Abstract
The Republic of India is the largest democracy by electorate. Electorate simply refers to all the people in a country or area who are entitled to vote in an election. However, despite strengthening various institutions for the last seven decades, India has not been able to evolve a transparent political funding system. Later in 2018, electoral bonds were introduced as a reform to political funding to curb black money in elections and strengthen financial integrity in India’s democratic process. This paper critically examines the Supreme court’s verdict on electoral bonds scheme. The also discusses the prospective outcomes the court could have opted rather than declaring the scheme unconstitutional.
Keywords: electoral bonds, right to vote, democracy, ethics, political funding
- Introduction
Electoral bonds were financial instruments introduced by the Government of India in 2018 to facilitate anonymous donations to political parties. The scheme aimed to promote transparency in political funding by allowing individuals and entities to contribute to political parties through banks, thereby reducing the reliance on cash donations. Electoral bonds are interest-free bearer bonds or money instruments that can be purchased by companies and individuals in India from authorised branches of the State Bank of India.
1.1. Background of Scheme
The scheme was announced in the 2017 Union Budget by then-Finance Minister Arun Jaitley, who cited the need to cleanse the system of political funding and bring about transparency in electoral funding in India. These bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore. They can be purchased through a KYC-compliant account to make donations to a political party. The political parties have to encash them within a stipulated time. The name and other information of the donor are not entered on the instrument and thus electoral bonds are said to be anonymous. There is no cap on the number of electoral bonds that a person or company can purchase. Former Union Finance Minister Arun Jaitley stated that after 70 years of Independence, “the country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections.” He proposed the Electoral Bonds Scheme, which was designed to “cleanse the system” of political funding. The introduction of electoral bonds was a significant attempt to reform political funding in India. However, the concerns raised about transparency and accountability led to legal challenges, culminating in the Supreme Court's decision to annul the scheme.
1.2. Significance of Supreme Court verdict
The Supreme Court of India's decision in February 2024 to declare the Electoral Bonds Scheme unconstitutional marked a pivotal moment in the nation's democratic journey. This landmark ruling not only addressed concerns over political funding but also reinforced the foundational principles of transparency, accountability, and voter rights. Central to the Court's judgment was the emphasis on the voter's right to information. The BJP is the biggest overall recipient (Rs 6,986.5 crore) of the bonds since they were introduced in 2018. The Trinamool Congress was the second (Rs 1,397 crore) followed by Congress (Rs 1,334 crore), BRS (Rs 1,322 crore) and Odisha's ruling party BJD at ₹ 944.5. The DMK was the sixth biggest recipient.
1.3. Aim & Scope of critical analysis
The primary objective of this critical analysis is to Examine how the Supreme Court's judgment aligns with or challenges constitutional principles, particularly the right to information under Article 19(1)(a) and the right to privacy, and analyse the Court's application of legal doctrines such as proportionality and the least restrictive means test in determining the constitutionality of the Electoral Bonds Scheme. By a critical analysis of these aspects, the study focuses to provide a comprehensive understanding of the Supreme Court's verdict on the Electoral Bonds Scheme and its significance in the context of Indian democracy.
2. Electoral Bond Scheme
2.1 Objectives aimed by government
The scheme aimed to achieve several key goals:
- Redemption of Electoral Bonds: All electoral bonds issued must be redeemed through a bank account disclosed to the Election Commission of India (ECI). This ensures that the flow of funds remains traceable, reducing the chances of malpractice or misuse of funds in political financing. However, critics argue that this process could inadvertently strengthen opportunities for corruption if not monitored transparently.
- Restricting Unregistered Political Parties: The use of electoral bonds limits funding to only registered political parties that have secured at least 1% of the votes in the previous general elections. This prevents unregulated or fly-by-night political entities from receiving donations, thereby discouraging parties that operate solely to collect funds from the public without contributing meaningfully to the democratic process.
- Safe and Digitized Election Funding: Electoral bonds align with the government’s vision of ensuring that election funding is secure and fully digitized. By mandating that any donation exceeding ₹2,000 must be made through electoral bonds, bank transfers, or cheques, the scheme reduces the use of unaccounted cash in political funding. This move promotes financial transparency while discouraging anonymous cash donations that have historically fuelled black money in the electoral system.
