Transparent political financing forms the bedrock of a functioning democracy. In India, however, the nexus between money and politics has long been a source of concern, with unaccounted donations and opaque electoral expenditures eroding public trust. The Union Government implemented the Electoral Bonds Scheme in 2017 as a reform to purify political financing. However, instead of fostering transparency, the scheme institutionalized anonymity in donations and enabled unlimited corporate contributions to political parties without disclosure, even to shareholders or the public.

The constitutionality of this scheme was challenged by civil society organizations and activists, culminating in the landmark judgment of Association for Democratic Reforms v. Union of India in February 2024. The five-judge Constitution Bench unanimously struck down the scheme, holding that it violated the right to information and the principles of free and fair elections.

This article provides a comprehensive legal analysis of the Supreme Court’s decision, evaluates its alignment with constitutional principles, and reflects on its broader implications for Indian democracy. It also compares the Indian framework with international standards and proposes legal reforms to fortify transparency and accountability in electoral finance.

Background: Electoral Bonds Scheme – Legislative & Political Context

The Electoral Bonds Scheme, introduced through the Finance Act, 2017, was implemented by amending several key statutes via a money bill, including:

• Section 29C of the Representation of the People Act, 1951
• Section 182 of the Companies Act, 2013
• Section 13A of the Income Tax Act, 1961
• Section 31 of the Reserve Bank of India Act, 1934

The stated objective was to promote clean political funding by allowing individuals and corporations to purchase interest-free bearer bonds from the State Bank of India (SBI), which could then be donated anonymously to political parties. The identity of the donor was not disclosed either to the public or to the Election Commission of India (ECI).

However, critics argued that the scheme legitimized opaque corporate donations, removed caps on contributions, and facilitated quid pro quo arrangements between political parties and corporate donors, thereby endangering electoral integrity. The Reserve Bank of India and the Election Commission themselves raised concerns over the scheme’s potential misuse and its deviation from global best practices in campaign finance regulation.

Notably, the government introduced these amendments via the money bill route, which bypassed the scrutiny of the Rajya Sabha — a move challenged as unconstitutional under Article 110 of the Constitution. The use of this route for far-reaching electoral reforms raised serious procedural and federalism concerns.

Case Brief: Association for Democratic Reforms v. Union of India (2024)

A. Parties Involved:

• Petitioners: Association for Democratic Reforms (ADR), Common Cause, and other civil society groups
• Respondents: Union of India, State Bank of India, and other stakeholders

B. Core Constitutional Issues:

1. Whether the Electoral Bonds Scheme violates the fundamental right to information under Article 19(1)(a).
2. Whether the amendments introduced via Money Bills were constitutionally valid under Article 110.
3. Whether corporate anonymity and unlimited donations infringe upon electoral fairness, a basic feature of the Constitution.

C. Supreme Court’s Findings:

In a unanimous 5-0 verdict delivered by a Constitution Bench headed by Chief Justice D.Y. Chandrachud, the Supreme Court:

• Struck down the Electoral Bonds Scheme and the enabling amendments to the above Acts.
• Held that anonymous donations compromise voter awareness, which is essential for meaningful electoral participation.
• Reiterated that Article 19(1)(a) includes the right to know the financial contributions behind political discourse and campaigning.
• Directed the SBI to disclose the identity of all donors and the recipient political parties from 2019 onwards.

Judicial Reasoning & Key Findings of the Supreme Court

In its historic 2024 ruling, the Supreme Court methodically destroyed the legal foundation of the Electoral Bonds Scheme in a doctrinally sound and constitutionally based reasoning.

1. Violation of Article 19(1)(a) – Right to Know

Chief Justice D.Y. Chandrachud, writing for the Bench, held that a voter’s right to make an informed choice is a crucial component of free speech and expression under Article 19(1)(a). The secrecy permitted by the scheme “destroys the very foundation of transparency in political funding.”

“Democracy cannot survive without accountability, and accountability is impossible without transparency in political financing.”
— ADR v. Union of India

2. Disproportionate Restriction

The Court applied the three-pronged proportionality test laid down in Modern Dental College v. State of Madhya Pradesh. It found that:

• The objective of curbing black money was legitimate.
• However, the means employed (donor anonymity and corporate secrecy) were not least restrictive.
• Therefore, the restriction on citizens’ right to know failed the test of constitutional proportionality.

3. Misuse of Money Bill Provisions

While the Court refrained from reopening the ruling in K.S. Puttaswamy (Aadhaar) case, it clearly noted that amendments of such vast electoral consequence introduced via the money bill route violated the bicameral legislative process, undermining federalism and legislative scrutiny.

4. Undue Influence of Corporations

The Court also held that unlimited corporate donations — even from loss-making shell companies — without donor traceability enhanced the risk of “quid pro quo” political favours, thereby threatening electoral equality and institutional integrity.

