Published On: July 31, 2026
Authored By: Layan Fathima
CUSAT
Court: Supreme Court of India
Citation: (2024) 5 SCC 1; 2024 INSC 113[1]
Bench: Chief Justice D.Y. Chandrachud, Justice Sanjiv Khanna, Justice B.R. Gavai, Justice J.B. Pardiwala, and Justice Manoj Misra
Date of Judgment: 15 February 2024
Introduction
At the very core of any vibrant democracy lies the concept of free and fair elections. In India’s political arena, political parties invariably need financial resources to participate in elections and fuel their day-to-day operations. However, the process by which these funds are obtained has consistently raised questions concerning accountability, transparency, and the potential for undue influence by affluent individuals or corporations.
To address this issue of political financing, the Indian government introduced the Electoral Bond Scheme in 2018. The scheme provided a mechanism through which individuals and companies could channel monetary contributions to political parties by purchasing electoral bonds from the State Bank of India (SBI). Its distinguishing feature was the veil of confidentiality that shielded the donor’s identity from public view, with only the bank retaining the transaction details.
The government defended the scheme as instrumental in purging black money from political funding and encouraging transactions through legitimate banking channels. This position was challenged by civil society organisations, election reform advocates, and political activists before the Supreme Court, who argued that secrecy around political donations infringes citizens’ constitutional right to know who finances their political parties, thereby enabling corruption, policy manipulation, and quid pro quo arrangements between corporate entities and the political class.
In its landmark verdict of 15 February 2024, the Supreme Court unanimously declared the Electoral Bond Scheme unconstitutional, reiterating that transparency in political funding is a fundamental pillar of democracy and that voters possess a constitutional entitlement to such information.
Facts of the Case
The Electoral Bond Scheme was introduced through the Finance Act, 2017, and rolled out in January 2018. Under its provisions, any Indian citizen or Indian-registered company could purchase electoral bonds from designated State Bank of India branches. These bonds, available in denominations ranging from ₹1,000 to ₹1 crore, could be gifted to eligible political parties, who could then redeem them through designated bank accounts within a stipulated time frame.
To operationalize the scheme, several existing statutes were amended. The Representation of the People Act, 1951 was amended to shield political parties from disclosing information about donations received through electoral bonds. The Companies Act, 2013 was amended to remove the existing cap on corporate donations, previously set at 7.5% of a company’s average net profits over the preceding three financial years, and to exempt corporations from disclosing which political parties received their contributions. Supporting amendments were also made to the Income Tax Act and the Reserve Bank of India Act to bolster the scheme’s implementation.
The Association for Democratic Reforms (ADR), along with other petitioners, challenged these amendments before the Supreme Court, arguing that the scheme created obscurity in political financing and infringed voters’ constitutional rights. According to the petitioners, the anonymity afforded by the scheme made it impossible for citizens to scrutinize whether elected representatives were influenced by particular financial benefactors, undermining democratic accountability and opening the door to corruption.
The Union Government defended the scheme, arguing that it protected donors from political vindictiveness and encouraged donations through legitimate banking channels rather than cash transactions, and that it achieved an appropriate balance between donor privacy and electoral integrity. The case thus raised profound constitutional questions concerning democratic governance, electoral transparency, and the scope of the right to information under Article 19(1)(a) of the Constitution.
Legal Issues Before the Court
The Supreme Court considered a range of critical constitutional issues, including:
1. Whether the Electoral Bond Scheme infringed the fundamental right to freedom of speech and expression under Article 19(1)(a), particularly citizens’ entitlement to information regarding political funding.
2. Whether anonymous political donations undermine the core principles of free and fair elections forming part of the Constitution’s basic structure.
3. Whether the amendments to the Companies Act, 2013, permitting unlimited corporate donations without disclosure, were constitutionally tenable.
4. Whether the amendments to the Representation of the People Act, 1951, the Income Tax Act, and the Reserve Bank of India Act, which facilitated donor anonymity, contravened constitutional principles of transparency and accountability.
5. Whether the government’s objective of curbing black money in politics could justify curtailing citizens’ right to information.
Significance of the Case
The Supreme Court’s judgment on the Electoral Bonds Scheme ranks among the most pivotal constitutional pronouncements in recent years. It navigates the relationship between the privacy rights of political donors and the imperative of public transparency in political finance, and reaffirms that democracy cannot function effectively if citizens are denied access to information necessary for making informed electoral choices.