- Cheques and Digital Transactions: All transactions related to electoral bonds are conducted either through cheques or digital payment systems. This ensures that the funding process remains formalized, trackable, and consistent with the government’s broader goal of fostering a cashless economy. By bringing political donations into a formal banking framework, the scheme aims to establish accountability and minimize the risks associated with unregulated cash contributions.
2.2. Criticisms pre-verdict
The Electoral Bond Scheme has faced significant criticism since its inception, with detractors pointing out its potential to skew the political playing field. A key concern raised by critics is that the scheme was primarily designed to choke funding to opposition parties. By maintaining the anonymity of donors, it is alleged that the ruling party has an unfair advantage, as it can access information about donor identities through the State Bank of India (SBI). This creates an imbalance, as opposition parties remain unaware of their funding sources, limiting their ability to compete effectively in elections. Another issue is the role of financially stable companies in the political funding landscape. For these corporations, the scheme does not present any threats or challenges. Instead, it offers a convenient mechanism to channel donations of transparency that is crucial for maintaining the integrity of elections in India. Moreover, the ADR’s petition raised concerns about how the right to information of voters is compromised under the Electoral Bond Scheme. The anonymity of donors means that voters are unable to know which individuals or entities are funding political parties, which could influence their voting decisions. This lack of information violates the voter’s right to make an informed choice, a right that is inherent to the democratic process. The petitioners argued that the anonymity feature of the scheme undermines the democratic principle of transparency and weakens the ability of citizens to hold political parties accountable for their sources of funding.
3. Supreme Court Ruling
In February 2024, the Supreme Court of India held the Electoral Bonds Scheme to be unconstitutional for violating the rights of citizens under Articles 14 and 19(1)(a) of the Constitution. The Court ruled that the scheme’s anonymity provision of political contributions diluted the right to information needed by voters for informed decision-making. It held that political funding transparency was pivotal to ensuring free and fair elections and that the anonymity of the scheme encouraged possible quid pro quo deals, thus boosting corruption and economic imbalance. The Court also held the provisions of the scheme to be arbitrary, especially the amendments of the Companies Act making corporate donations unlimited, which disproportionately benefited the ruling party and undermined the principle of political equality.
4. Critical Concerns
4.1. Implementation Challenges
Even as the Court had ordered the suspension of electoral bond issuance and revealing the identity of donors, the government has so far failed to present an overall legislative scheme to manage political donations. This inaction created a vacuum in regulations that can keep lucre transactions shrouded in secrecy. Certain political organizations have shown resistance to adhering to the Court's judgment on grounds of donor privacy as well as possible effects on their funding streams. This has slowed down the complete enactment of provisions of the verdict.
4.2. Limited Scope
The Court ruled that even though the scheme was intended to offer anonymity to donors, it did so selectively—favoring contributors with deep pockets while keeping political fund sources unknown to voters. This selective anonymity curbed the right to information, needed for voters to make informed choices. The Court noted that the design of the scheme invariably privileged donor confidentiality at the expense of the right of the electorate to know and thus impaired the integrity of the democratic process.
4.3. Delayed judicial intervention
In spite of writ petitions questioning the scheme even in 2017, the Court did not start meaningful hearings until October 2023, and the last judgment was rendered in February 2024. In this interim, the scheme allowed for the anonymous transfer of large amounts to political parties, mostly the ruling party, to the tune of more than 60 billion rupees via these bonds. This judicial delay enabled the scheme to have the potential to affect election results and generate questions regarding the transparency and integrity of the political funding process.
4.4. Political Pushback
The BJP, as the main beneficiary of the scheme, was hesitant about the Court order to reveal the identities of the donors, citing possible victimization of the donors. BJP leader Ravi Shankar Prasad supported the scheme, contending that the scheme was brought in to introduce transparency in poll funding and curb cash flow during elections, and stated that donors wanted secrecy.
Also, the Income Tax Department froze the four bank accounts of the Congress party within hours of the verdict, leading Congress President Mallikarjun Kharge to charge that the government was retaliating against the opposition. This chain of events highlights the difficulty in enforcing judicial rulings when political stakes are involved.
