Case Summary: Association for Democratic Reforms & Anr. v. Union of India & Ors. [(2024) SCC OnLine SC 49]

I. Case Details

Full Case Name: Association for Democratic Reforms & Anr. v. Union of India & Ors.
Citation: Writ Petition (Civil) No. 880 of 2017; (2024) 5 SCC 1; 2024 INSC 113
Court: Supreme Court of India (Constitution Bench)
Bench: CJI Dr. D.Y. Chandrachud; JJ. Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala, Manoj Misra
Date of Judgment: 15 February 2024
Outcome: Electoral Bonds Scheme, 2018 unanimously struck down as unconstitutional

II. Background and Facts

The Electoral Bonds Scheme, 2018[1] was introduced by the Government of India as a mechanism for political funding, ostensibly to bring transparency and accountability to the financing of elections by eliminating cash donations. Under the scheme, electoral bonds were promissory notes, purchasable by any Indian citizen or company incorporated in India from authorised branches of the State Bank of India (“SBI”), in denominations ranging from Rs. 1,000 to Rs. 1 crore. Bonds were valid for fifteen days from the date of purchase and could be donated to any registered political party that had secured at least one percent of votes in the preceding general or state legislative assembly election.

The scheme was given effect through amendments to multiple statutes effected by the Finance Act, 2017,[2] including modifications to the Representation of the People Act, 1951 (removing the requirement to disclose donations received through electoral bonds), the Income Tax Act, 1961 (granting tax exemption on donations made through bonds), and critically, the Companies Act, 2013,[3] which eliminated the pre-existing cap limiting corporate donations to political parties to 7.5% of the company’s average net profit over three preceding years, and abolished the disclosure obligation in company accounts.

Association for Democratic Reforms, a non-governmental organisation engaged in electoral reform advocacy, filed a writ petition under Article 32 of the Constitution challenging the scheme’s constitutionality. The petition was later heard by a five-judge Constitution Bench given the substantial questions of constitutional law it raised.

III. Issues Before the Court

Issue 1: Whether the Electoral Bonds Scheme, by shielding the identity of political donors from public disclosure, violates the voters’ right to information guaranteed under Article 19(1)(a) of the Constitution of India?

Issue 2: Whether the removal of the cap on corporate political donations under the amended Companies Act, 2013, enabling unlimited contributions from companies including loss-making companies and shell entities to political parties, is constitutionally valid?

Issue 3: Whether the claimed objective of curbing black money in political financing constitutes a proportionate justification for the anonymity granted under the scheme?

IV. Summary of Arguments

A. Petitioner’s Contentions

The petitioners argued, first, that voters possess a fundamental right to information under Article 19(1)(a) that extends to the sources of political party funding. Reliance was placed upon the Court’s earlier decisions in Association for Democratic Reforms v Union of India (2002)[4] and People’s Union for Civil Liberties v Union of India (2003),[5] in which the Court recognised that the right to cast an informed vote is inseparable from access to information about candidates and their political affiliations. The anonymity of donor identity under the scheme directly undermines this right by preventing voters from assessing the financial interests that back political parties.

Second, the petitioners contended that unlimited corporate donations, freed from any ceiling or disclosure requirement, create an institutionalised channel for quid pro quo arrangements between corporate entities and the ruling party, which controls the administrative machinery including regulatory bodies with authority over those very corporations. The removal of the 7.5% profit ceiling is particularly egregious, as it permits even shell companies or loss-making entities with no ostensible business rationale for political donation to make unlimited contributions, enabling money laundering through the political financing system.

Third, the petitioners submitted that even accepting the legitimate objective of curbing black money, the scheme fails the proportionality test because less restrictive measures, including enhanced disclosure to a neutral authority such as the Election Commission with appropriate confidentiality safeguards, could achieve the same objective without eliminating transparency altogether.

B. Respondent’s Contentions

The Union of India defended the scheme on three principal grounds. First, electoral bonds replace unaccountable cash donations that previously constituted the bulk of political financing, thereby reducing the circulation of black money. Second, the anonymity of donors is a constitutionally legitimate feature designed to protect donors from political victimisation and retaliation by parties they did not support, particularly in a politically polarised environment. Third, the scheme provides a traceable paper trail since bonds are purchased through the banking system, making them susceptible to investigation by financial intelligence agencies if criminal activity is suspected.

The Union further argued that the right to political privacy, a donor’s choice to contribute to a political party without public disclosure, is itself a component of the right to privacy recognised by the Court in Justice K.S. Puttaswamy (Retd.) v Union of India (2017),[12] and that this right must be balanced against, rather than simply subordinated to, the voters’ right to information.

V. Judgment and Ratio Decidendi

The Constitution Bench delivered a unanimous judgment on 15 February 2024, holding the Electoral Bonds Scheme, 2018 to be unconstitutional in its entirety.[6]

The Court’s ratio rested on three foundational pillars. First, the Court held that the right to information under Article 19(1)(a), read with the constitutional framework for free and fair elections, encompasses the voters’ right to know the sources of political party funding. An uninformed electorate cannot meaningfully exercise its franchise, and political donations are a key indicator of the financial and ideological interests that shape party policy. Concealment of donor identity from voters is a restriction on the voters’ right to information that must satisfy the test of reasonable restriction under Article 19(2).

