DATE: 15.02.2024
COURT: Supreme Court of India
BENCH: Chief Justice Dr. Dhananjaya Y.
Chandrachud, Justice Sanjiv Khanna, Justice B.R. Gavai, Justice J.B. Pardiwala,
and Justice Manoj Misra.
FACTS:
On 2 January 2018, the Government of India
notified the Electoral Bond Scheme, 2018,
which allowed individuals and entities to purchase bearer electoral bonds from
the State Bank of India and donate them anonymously to registered political
parties. The scheme was introduced through amendments carried out via the
Finance Act, 2017 (passed as a Money Bill), which made significant changes to
multiple statutes: it amended Section 31 of the Reserve Bank of India Act, 1934
to enable issuance of such bonds; inserted provisions in the Representation of
the People Act, 1951 exempting political parties from disclosing donations
received through electoral bonds; amended Section 182 of the Companies Act,
2013 to remove the cap on corporate political contributions and the requirement
to disclose the names of recipient parties in profit-and-loss accounts; and
altered the Income Tax Act, 1961 to grant tax exemptions on such anonymous
donations. These changes collectively enabled completely anonymous, unlimited,
and largely unregulated funding of political parties.
The Association for Democratic
Reforms (ADR), along with Common Cause and the Communist Party
of India (Marxist), challenged the constitutional validity of the Electoral
Bond Scheme and the related amendments introduced by the Finance Act, 2017. ADR
filed Writ Petition (C) No. 880 of 2017 on 14 September 2017 (with connected
petitions in 2018 and 2022), contending that the scheme and amendments violated
voters’ right to information under Article 19(1)(a) of the Constitution by
allowing anonymous political funding, promoted opacity and potential quid pro
quo between donors and parties, removed essential safeguards against corporate
influence and foreign funding, and were improperly enacted as Money Bills to
bypass Rajya Sabha scrutiny. These writ petitions filed under Article 32
directly before the Supreme Court, highlighting the threat to electoral
transparency and democratic accountability posed by the new regime of anonymous
donations, formed the sole basis for the Supreme Court entertaining the matter
ISSUES:
The issues presented were twofold: (a)
whether the amendment to Section 182(1) of the Companies Act, 2013 (via the
Finance Act, 2017) permitting unlimited corporate funding to political parties
infringed the principle of free and fair elections and violated Article 14 of
the Constitution as manifestly arbitrary; and (b) whether the Electoral Bond
Scheme, 2018 together with the amendments to Section 29C of the Representation
of the People Act, 1951, Section 182(3) of the Companies Act, 2013 and Section
13A(b) of the Income Tax Act, 1961, which enabled complete non-disclosure of
the identity of donors, violated the right to information of citizens and
voters under Article 19(1)(a) of the Constitution by denying them knowledge of
the sources of political funding essential for informed electoral choice.
JUDGEMENT WITH REASONING:
In its unanimous judgment dated 15 February
2024, the five-Judge Constitution Bench struck down the Electoral Bond Scheme,
2018 in its entirety as unconstitutional and declared the impugned amendments
to the Representation of the People Act, Companies Act and Income Tax Act (to
the extent they facilitated anonymous political contributions) void under
Article 19(1)(a). The Court also held the deletion of the statutory cap on
corporate contributions and the removal of disclosure requirements under
Section 182 of the Companies Act to be arbitrary and violative of Article 14.
It directed the State Bank of India to forthwith disclose to the Election
Commission of India all particulars of electoral bonds purchased and encashed
since 12 April 2019, and ordered the ECI to publish the information on its
website within one week, thereby restoring transparency in political funding.
The Court’s reasoning was anchored in the
recognition that the right to information under Article 19(1)(a) is not
confined to the press or candidates but extends to every voter’s right to know
the sources of funding of political parties, which is indispensable for making
an informed choice in a free and fair election. Drawing from its earlier
decisions in Association for Democratic Reforms (2002) and People’s Union for Civil Liberties
(2003), the bench held that political funding constitutes “information” vital
to the democratic process; the anonymity created by the Electoral Bond Scheme
and the 2017 amendments completely obliterated this right, creating an
asymmetrical information regime where only the ruling government (through the
State Bank of India) could access donor identities while the public and
opposition remained in the dark. The Court applied the proportionality test and
found that the scheme failed every limb: the objective of curbing black money
had no rational nexus with blanket anonymity (as banking channels already
existed), less restrictive alternatives such as mandatory disclosure were
available, and the infringement on voters’ rights was disproportionate. It
rejected the Union’s defence of donor privacy, holding that in the context of
political donations, especially large corporate ones, the public interest in
transparency overwhelmingly outweighed any limited privacy claim.
On the corporate funding issue, the bench
ruled that removing the cap on contributions and exempting companies (including
loss-making ones and foreign-controlled entities) from disclosing recipient
parties rendered the amendment manifestly arbitrary under Article 14, as it
enabled unlimited, untraceable influence over policy-making and created a real
risk of quid pro quo arrangements that undermine the purity of elections. The
Court emphasised that free and fair elections under Article 326 form the
bedrock of democracy; any regime that permits opaque, unlimited corporate money
without accountability distorts the level playing field between political
parties and erodes public trust. By striking down the scheme and restoring the
pre-2017 disclosure regime, the judgment reinforced that electoral transparency
is not a matter of economic policy immune from judicial review but a
constitutional imperative that the Court is duty-bound to enforce when
fundamental rights are infringed.
ANALYSIS:
The Supreme Court’s unanimous judgment in this
case is a landmark reaffirmation of electoral
transparency as a core constitutional value. By striking down
the Electoral Bonds Scheme, 2018 and the associated amendments introduced
through the Finance Act, 2017, the five-judge Constitution Bench held that
complete anonymity in political funding violates the voters’ fundamental right
to information under Article 19(1)(a). The Court extended its earlier
jurisprudence from the 2002 ADR and 2003 PUCL cases to political parties,
recognising that citizens have a right to know who is funding political parties
because such information is essential for making an informed electoral choice.
It applied the proportionality test rigorously and found the scheme failed on
all counts: the stated aim of curbing black money had no rational connection
with blanket anonymity, less intrusive alternatives like mandatory disclosure
existed, and the infringement on voters’ rights was disproportionate. The
deletion of the cap on corporate donations and removal of disclosure
requirements under the Companies Act were also declared manifestly arbitrary
under Article 14, as they enabled unlimited, untraceable corporate influence
and risked quid pro quo arrangements that distort free and fair elections.
This verdict has profound implications for
Indian democracy and political funding. It restores the pre-2017 disclosure
regime, levels the playing field by curbing unchecked corporate donations
(including from loss-making and foreign-influenced companies), and strengthens
public accountability by directing full disclosure of all electoral bond
transactions since 2019. The judgment emphasises that political parties are not
private entities but vital units in the democratic process, owing a duty of
transparency to voters. It rejects the notion that economic policy objectives
or donor privacy can override the constitutional imperative of an informed
electorate, while cautioning against any regime that creates asymmetry of
information favouring the ruling dispensation. Overall, the decision bolsters
the purity of elections, enhances public trust in the democratic process, and
sets a strong precedent that electoral reforms must withstand strict
constitutional scrutiny when they impact fundamental rights.
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