Introduction
In a historic judgment delivered on February 15, 2024, a five-judge Constitution Bench of the Supreme Court of India, led by Chief Justice D.Y. Chandrachud, unanimously struck down the Electoral Bond Scheme, 2018, declaring it unconstitutional. The decision in Association for Democratic Reforms & Another v. Union of India & Others carries far-reaching implications for transparency, electoral integrity, democratic accountability, and the fundamental right to information under Article 19(1)(a). This post delves into the scheme’s framework, legal challenges, the Court’s findings, and its broader impact on Indian democracy.
What Was the Electoral Bond Scheme?
Notified in 2018, the Electoral Bond Scheme allowed individuals and corporate entities to purchase bonds from the State Bank of India (SBI) and donate them to registered political parties, anonymously. Promoted as a reform to cleanse political funding and curb black money, the scheme:
* Was introduced via amendments made by the Finance Act, 2017, passed as a Money Bill;
* Enabled anonymous donations while requiring KYC for purchasers (details retained by SBI);
* Removed caps on corporate political donations, even permitting loss-making firms to contribute;
* Provided tax exemptions to donors and non-disclosure obligations on political parties.
Background and Facts
The scheme’s architecture was challenged on constitutional grounds by the Association for Democratic Reforms (ADR) and others. The key contentions involved violations of the right to information, electoral equality, and the misuse of the Money Bill route. Petitioners argued that the scheme fostered opacity, allowed corporate capture of politics, and enabled disproportionate influence by the ruling party, as the government could access donor information through SBI.
Issues before the Court
The Supreme Court considered the following pivotal questions:
1. Whether anonymous political funding violates the voters’ right to information under Article 19(1)(a);
2. Whether unlimited corporate donations infringe Article 14 (equality before law);
3. Whether the Money Bill route adopted to pass the enabling legislation was constitutionally valid;
4. Whether the scheme satisfies the proportionality test under Article 19(1)(a).
Arguments of the Petitioners
* Transparency is essential to democratic participation; the right to know who funds political parties is implicit in Article 19(1)(a);
* Anonymous and unlimited corporate donations undermine electoral fairness and invite quid pro quo governance;
* The Money Bill route was misused, bypassing the Rajya Sabha’s scrutiny, thereby subverting parliamentary process;
* The scheme gave the ruling party an unfair informational advantage, as SBI (a government entity) held donor records.
Government’s Defence
* The scheme aimed to channel donations through legitimate banking routes, reducing cash transactions and black money;
* Voter’s right to know is not absolute and must be balanced against donor privacy and risks of political retribution;
* The design and scope of the scheme were legislative policy matters, entitled to judicial deference unless they explicitly violated the Constitution.
The Supreme Court’s Verdict
1. Violation of Right to Information (Article 19(1)(a))
The Court upheld the voter’s right to know financial contributions to political parties as integral to free speech and expression. Political funding, especially from corporations, has the potential to influence public policy — thus, transparency is non-negotiable.
2. Failure of Proportionality Test
Applying the four-pronged proportionality test, the Court found the scheme unconstitutional:
* Legitimate Aim: Curbing black money – valid;
* Rational Connection: Anonymity does not directly help curb black money;
* Necessity: Less restrictive alternatives (e.g., electoral trusts, banking disclosures) existed;
* Balancing Interests: Voter’s right to information outweighed any donor’s interest in anonymity.
3. Violation of Article 14
Permitting unlimited and anonymous corporate donations, without adequate checks, resulted in electoral inequality and enabled corporate influence over governance, violating Article 14.
4. Money Bill Issue Left Open
While the issue of whether the Finance Act, 2017, could be validly passed as a Money Bill was raised, the Court left this question to be decided in the pending Rojer Mathew case.
Key Directions Issued
* SBI was prohibited from issuing any further electoral bonds;
* SBI was directed to disclose all details of bonds purchased and redeemed since April 12, 2019, including:
– Purchaser’s name
– Denomination
– Date of purchase
– Political party receiving the donation
* SBI had to submit this data to the Election Commission of India (ECI);
* The ECI was directed to publish the full list on its website within one week of receiving it;
* Bonds uncashed within 15 days were to be refunded.
Rationale and Significance
This ruling marks a watershed moment in electoral jurisprudence:
* It reinforces the notion that voter sovereignty lies at the heart of democracy;
* It restores transparency in political finance, previously eroded by secrecy;
* It protects the Constitution from legislative overreach, especially misuse of Money Bills;
* It upholds the judiciary’s role in safeguarding democratic integrity.
Conclusion
The Supreme Court’s verdict in Association for Democratic Reforms v. Union of India is a decisive reaffirmation that transparency is the lifeblood of electoral democracy. While the scheme’s ostensible objective was to reduce black money, it ended up undermining constitutional principles and enabling a veil of secrecy over political financing. This judgment closes the door on one form of opaque funding but opens a much-needed dialogue on institutional reforms in campaign finance.
Ultimately, the Court has reminded us that constitutional values — not political expediency — must guide electoral processes. A vibrant democracy requires more than ballots; it requires informed voters, transparent institutions, and accountable governance.
