treatment. The judgement invoked judicial review (the Court’s power to abate legislation that’s extremist vires the Constitution) and applied the proportionality or least restrictive- means test under Composition 19(2) to scrutiny of the scheme. Other generalities are instructional sequestration (claimed by benefactors), quid pro quo corruption (the fear that undisclosed donations buy policy favours), and free and fair choices (indigenous value tied to translucency). An Electoral Trust was suggested as an alternate vehicle for transparent fundraising. Understanding these terms is pivotal for case, “anonymous donation” and “confidentiality” were rejected by the Court as false parallels to the secret ballot, since the State Bank of India (a public authority) held full KYC details of all bond deals.
The Proof
The Electoral Bond Scheme was legislated via the 2017 Finance Act, which amended several bills. It fitted a contingency to Section 29C of the Representation of People Act allowing benefactions via bonds to be pure from public inspection, and altered the Companies Act to cancel a cap on commercial funding. Under the scheme, eligible benefactors could buy SBI- issued bonds (in appellations from ₹ 1,000 to ₹ 1 crore) and hand them to a qualifying party, which must encash them within 15 days. The bonds had no patron name; only SBI recorded the purchaser’s KYC. In theory, this computerized plutocrat was “clean cash” (via the official banking system), and benefactors remained unknown to parties and the public. Critics advised that the scheme enabled “picky obscurity. By law, 94 of bonds bought were of the loftiest denotation (₹ 1 crore) and a small number of large benefactors – substantially corporates – reckoned for utmost bonds. ADR data showed BJP was the overwhelmingly dominant philanthropist of bond plutocrat (entering 57 – 66 of bond value in colourful times). Because SBI (a government- controlled bank) retained individualities, the ruling party had de facto access to patron lists, undermining the claimed impartiality. Pleaders (ADR, Common Beget, CPI(M)) argued that the scheme broke the “informed namer” principle. A free and fair election depends on choosers knowing crucial information about parties, including backing sources. They argued the scheme violated Composition 19(1) (a) by removing the information that choosers need to make choices.
They also challenged the 2016 Finance Act correction (passed as a plutocrat Bill) that under the Foreign Contribution (Regulation) Act had allowed foreign possessed companies to contribute, stewing limited foreign influence. A Constitution Bench of five judges (CJI Chandrachud, JJ. Sanjiv Khanna, Gavai, Pardiwala, Misra) heard expansive arguments in late 2023. On indigenous analysis, the Court concentrated on the conflict between obscurity and translucency. It held that political backing exposure is natural to the freedom of speech and expression, because “information about backing to a political party is essential for a namer to exercise (the) freedom to bounce in an efficient way”. In effect, Composition 19(1) (a) was interpreted to confer on every citizen a right to information about election finance. The Court also examined Composition 19(2), which permits restrictions on speech for certain purposes. It set up none of the enumerated grounds in 19(2) (public order, security, vilification, etc.) fit secret donations. The stated end of bridling black plutocrat didn’t itself justify curtailing choosers’ rights, especially since the Court noted indispensable anti-corruption measures live (digital transfers, full enforcement of Electoral Trust rules) that would be less restrictive on information inflow. As a result, the scheme’s obscurity vittles failed the proportionality test.
Turning to Article 14, the Court struck down the amendments removing donation caps. It found the deletion of the 7.5% profit-based limit on company contributions “manifestly arbitrary”.
Corporations, unlike individuals, have “much graver influence” over the political process, so treating them identically to individuals breaches political equality. The Court noted that post 2017, companies could donate unlimited sums with no disclosure of payee – a drastic regime shift with no rational basis. The amendment undermined the anti‐corruption purpose of Section 182(1), which originally aimed to curb quid pro quo patronage. By removing safeguards and failing to distinguish loss making from profit making firms (which likely donate for future gains), the law invited “unrestrained influence” and violated “one person, one vote” equality. In summary, the Court concluded the entire scheme and its supporting amendments were unconstitutional. It therefore struck down the Electoral Bond Scheme and related provisos, effectively nullifying the law as of February 15, 202. The Court directed immediate remedial measures: SBI must stop issuing new bonds and, within weeks, hand over all bond purchase and encashment records (names, dates, amounts) dating from April 2019 to the Election Commission. The ECI must publish these details on its website (the Court set March 13, 2024, as a deadline). Any bonds not yet encashed (within their 15day validity) must be returned to purchasers with refunds. These orders effectively open the “floodgates” of donor information to the public. The verdict’s immediate effect is to enhance transparency in political finance. Voters and watchdogs will soon see historic data on who funded which party, helping them judge influence and accountability.