Right to Information & Electoral Integrity under Article 19(1)(a)

The right to freedom of speech and expression in India is not confined to verbal articulation. It includes the right to receive information, especially on matters impacting democratic governance.In State of U.P. v. Raj Narain, (1975) 4 SCC 428, the Supreme Court had observed:

“Every official act and everything carried out by their public servants should be known to the citizens of this nation.”

Building on this precedent, the 2024 judgment held that opaque donations inhibit informed voting, undermining the essence of a level playing field in elections. Hence, transparency in political finance is a constitutional imperative.This expansion of Article 19(1)(a) from speech to electoral financial disclosure aligns India with global best practices and enhances the legitimacy of the electoral process.

Corporate Anonymity, Electoral Disparity & Quid Pro Quo Risks

The Companies Act, 2013, prior to amendment, had placed a cap of 7.5% of net profits on political contributions and mandated disclosure in annual reports. The Electoral Bonds Scheme removed both safeguards.

This allowed:

• Loss-making companies to fund parties (raising suspicion of shell companies being used for influence-buying).
• No disclosure of beneficiaries or contributors in public records.
• Central government having access to donation records via SBI — creating a potential for targeted political retaliation.

Such structural flaws rendered the scheme not only constitutionally suspect but also deeply unequal in practice, giving ruling parties disproportionate advantage. As revealed in SBI’s court-directed disclosures post-verdict, the ruling party (BJP) received over 52% of all electoral bond donations, with the rest fragmented across smaller parties — confirming the asymmetry.

Comparative International Perspective: Global Norms on Political Funding Transparency

United States

In the U.S., campaign finance is governed by the Federal Election Campaign Act (FECA) and regulated by the Federal Election Commission (FEC). Although the Citizens United v. FEC, 558 U.S. 310 (2010) decision controversially expanded corporate spending rights, disclosure of political contributions remains mandatory.

• Super PACs and donors must disclose their identities.
• Foreign donations are prohibited.
• Contribution limits are imposed for individual donors.

Despite flaws, the U.S. retains a regulatory framework based on transparency, supported by robust First Amendment jurisprudence and oversight by independent watchdogs.

United Kingdom

The Political Parties, Elections and Referendums Act, 2000 (PPERA) regulates party funding in the UK. It mandates:

• Real-time disclosure of all donations over £7,500.
• Ban on anonymous contributions beyond a nominal threshold.
• Strict monitoring by the Electoral Commission.

Donors must be registered electors, and corporate contributions require shareholder approval, promoting both transparency and internal accountability.

Germany

Under the Political Parties Act (Parteiengesetz) in Germany:

• The President of the Bundestag must receive annual financial disclosures from the parties.

• Anonymous donations over €500 are illegal.
• The state provides matching public funding, reducing dependence on private donations.

Germany’s framework combines strict disclosure norms with state subsidies, ensuring transparency, equity, and pluralism in political finance.

Key Takeaways for India

• India’s electoral bonds allowed for an unprecedented degree of donation confidentiality compared to the aforementioned jurisdictions.

• Global democracies emphasize transparency, identity disclosure, and donor traceability, viewing them as essential to free and fair elections.
• The Indian Supreme Court’s verdict thus brings Indian law closer to global standards, reaffirming constitutional accountability in campaign finance.

Democratic Implications of the Verdict: Electoral Integrity & Voter Sovereignty

The 2024 judgment striking down the Electoral Bonds Scheme is more than a technical reading of constitutional provisions — it is a restoration of core democratic values. The implications for India’s electoral and democratic architecture are profound.

1. Strengthening Voter Sovereignty through Informed Choice

At the heart of the decision lies the Court’s reaffirmation of the voter’s right to know — not as a privilege but as a constitutional entitlement under Article 19(1)(a). By requiring disclosure of contributors and beneficiaries, the judgment restores the electoral agency of the citizen. Informed voting is not merely a civic virtue; it is the foundation of representative democracy. The scheme’s secrecy diluted this ideal, turning elections into arenas of undisclosed corporate influence and monetary power.

 2. Reinforcing the Rule of Law and Constitutional Morality

The Court’s decision reinforces the doctrine of constitutional morality, as evolved in Navtej Singh Johar v. Union of India, (2018) 10 SCC 1. It clarified that transparency in political finance is not a matter of policy discretion but a constitutional obligation, especially when electoral fairness — a basic feature of the Constitution — is at stake. The ruling also indirectly critiques the executive’s misuse of the Money Bill route, preserving the bicameral spirit of parliamentary democracy and institutional checks and balances.

3. Restoring Institutional Credibility and Electoral Neutrality

The judgment significantly impacts the credibility of constitutional bodies such as:

• Election Commission of India (ECI): Earlier muted on the issue, it now has judicial backing to demand robust transparency norms.
• State Bank of India (SBI): Directed to disclose full donation records, reinforcing financial transparency.
• Political parties: All major parties, especially those in power, are now compelled to operate under public financial scrutiny, preventing capture by elite economic interests.

