The Supreme Court of India, in a five-judge verdict, passed its judgment in the case of Association for Democratic Reforms & Another Vs Union of India and Others, 2024 INSC 113. In the landmark verdict, the Constitution Bench struck down the Electoral Bonds Scheme of 2018 as unconstitutional and violative of the doctrine of equality and right to information enshrined under Articles 14 and 19(1)(a) of the Constitution, respectively.

What Was The Electoral Bonds Scheme Of 2018?

The Electoral Bonds Scheme was announced by the then finance minister, Arun Jaitley, in January 2018. The scheme permitted persons, companies and entities to make monetary contributions to political parties by purchasing anonymous ‘bearer’ electoral bonds from the State Bank of India and handing them to political parties, who would subsequently deposit the same in their bank accounts. According to Jaitely, the objective of the scheme was to put an end to ‘cash funding’ of political parties in black.

According to the scheme, electoral bonds were to be in the form of a promissory note that would not carry the name of the buyer or the payee. They would be available in the denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, 10 lakh and Rs 1 Crore. Each bond would be valid for 15 days from the date of issuance, after which they would expire and become non-refundable, with their proceedings being deposited in the Prime Minister’s Relief Fund (PMRF).

While fulfilment of KYC (Know Your Customer) requirements was compulsory under the bonds, the information furnished by purchasers would be regarded as strictly private and confidential, immune to disclosure. Such information could be provided only when called for by a competent court or law enforcement agency investigating a criminal case.

Statistics Of Political Funding Obtained By Issuance Of Electoral Bonds

According to data provided by the Election Commission of India and the Association for Democratic Reforms (ADR), India, the total value of electoral bonds sold since the inception of the scheme in March 2018 to January 2024 exceeded Rs 16,000 crore. Party-wise break-up was available for Rs 11,733 crore worth of electoral bonds issued between March 2018 and March 2023:

• BJP: Rs. 6,565 Crore (56.5%) 
• Congress (INC): 9.9%
• TMC: 9.7%
• BRS: 8.1%
• BJD: 6.9%
• DMK: 5.5% 
• YSR Congress Party: 3.4%

Thus, the ruling BJP emerged as the single largest beneficiary of the Electoral Bonds Scheme as it also held the title of the ‘Richest Political Party in India’.

PIL Filed In SC To Challenge Electoral Bonds Scheme

The ADR, a non-governmental organisation, filed a writ petition in the Supreme Court, challenging the constitutionality of the Electoral Bond Scheme of 2018. It also challenged the provisions of the Finance Act 2017, which among other things amended the provisions of the Reserve Bank of India Act 1934, the Representation of the People Act 1951, the Income Tax Act 1961, and the Companies Act 2013.

Represented by advocate Prashant Bhushan, the petitioners asserted that the lack of transparency in disclosing electoral funding was unconstitutional and violated the Right to Information under Article 19(1)(a). Further, they said, the non-disclosure of political funding promoted corruption, thereby imperiling the Right to Life under Article 21 of the Constitution of India. Anonymous donations by companies under the scheme also violated the rights of shareholders, they added.

Issues Framed By SC For Decision

Two issues for decision were framed by the bench in the case. They are summarised as under:

a. Whether non-disclosure of information on voluntary contributions to political parties violates the Right to Information of citizens under Article 19(1)(a) of the Constitution?

b. Whether unlimited corporate funding to political parties violates the principle of free and fair elections as well as the doctrine of equality enshrined under Article 14 of the Constitution?

Reasoning of the court and adjudication of Issues:

On the first issue, the Supreme Court reasoned that the Electoral Bonds Scheme of 2018 was unconstitutional. The court observed “that the information about funding to a political party is essential for a voter to exercise their freedom to vote in an effective manner. The Electoral Bond Scheme infringed upon the right to information of the voter by anonymizing contributions through electoral bonds are violative of Article 19(1)(a)”.

While considering the second issue, the court laid down the proportionality standard to determine if the violation of the fundamental right is justified. The court concluded that “Electoral Bond Scheme does not fulfill the least restrictive means test. The Electoral Bond Scheme is not the only means for curbing black money in Electoral Finance. There are other alternatives which substantially fulfill the purpose and impact the right to information minimally when compared to the impact of electoral bonds on the right to information.”

Judgment And Directions Passed By SC As It Declared Electoral Bonds Scheme Unconstitutional

In its judgment, the Constitution Bench of the Supreme Court struck down the Electoral Bond Scheme of 2018 as "unconstitutional" and violation of Article 19(1)(a) of the Constitution. Further, the amendment to Section 182(1) of the Companies Act of 2013, which permitted unlimited corporate donations to political parties, was also struck down as unconstitutional.

The court further directed banks, chiefly the State Bank of India (SBI), to stop issuing electoral bonds with immediate effect. In addition, the bank has also been directed to submit details of all electoral bonds purchased from April 12, 2019 till date.

In addition, the SBI also has to submit details of all political parties who have received contributions through electoral bonds since April 12,  2019, i.e. the date on which the SC had passed interim orders. The court has further directed that all such information submitted by SBI shall be published by the Election Commission of India on its website for public viewership.

SC Judgment Will Go A Long Way

When India emerged as a constitutional and democratic republic on January 26, 1950, the founding fathers of the Constituent Assembly had never envisioned that elections would become the money-driven behemoth that has emerged today. Not once did they imagine that truckloads of cash and liquor would be seized during election campaigns and that voters would be susceptible to monetary freebies and handouts by unscrupulous politicians and political parties.

The founding fathers had further envisioned that the Indian voter would strive to fulfil his fundamental duties as a citizen under Article 51A of the Constitution of India. Citizens were to cherish and follow the noble ideals which inspired India’s national struggle for freedom. Further, citizens were expected to develop the scientific temper, humanism and the spirit of inquiry and reform.

Unfortunately, these lofty ideals did not materialise as expected. Instead of exercising the right to vote in a dignified manner, the Indian voter befell all sorts of traps and inducements set by unscrupulous politicians greedy for power at all costs.

The Supreme Court judgment will go a long way in cleaning up the murky waters of political funding in India. It will hold accountable those parties who seek to use money powers to influence elections and buy votes. The Supreme Court has acted as the vanguard and protector of India’s democratic principles and the fundamental rights of its citizens.