5. Impact
5.1. Voter rights
The Supreme Court’s February 2024 ruling holding the Electoral Bonds Scheme unconstitutional strengthened voters’ rights considerably in India by asserting the right to information under Article 19(1)(a) of the Constitution. The Court underlined the importance of transparency of political funding so that voters can make informed choices because undisclosed donations might result in quid pro quo deals, compromising democratic integrity. By invalidating the scheme, the Court cut down the scope for anonymous money power over political parties, thus ensuring accountability and minimizing the risk of corruption. This judgment provides voters with information regarding the political funding sources, thus making the election process more transparent and equitable. 5.2.\t Democratic Ethics
The Supreme Court's February 2024 decision holding the Electoral Bonds Scheme unconstitutional greatly bolstered democratic ethics in India by highlighting the importance of transparency and accountability in political financing. The Court emphasized that the anonymous donations under the scheme circumvented voters’ right to information, a corner stone of a strong democracy. Through the annulment of the scheme, the Court sought to avoid possible quid pro quo dealings between donors and political parties, hence ensuring equity and fairness in the electoral process.
This move reiterates the maxim that democratic integrity is paramount and that instruments for making financial contributions in a non-transparent manner can dent the credibility of democratic institutions. 6.\tComparive Analysis India’s political financing transparency has also been severely tested, as exemplified by the Electoral Bonds Scheme, which facilitated anonymous political party donations. The Supreme Court in 2024 marked the scheme as unconstitutional for infringing on voters’ right to information. This is to be compared with Pakistan’s democracies, which have instigated more strict measures to guarantee political funding transparency. A) United States: Although the U.S. has strong disclosure obligations for campaign contributions, including the donor’s identification who gives more than $200, it also has “dark money”—money from organizations that don’t have to disclose donors. In spite of this, the U.S. still has a good level of transparency in political finance.
b) United Kingdom: The UK has stringent regulations, in which political parties must report donations in excess of £7,500 each year. The reports are made available to the public, increasing accountability and limiting opportunities for excessive influence.
c) Brazil: Political parties in Brazil are mandated to post all donations on their websites, increasing public visibility of funding data. The move is in an effort to promote transparency and build trust during elections.
7. Recommendations
7.1. Real time transparency
Real-time transparency in political funding means the public and instant disclosure of contributions as and when they are made, and the provision to voters with current data on the origins of campaign finances. Even after the Supreme Court’s 2024 judgment overturning the Electoral Bonds Scheme, which required the identification of donors, real-time transparency is yet to be attained in India. There needs to be stricter guidelines to abide by in order to ensure transparency along with penalties in case of not adhering to the same.
7.2. Legislative Reforms Though the Finance Ministry is said to be drafting a new scheme in place of electoral bonds, this move is yet to be completed and is likely to be finalized after the national elections in the April-June 2024 window. So far, no official legislative proposals have been made in Parliament for laying down a transparent and accountable political donation system.
7.3. Effective oversight It is crucial to create independent agencies committed to the supervision of political financing. These agencies must be free from political interference, with the aim of ensuring transparency and accountability in the election process. Agencies such as National election funding body need to be created that are responsible for overseeing and monitoring political donations of any kind, providing for enforcement of legal requirements and keeping a publicly accessible database of contributions.
8. Conclusion
The Supreme Court’s February 2024 decision holding the Electoral Bonds Scheme to be unconstitutional was a major milestone in India’s democratic trajectory but was far from the last word. The Court strongly reiterated that the scheme infringed on voters’ right to information under Article 19(1)(a) of the Constitution, accentuating apprehensions regarding the lack of transparency and possible quid pro quo in political funding.
The Supreme Court's judgment in February 2024 invalidating the Electoral Bonds Scheme as unconstitutional was a major turning point in India’s democratic history, but it wasn’t the ultimate resolution. The Court underscored the fact that the scheme infringed on voters’ right to information under Article 19(1)(a) of the Constitution, citing issues related to transparency and possible quid pro quo deals in political funding.
References
- Lumen learning, United States, available at https://courses.lumenlearning.com/suny worldhistory/chapter/35-4-4-the-worlds-largest-democracy/ (last visited on June 6, 2025).
- Shri Arun Jaitley, on “why electoral bonds are necessary” The campaign diary (2014)
- Association for Democratic Reforms & Anr. v. Union of India & Ors, 2024 INSC 113
- Editorial, “What are electoral bonds” The Economic Times, Nov 01, 2023
- Editorial, “The Union budget 2017” Times of India, Feb 01, 2017
- Sunil Prabhu, “Electoral Bonds Data Out With Numbers, Donors Can Be Matched With Parties” India News