The decision also strengthens the judiciary’s role in overseeing electoral reforms, affirming that constitutional rights cannot be sacrificed for administrative expediency or policy goals alone. By declaring the scheme unconstitutional, the Court underscored that transparency, accountability, and informed participation by the electorate are indispensable to India’s democratic fabric.
Arguments of the Petitioners
The petitioners, led by the Association for Democratic Reforms, argued that the Electoral Bond Scheme violated the principles of democracy, transparency, and accountability, and impeded citizens’ right to know facts integral to freedom of speech and expression. They submitted that political funding mechanisms are closely linked to the discharge of government functions and can influence public policy, and that voters are therefore entitled to know the nature of any donor’s contribution so they can assess whether elected representatives serve public interest or favour private donors. Without such information, they argued, voters cannot guard against quid pro quo arrangements or make informed decisions at the time of voting.
The petitioners further argued that Section 29C of the Representation of the People Act, 1951 originally required political parties receiving donations above ₹2,000 to record the donor’s name, address, and the nature of the transaction, and report this to the Election Commission of India. The Finance Act, 2017 amendment to Section 29C exempted electoral bond donations from this reporting requirement, making it practically impossible to identify donors and effectively nullifying the law’s original purpose of curbing black money.
They also argued that the Companies Act amendment, which removed the 7.5% cap on corporate donations and the requirement to disclose the recipient political party, opened a “back door” for generating slush funds and allowed shell companies to funnel money into politics.
The petitioners contended that since the State Bank of India, a government-owned bank, processes every electoral bond transaction, the government retains access to donor information even as the public is denied it — creating an information imbalance that favours the ruling party and leaves the opposition unaware of such transactions, thereby enabling quid pro quo arrangements. They argued that electoral bonds therefore do not serve their stated purpose of cleansing electoral finance: since all transactions occur through SBI and are recorded in its books, anonymity from the public serves no legitimate objective, particularly as the government took no additional steps to limit cash-based transactions. If black money were truly the concern, they argued, addressing it required transparency to the electorate — not merely to the government — making the scheme’s restrictions on public information disproportionate.
Arguments of the Respondents (Union of India)
The Union Government argued that the electoral process must be conducted honestly and fairly, and that the Electoral Bond Scheme, introduced through the Finance Act, 2017, was intended to bring cleanliness and transparency to political funding by encouraging donations through formal banking channels — cheques, drafts, or electoral bonds — rather than cash, thereby helping eliminate black money from the electoral process.
The respondents submitted that donors should be able to make political contributions without public disclosure of their identity, so their freedom of speech, expression, and political association could be exercised without fear of political or societal repercussions. They argued that donors, particularly corporations, contribute with a legitimate expectation of privacy, and that removing this protection would make political funding prohibitively risky for donors and ultimately counterproductive to the goal of transparency.
The government reiterated that every electoral bond transaction is subject to Know Your Customer (KYC) requirements and issued through the State Bank of India, a public sector bank, meaning every transaction is well-documented and verifiable — substantially reducing the risk of unaccounted or black money entering the system. While donor identity is not disclosed to political parties or the public, they argued, it remains fully known to the banking system; the anonymity, therefore, operates only vis-à-vis political parties and the public, not the state.
The respondents submitted that the case involved competing constitutional interests — citizens’ right to information and privacy against donors’ right to participate in political discourse — and that any electoral reform must balance these interests. In their view, the scheme struck the correct balance by channeling all political contributions through the regulated banking system without compromising donor privacy, and that corporate participation in political funding is itself a legitimate form of democratic participation. They argued that further restrictions, such as donation caps, would not serve the broader interest of democracy, which requires active participation from all sections of society. Finally, they submitted that judicial review is limited to striking down enactments suffering from constitutional infirmity, and that the Electoral Bond Scheme violated no constitutional provision, such that the petition should be dismissed.
Judgment of the Supreme Court
On 15 February 2024, a five-judge Constitution Bench of the Supreme Court unanimously struck down the Electoral Bond Scheme as unconstitutional. The Bench held that the scheme violated the fundamental right to information under Article 19(1)(a) and undermined the democratic principles of transparency, accountability, and free and fair elections. The Court observed that in a representative democracy, citizens must have sufficient information to make informed electoral choices, since political funding is closely linked to public policy — financial contributors may expect favourable treatment from parties once in power. Information about political donations is therefore not a matter of mere curiosity but is essential to meaningful democratic participation.