As ADR Chairman Trilochan Sastry noted, “going into the next election, voters can find out who has funded political parties” and watch for any quid pro quo. By reinstating limits on corporate donations and original disclosure norms, the judgment curbs the unbridled corporate clout that had arisen from the scheme. The requirement to publish past bond data (including from the current ruling party’s tenure) is expected to expose partisan funding patterns. Critically, the ruling vindicates the principle that democracy thrives on informed choice and “transparency is essential to political equality”.
Politically, the decision has mixed reactions. It is seen as a setback for parties (like the BJP) that benefited most from the opaque system. Critics celebrate it as leveling the playing field and disincentivizing covert “crony capitalism”. The government argued the scheme was needed to clean up cash funding, but the Court observed that disclosure does not thwart legitimate giving – it only prevents unfair secrecy. Diplomatically, the verdict removes a source of international concern. Under the 2017 amendments, even foreign owned companies were allowed to donate (via the Finance Act 2016 change to FCRA). This raised questions of foreign influence in elections.
By mandating disclosure (and effectively reimposing FCRA’s original strictures), the Court aligns India closer with global norms.
Commentators note that most established democracies require public disclosure of all political donations. The scrapping of “anonymous” donations improves India’s anti-corruption image abroad and reduces the risk of illicit foreign money secretly shaping Indian policy.
Case Laws
1. Association for Democratic Reforms & Ors. v. Union of India & Ors., (2024) – In this landmark constitutional challenge (Writ Petition (C) No. 880 of 2017), the Supreme Court (Constitution Bench) held that the Electoral Bond Scheme and related statutory amendments were unconstitutional. The Court ruled that the scheme violated the voters’ right to information under Article 19(1)(a) and that removing corporate contribution limits was arbitrary under Article 14. It struck down Section 29C’s proviso, Sec. 182(3) of the Companies Act, and Sec. 13A(b) of the IT Act (as amended), and directed SBI to disclose donor details and halt bond issuance.
2. Union of India v. Association for Democratic Reforms & Ors., (2002) 5 SCC 294 – In an earlier political-finance case, the Supreme Court recognized that electors have a fundamental right to know the antecedents of candidates (criminal record, assets, liabilities, etc.) as part of Article 19(1)(a). This principle underpins the right of voters to be informed about those who seek power, a theme extended in the Electoral Bonds decision to cover funding transparency.
3. People’s Union for Civil Liberties & Ors. v. Union of India & Ors., (2013) 10 SCC 1 – In the “NOTA” case, the Court held that the freedom of speech and expression entitles voters to choose (or reject) candidates freely. The judgment reaffirmed that Article 19(1)(a) covers voters’ informational rights, including knowledge about political processes and party funding, and stressed that voting (and even not voting) are aspects of meaningful political expression.
4. S. Subramaniam Balaji v. State of Tamil Nadu & Ors., (2013) 9 SCC 659 – Though not directly about electoral bonds, this case underscored the need for financial transparency. The Court ruled that political contributions by companies, if exceeding tax-exemption thresholds, must be accompanied by full disclosure of the recipients to which they were given. This reinforced the idea that corporate donations should not be hidden from public scrutiny (so that voters can detect any undue influence), aligning with the rationales in the Bonds case.
Conclusion
The Supreme Court’s verdict on electoral bonds is a watershed for Indian democracy. It emphatically restores the “sunlight” of disclosure to political funding by overturning a scheme that had shrouded large donations in secrecy. Constitutionally, the decision affirms that the right to free and informed voting is anchored in Article 19(1)(a), and that equality (Article 14) prohibits laws giving privileged status to corporate donors. Legally, it re-establishes key provisions of the Companies Act and other statutes, effectively reviving the pre-2017 regime of capped, documented contributions. Politically, the ruling compels parties to adjust fundraising strategies and may influence campaign dynamics, as funding will soon be fully transparent. By mandating SBI/EC disclosures, the Court ensures voters can scrutinize who bankrolled whom in past elections. On the diplomatic front, the verdict aligns India with international best practices on anti-corruption and electoral integrity; it sends a strong signal that covert foreign or corporate money has no place in governance.