Second, the Court applied a three-part proportionality test,[7] finding that while curtailing black money constitutes a legitimate state aim, the scheme fails the least restrictive means requirement. The anonymity provided is absolute vis-à-vis the public and the Election Commission, yet transparent to the ruling government through its control over SBI records — an asymmetry that the concurring opinion of Justice Sanjiv Khanna identified as a structural incentive for quid pro quo rather than a safeguard against it.[8]

Third, the Court struck down the amendment to the Companies Act, 2013 removing the 7.5% profit ceiling as unconstitutional.[9] The Court held that unlimited corporate funding, divorced from any limit or disclosure requirement, transforms corporate entities into vehicles for influencing electoral outcomes in proportion to their financial power, violating the constitutionally implied principle of political equality and free and fair elections.

By way of relief, the Court directed SBI to immediately stop issuing electoral bonds and to submit to the Election Commission of India the details of all bonds purchased since 12 April 2019, with directions for the Commission to publish this information on its official website.[10]

VI. Critical Analysis

The Electoral Bonds judgment is a landmark affirmation of constitutional democracy’s foundational commitment to the informed voter. Its jurisprudential significance lies in its explicit extension of the right to information from the conduct of state functionaries, the traditional domain of this right, to the financing of political parties themselves. In doing so, the Court builds upon a coherent lineage of electoral transparency decisions[11] while significantly expanding their scope.

The most analytically powerful dimension of the judgment is its treatment of ‘selective anonymity’, the fact that the scheme was anonymous to the public and the Election Commission but transparent to the government through SBI. Justice Sanjiv Khanna’s concurrence correctly identifies this asymmetry as the scheme’s most constitutionally damning feature: rather than protecting donors from retaliation, the design structurally advantaged the incumbent ruling party, which could identify its supporters and opponents while the public remained uninformed.

The Court’s engagement with proportionality is commendable, though it raises one significant analytical question: the judgment does not articulate a constitutionally permissible model for political funding anonymity, leaving open the question of what level of donor privacy may be permissible. The Court’s holding that voters’ right to information overrides donor privacy in this context is sound, but its reconciliation with the right to political privacy recognised in Puttaswamy[12] could have been more explicitly addressed. A clearer normative framework for the hierarchy of competing rights in electoral financing cases would have strengthened the judgment’s doctrinal legacy.

The directive to publish electoral bond data has had immediate structural consequences, exposing significant donations from industries under regulatory scrutiny, validating the Court’s concern about quid pro quo arrangements. However, the judgment’s prospective impact depends critically on Parliament enacting a reformed political financing regime that balances transparency with genuine donor protection. In the absence of such legislation, the judgment removes a flawed scheme without supplying an alternative framework, potentially creating a renewed incentive for opaque cash donations that the scheme was ostensibly designed to address.

VII. Conclusion

The Constitution Bench’s decision in Association for Democratic Reforms v Union of India (2024) represents one of the most significant constitutional judgments of the decade in the domain of electoral law. By striking down the Electoral Bonds Scheme and unambiguously affirming the voters’ right to know the sources of political funding, the Court has articulated a principled vision of constitutional democracy in which the integrity of the ballot cannot be compromised by the opacity of campaign financing. The judgment’s doctrinal strength lies in its proportionality analysis, its identification of the scheme’s structural asymmetry, and its reaffirmation of the foundational equivalence between the right to vote and the right to vote with meaningful information. The challenge now lies with the legislature to construct a political financing architecture that serves both transparency and genuine democratic participation.

References

[1] Ministry of Finance (Department of Economic Affairs), Notification No. S.O. 29(E) (2 January 2018), introducing the Electoral Bond Scheme, 2018.
[2] Finance Act 2017 (Act No 7 of 2017), ss 134–137 (amending the Reserve Bank of India Act 1934, Representation of the People Act 1951, Income Tax Act 1961, and Companies Act 2013).
[3] Companies Act 2013 (Act No 18 of 2013), s 182, as amended by the Finance Act 2017, removing the ceiling of 7.5% of average net profit for corporate donations to political parties.
[4] Association for Democratic Reforms v Union of India (2002) 5 SCC 294 – the Supreme Court directed disclosure of criminal antecedents, assets, and educational qualifications of candidates as part of the right to information in electoral matters.
[5] People’s Union for Civil Liberties v Union of India (2003) 4 SCC 399 – right to know the antecedents of candidates recognised as part of the right to free speech and expression under Article 19(1)(a) of the Constitution.
[6] Association for Democratic Reforms & Anr v Union of India & Ors, Writ Petition (Civil) No 880 of 2017, decided 15 February 2024 (Supreme Court of India, Constitution Bench), (2024) 5 SCC 1; 2024 INSC 113.
[7] Association for Democratic Reforms (n 6) [176] – the Court applied a three-part proportionality test: (i) legitimate state aim; (ii) rational nexus; (iii) least restrictive means.
[8] Association for Democratic Reforms (n 6) [189], Sanjiv Khanna J (concurring), emphasising that the scheme’s anonymity was ‘selective’, anonymous to the public but transparent to the government through SBI records, creating an asymmetry that exacerbated rather than mitigated the risk of quid pro quo.
[9] ibid [194] – the Court held that unlimited corporate donations with anonymity provide a channel for quid pro quo arrangements between donors and the ruling party, which is constitutionally impermissible.
[10] ibid [201] – the Court directed SBI to immediately cease issuing electoral bonds and submit details of all bonds purchased since 12 April 2019 to the Election Commission of India.
[11] Kedar Nath Singh v State of Bihar AIR 1962 SC 955, on balancing fundamental rights with the public interest; S.P. Gupta v Union of India 1981 Supp SCC 87 – right to information as part of Article 19(1)(a). 
[12] Justice K.S. Puttaswamy (Retd.) v Union of India (2017) 10 SCC 1, [645] – the nine-judge bench’s unanimous recognition of privacy as a fundamental right, which the Electoral Bonds Court drew upon for its analysis of informational autonomy.