The Court rejected the government’s argument that donor anonymity was necessary to prevent political victimisation. While acknowledging donor privacy as a legitimate concern, it held that such privacy cannot outweigh the public’s constitutional right to know who finances political parties, given that political parties perform vital public functions and directly influence governance.
The Court further held that the Electoral Bond Scheme failed the doctrine of proportionality. Although preventing black money was a legitimate governmental objective, the restrictions imposed on citizens’ right to information were disproportionate, since less restrictive alternatives — such as mandatory disclosure of donations made through banking channels — could have achieved the same objective without sacrificing transparency.
Findings on the Companies Act Amendment
The Court also examined the amendments made to the Companies Act, 2013 through the Finance Act, 2017. Before these amendments, companies could donate only up to 7.5% of their average net profits over the previous three financial years and were required to disclose the recipient political parties in their financial statements. The Court found that removing these safeguards raised serious constitutional concerns: unlimited corporate donations allowed companies — including newly incorporated entities with no genuine commercial activity — to contribute unlimited sums to political parties, increasing the risk of shell companies serving as conduits for political funding and enhancing the potential for undue corporate influence over public policy.
The Court emphasised that corporations do not participate in elections as voters, and that equating corporate political rights with those of individual citizens is inconsistent with constitutional democracy. Unlimited anonymous corporate funding, the Court held, threatens political equality by allowing wealthy corporate entities to exercise disproportionate influence over the electoral process.
Directions Issued by the Court
Having declared the scheme unconstitutional, the Supreme Court issued several directions to restore transparency in political funding. First, the Court directed the State Bank of India to immediately stop issuing electoral bonds. Second, SBI was ordered to submit detailed information on every electoral bond issued since the scheme’s inception — including the purchaser’s name, the bond’s denomination, the date of purchase, the redeeming political party, and the date of redemption — to the Election Commission of India. The Election Commission was further directed to publish this complete information on its official website within a stipulated time, enabling citizens to access details of political donations and evaluate the financial relationships between donors and political parties. These directions ensured that information previously shielded under the scheme became publicly available, restoring transparency in electoral finance.
Ratio Decidendi
The ratio decidendi of the judgment can be summarised as follows:
1. The right to know the sources of political funding forms an integral part of the fundamental right to freedom of speech and expression under Article 19(1)(a); voters cannot make informed electoral choices without knowing who finances political parties.
2. Transparency in political funding is an essential feature of free and fair elections, forming part of the Constitution’s basic structure.
3. Donor anonymity cannot override the constitutional requirement of democratic accountability; while privacy is an important constitutional value, it must yield where secrecy undermines the electoral process’s integrity.
4. Unlimited anonymous corporate donations create the possibility of disproportionate influence over governmental decision-making, violating the constitutional principle of political equality.
5. Restrictions on fundamental rights must satisfy the doctrine of proportionality; since less restrictive alternatives were available to combat black money, the Electoral Bond Scheme failed constitutional scrutiny.
Constitutional Principles Reinforced
This judgment reaffirmed several constitutional principles fundamental to India’s democratic system:
Right to Information under Article 19(1)(a): Citizens have the right to receive information necessary for meaningful participation in democracy.
Free and Fair Elections: Electoral integrity requires openness in political financing to prevent corruption and undue influence.
Political Equality: Economic power should not translate into unequal political influence.
Accountability and Transparency: Political parties, although not government institutions, perform public functions and must remain accountable to the electorate.
Judicial Review: The Supreme Court reaffirmed its role as guardian of the Constitution by striking down legislation infringing fundamental rights.
Critical Analysis
The judgment in Association for Democratic Reforms v. Union of India provides a remarkable precedent in Indian constitutional and electoral jurisprudence. Beyond annulling the Electoral Bond Scheme, the Supreme Court articulated that transparency, accountability, and informed decision-making constitute the pillars of democratic governance. It reinforces the constitutional balance between citizens and the state by establishing that the right to vote finds true meaning only when citizens can understand the financial backing of potential political leaders.