4. Public Trust and Political Accountability

Perhaps the most important consequence lies in the rebuilding of public trust. In recent years, allegations of crony capitalism, anonymous lobbying, and policy-for-donation arrangements have vitiated the democratic environment.

This verdict enables:

• Greater civic activism
• Informed media scrutiny
• Judicially protected access to political information

Such mechanisms are essential to what Dr. B.R. Ambedkar called the “constitutional morality” needed to sustain a democracy beyond elections.

Reforms and the Way Forward: Toward Transparent and Equitable Political Financing

While the Supreme Court’s decision in ADR v. Union of India marks a constitutional milestone, the judicial invalidation of the Electoral Bonds Scheme is not, by itself, a comprehensive reform. India now stands at a crucial juncture — the need is to institutionalize reforms that ensure fair, transparent, and equitable political finance.

1. Reviving Legislative Oversight: No More Money Bills for Political Reform

The misuse of the money bill route to bypass Rajya Sabha scrutiny must be constitutionally curtailed. As suggested in Rojer Mathew v. South Indian Bank, (2020) 6 SCC 1, a relook at the interpretation of Article 110 is necessary to prevent the executive from unilaterally enacting significant reforms without parliamentary consensus.

2. Mandatory Disclosure of All Political Donations

Parliament must enact laws that mandate:

• Real-time disclosure of donations above a minimal threshold (e.g., ₹10,000)
• Public access to donation databases via a digital portal
• Shareholder approval for corporate contributions

This aligns with the UK’s PPERA model and the Right to Information jurisprudence under Article 19(1)(a).

3. Restore Caps and Limitations on Corporate Contributions

Reinstating:

• The 7.5% cap on corporate contributions based on net profits
• Bans on donations by loss-making companies
• Mandatory audit trails for all donations

These measures would prevent the abuse of shell entities and reduce policy capture by moneyed interests.

4. Introduce Public Financing for Elections

As practiced in Germany and Canada, introducing partial public funding of elections (e.g., subsidizing airtime, campaign material, or voter outreach) can:

• Level the playing field
• Reduce overreliance on corporate capital
• Encourage smaller or regional parties to compete fairly

5. Empower the Election Commission

The ECI must be constitutionally empowered to:

• Audit party accounts
• Investigate violations of political funding laws
• Penalize non-compliance with transparency norms

A permanent, independent regulatory body for political finance may be created, similar to the UK’s Electoral Commission or the FEC in the U.S.

6. Civic Education and Voter Awareness

Long-term reform requires public engagement. Integrating modules on electoral transparency, democratic rights, and donor disclosure into education and civic campaigns will ensure an active, aware, and empowered electorate.

Conclusion

The Supreme Court’s 2024 judgment in Association for Democratic Reforms v. Union of India is a historic judicial intervention in India’s democratic evolution. By dismantling the Electoral Bonds Scheme, the Court reaffirmed that transparency in political financing is not optional but constitutionally mandated under the fundamental right to information. It underscored that a democracy cannot function in darkness, where the flow of money behind electoral outcomes remains hidden from its very citizens.

The judgment restores voter sovereignty, strengthens institutional accountability, and calls for a paradigm shift in campaign finance governance. However, the burden now shifts from the judiciary to the legislature, the Election Commission, and civil society — to translate this legal victory into systemic reform.Comparative global frameworks show that it is possible to balance privacy with accountability, corporate influence with electoral fairness, and efficiency with equity. India must now enact reforms that entrench these values — through legislative scrutiny, donor disclosures, corporate donation caps, public funding models, and regulatory autonomy.

In a democracy as vast and diverse as India, electoral integrity is the lifeblood of legitimacy. The Supreme Court has lit the path — it is now up to Parliament and the people to walk it.

References

1. Association for Democratic Reforms v. Union of India, 2024 SCC OnLine SC 172.
2. State of U.P. v. Raj Narain, (1975) 4 SCC 428.
3. Modern Dental College v. State of M.P., (2016) 7 SCC 353.
4. Navtej Singh Johar v. Union of India, (2018) 10 SCC 1.
5. Citizens United v. Federal Election Commission, 558 U.S. 310 (2010).
6. Representation of the People Act, No. 43 of 1951, § 29C (India).
7. Companies Act, No. 18 of 2013, § 182 (India).
8. Income Tax Act, No. 43 of 1961, § 13A (India).
9. The Political Parties, Elections and Referendums Act 2000, c. 41 (UK).
10. Federal Election Campaign Act, 52 U.S.C. § 30101 (United States).
11. Parteiengesetz [Political Parties Act], Bundesgesetzblatt I, 1967, p. 1231 (Germany).

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Author: Priya Patel

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