Supreme Court Declares Electoral Bond Scheme Unconstitutional

The Supreme Court of India’s decision to strike down the Electoral Bond Scheme marks a pivotal moment in the country’s democratic and electoral history. This landmark judgment reinforces the principles of transparency, accountability, and the voters’ right to information under Article 19(1)(a) of the Constitution.

Background of the Electoral Bond Scheme

Introduced in 2018 by the Government of India, the Electoral Bond Scheme allowed individuals and corporations to make donations to political parties while maintaining donor anonymity. Electoral bonds functioned similarly to promissory notes and were available for purchase from select branches of the State Bank of India. Only those political parties registered under Section 29A of the Representation of the People Act, 1951, and that had secured at least 1% of the votes in the most recent general or assembly elections, were eligible to receive these bonds. All transactions were to be conducted through a verified account allocated by the Election Commission of India.

While the scheme aimed to formalize political funding and reduce cash donations, it soon drew sharp criticism for its lack of transparency. The most controversial aspect was the complete anonymity it provided to donors—raising concerns about potential misuse, including the channeling of unaccounted or black money. Initially, companies could donate only 7.5% of their average net profits over the previous three years. However, the Finance Act of 2017 amended the Companies Act, removing this cap and allowing even loss-making companies to contribute unlimited amounts.

Another major concern was that while the public was kept in the dark about donor identities, the government—through the banking system—had access to this information. Critics argued that this selective transparency could lead to undue influence, favoritism, or even retaliation.

Legal Challenge and Supreme Court Verdict

The constitutionality of the Electoral Bond Scheme was challenged in 2017 by the Association for Democratic Reforms (ADR), followed by petitions from the Communist Party of India (Marxist) and other organizations. The petitioners contended that the scheme violated the fundamental right to information, compromised the electoral process, and undermined the democratic principle of fair and transparent political funding.

The case was heard by a five-judge Constitution Bench of the Supreme Court, led by then Chief Justice of India D. Y. Chandrachud. On February 15, 2024, the Court declared the Electoral Bond Scheme unconstitutional. It held that the scheme violated Article 19(1)(a) by infringing on the right of citizens to be informed about the sources of political funding, which is essential for making informed electoral choices.

In addition to striking down the scheme, the Court directed the immediate cessation of all electoral bond sales. It also ordered the State Bank of India to disclose comprehensive data on all electoral bond transactions since April 2019, including details of purchasers and recipient political parties.

Significance of the Judgment

This ruling is a milestone in India’s journey toward greater transparency and accountability in its electoral process. It sends a clear message that any mechanism which conceals the nexus between political power and financial influence will not withstand constitutional scrutiny. The judgment is expected to pave the way for reforms that balance legitimate political funding with democratic transparency.

Conclusion

The Supreme Court’s decision to strike down the Electoral Bond Scheme restores the sanctity of the voters’ right to know and reaffirms the judiciary’s role as a guardian of democratic values. As India continues to grapple with the complexities of political financing, this verdict serves as a beacon, guiding future reforms toward openness, fairness, and accountability.

References:

• Supreme Court Observer
• Business Standard