Among the judgment’s significant virtues is the Court’s recognition of the right to information as an intrinsic feature of Article 19(1)(a). The Court reasoned that political funding influences how governance is conducted, since it entails significant corporate and monetary contributions made in the expectation of future policy influence. Without disclosure, citizens’ ability to understand governmental policy and make informed choices would be significantly compromised. Through its interpretation of what constitutes “information” in the context of free speech, the Court further enriched the scope of constitutional protections applicable to participatory democracy.
The Court also demonstrated judicial restraint by not disputing the government’s legitimate goal of addressing black money, while holding that complete non-disclosure of donor identities exceeded the legitimate means required by the Constitution. This distinction — challenging the method rather than the objective — reflects a disproportionate-restriction analysis rather than a rejection of the policy goal itself.
The judgment’s treatment of corporate political financing is another notable contribution. By striking down the amendment permitting limitless and secretive corporate donations, the Court addressed the pressing concern of corporate influence over democratic institutions. Democracy implies political equality, which depends on each voter holding equal weight; unchecked corporate funding risks disparity if it is allowed to disproportionately influence elections. The judgment thus safeguards democratic values against excessive economic influence, reiterating the long-established principle that political parties are not ordinary organisations but bodies performing a public function — selecting candidates, preparing manifestos, and shaping legislation that affects all citizens. It follows that concealing how such institutions are financed could never have been constitutionally intended.
Some criticism of the judgment suggests that unfettered transparency might deter legitimate financing and push donors toward informal channels. This concern should be understood against the principle that transparency itself functions as an antidote to ill intent, preventing circumvention of other disclosure requirements in electoral funding. Others have argued that this issue should have been left to Parliament, given the complex financial and economic considerations involved in electoral reform. However, while Parliament retains discretion to formulate electoral reform policy, the implementation of such reforms cannot come at the cost of constitutionally guaranteed rights.
Author’s Perspective
While the Court reaches what is, in my view, the correct constitutional outcome, the scheme’s underlying informational asymmetry deserves further scrutiny: the government was presumably able to trace bond purchasers through banking records, while ordinary citizens had no equivalent access to information about who finances elections. This asymmetric information flow runs counter to the principles of an open democracy. Transparency alone will not stop corruption directly, but it promotes accountability through exposure, investigation, and civil society engagement. I believe this judgment is a positive step, but it should not be treated as a complete answer to the challenges of electoral finance in India. Further reforms remain necessary — including reasonable thresholds for disclosure of smaller contributions, stronger audit frameworks for political parties, stricter regulation of corporate donations, and independent oversight mechanisms for political financing, including disclosure of election-related payments in the public interest. Nonetheless, the judgment provides a foundational step toward better electoral practices by restoring public access to information central to the conduct of elections.
Impact of the Judgment
The Electoral Bonds judgment can be viewed as a watershed moment in Indian jurisprudence, with wide-ranging implications for democratic governance:
Increased Electoral Transparency: The judgment promotes electoral transparency by requiring disclosure of the identities of those who contribute to political parties, reinforcing the constitutional importance of citizens’ access to information for free and fair elections and informed participation.
Reinforces Judicial Supremacy over Elections: The judgment clarifies that legislation related to the electoral process is not beyond judicial review where it affects fundamental rights. It sets a landmark constitutional precedent undermining the concept of secret political funding in a democratic setup and is likely to influence future debates over electoral finance laws, campaign regulation, and the relationship between money and politics.
Conclusion
The Supreme Court’s ruling in the Electoral Bonds case is a profound judgment in contemporary Indian constitutional law, setting a new benchmark for transparency in electoral finance. By deeming the Electoral Bond Scheme unconstitutional, the Supreme Court reaffirmed that a healthy democracy depends not only on process and conduct, but crucially on the information that enables citizen participation. It strikes a balance between the competing interests of transparency, accountability, and election integrity, while recognizing the need to combat black money.
The judgment stands as testament to the judiciary’s role as defender of constitutional values, underlining that democratic governance cannot operate behind closed doors. A further step will require parliamentary legislative reform to create more comprehensive regulations on political funding — balancing donor privacy with the need for disclosure in the interest of electoral and public transparency. Nonetheless, this judgment can be seen as a vital step in reforming Indian democracy and restoring public faith in the electoral process.
References
[1] Association for Democratic Reforms & Ors. v. Union of India & Ors., (2024) 5 SCC 1; 2024 INSC 113 (SC).