Critics of the scheme argued that “political contributions give a seat at the table, which translates into influence over policy making”. The Court has acted on this insight, tilting the balance back towards equity and accountability. The judgment’s import cannot be overstated: it reasserts democratic ideals over opaque patronage. However, its promise hinges on implementation. Ensuring that SBI hands over accurate data and that the Election Commission promptly publishes it is now paramount. Overall, the decision is a significant step toward more transparent elections. It broadens the constitutional doctrine of informational rights and strengthens safeguards against corruption, although ongoing debate will likely continue over how best to balance donor privacy and public interest in a vibrant democracy.
FAQS
What was the Electoral Bonds Scheme?
An electoral bond is a financial instrument introduced in India in 2017 for making donations to political parties. It was introduced by the Indian government in 2018 as a means to bring transparency to political funding while also protecting donor anonymity. Citizens or corporations could buy these bonds (from certain SBI branches) in large denominations and give them to a qualifying political party, which would then encash them. Crucially, neither the donor’s nor the payee’s name appeared on the bond, so the contribution remained anonymous to the public. The government’s goal was stated as cleaning up cash funding, but critics said it simply masked the sources of money.
For what reasons did the Supreme Court invalidate the scheme?
The Supreme Court found that electoral bonds violated the constitutional rights of voters. It held that the right to vote effectively includes the right to know who is funding parties (so voters can make informed decisions). Because the scheme allowed anonymous donations without sufficient justification, it breached Article 19(1)(a) (free speech and information). Moreover, removing limits on corporate donations was held “arbitrary” under Article 14. In short, secrecy in political funding was deemed incompatible with a transparent democracy.
How does the verdict affect political funding transparency?
By nullifying the scheme, the Court removed the legal basis for secret donations. The SBI has been ordered to disclose all bond purchasers and encashments (from April 2019 onward) to the Election Commission, which must publish the information. This means that media, analysts, and voters will soon see detailed funding records. Future donations will have to comply with existing laws (reinstating the old 7.5% corporate cap and disclosure rules). In effect, the verdict forces parties and donors into the open. It enhances transparency by making all significant contributions traceable, thereby discouraging opaque, quid pro quo funding.
What happened to the bonds already issued?
The Court directed that no new bonds be issued or sold after the decision. All bonds that have been sold but not yet encashed (within their 15 day validity) must be returned and refunded to the purchasers. SBI was instructed to hand over records of bonds from April 2019 to date to the Election Commission. The ECI must then disclose this information (by mid-March 2024).Thus, all existing electoral bonds are either to be converted into public information (via disclosures) or effectively nullified by refund.
Does this judgment allow unlimited foreign or corporate donations?
No. In fact, it does the opposite. The pre-2017 cap on corporate donations (7.5% of profits) and disclosure requirements now stand revived. The Court explicitly struck down the 2017 amendments that permitted unlimited corporate contributions without detail. Furthermore, before electoral bonds were introduced, foreign companies with majority Indian ownership were barred from funding parties (under FCRA and RBI rules). Those relaxed rules were tied to the bonds scheme and may need reevaluation. Going forward, any large corporate or foreign donations must adhere to older FCRA/Companies Act limits and have transparent accounting.
What are the broader implications of the decision?
Constitutionally, the decision expands democratic rights by emphasizing that voters must be informed about election finance. Politically, it may force parties to diversify funding sources (e.g. small donors, membership fees) and could influence electoral behaviour as voters learn who is backing each party. It also validates international concerns about hidden campaign finance: most major democracies require donor disclosure, and India’s move aligns it with those standards. Diplomatically, it enhances India’s credibility on anti-corruption commitments. In summary, the verdict strengthens transparency, curbs the potential for corporate and foreign “influence peddling,” and reaffirms that openness in funding is essential for the integrity of elections.
