Undermining Democracy - The Unconstitutional Nature Of Electoral Bonds

Author: LawSphereX

Category: Constitutional & Human Rights

Published: 2026-08-23T21:38:14.179384+00:00

Updated: 2026-08-26T17:05:12.143+00:00

UNDERMINING DEMOCRACY: THE UNCONSTITUTIONAL

NATURE OF ELECTORAL BONDS

Saumitra Deep Dwivedi, LL.M., Amity Law School, Amity University Dr Jyoti Yadav, Assistant Professor, Amity Law School, Amity University

ABSTRACT

This paper discusses the Indian Supreme Court’s recent decision to strike down the electoral bonds scheme for political donation, ruling it unconstitutional. Electoral bonds, introduced in 2017, allowed individuals and corporations to donate money to political parties anonymously. While the government claimed this would help curb illegal cash donations, critics argued that it enabled unchecked corporate influence in political process by allowing unlimited, unregulated funding without transparency. The paper explains how the system worked: donors could purchase bonds of different values through the State Bank of India and deposit them directly into political party accounts without revealing their identities. Between 2018 and 2022, nearly $2 billion worth of bonds were issued, with the ruling party ie. Bharatiya Janata Party (BJP) receiving the majority—about 60%—of the donations.

Opposition parties argued that this system encouraged money laundering and allowed corporations to exert hidden influence over policymaking. The Supreme Court unanimously ruled that electoral bonds violated citizens' right to know who funds political parties, a key aspect of democracy. The judges determined that the need for transparency outweighed donor privacy concerns and rejected the government's argument that the system helped reduce black money in election process. As a result, the State Bank of India was made required to disclose all details of past bond transactions to the Election Commission, which will make this information public before the

2024 national elections.

The paper explores the broader impact of this verdict, particularly on political party finances and electoral integrity in India. It also compares India's political donation regulations with those in countries like the UK, US, and Germany. Finally, the paper emphasizes the need to balance transparency with legitimate privacy concerns when designing fair and constitutional political funding systems. Ensuring openness in political donations will strengthen Indian democracy by allowing voters to understand and monitor financial influences on political parties.

Keywords: Electoral bonds, Political funding, Anonymous donations, Transparency, Right to Information, Supreme Court Judgement, Electoral Funding reforms, Party donations, Elections, Democracy. Introduction Political campaign financing in India has long been shrouded in secrecy. Electoral bonds, introduced in 2017, were meant to reform political donations, but in reality, they created a system that allowed unrestricted and anonymous contributions. This lack of transparency raised serious concerns about the influence of black money and corporate interests in elections. Since neither the donor's identity nor the recipient political party was disclosed, the entire process became opaque, raising questions about accountability in political funding.

At the heart of the legal challenge against electoral bonds was the fundamental right to information, protected under Article 19(1)(a) of the Indian Constitution. Article19(1)(a) guarantees not just freedom of speech and expression but also the right to seek, receive, and access information. In a democratic society, voters have the right to know who is funding political parties, as financial contributions can significantly impact policymaking. While the government justified electoral bonds as a way to streamline political donations, critics argued that they enabled corporations to funnel large sums to parties in expectation of favourable policies, effectively turning political entities into corporate-driven institutions.

Given the increasing role of money in elections, corporate donations became a decisive factor in political campaigns, potentially skewing election outcomes in favour of well-funded parties. The concern was not just about fairness but also about the fundamental democratic principle of accountability. If political parties receive large sums of money from undisclosed sources, the public remains unaware of the potential influence behind key policy decisions. In February 2024, the Supreme Court of India delivered a landmark verdict, declaring the Electoral Bond Scheme unconstitutional. This ruling marked a significant moment in the country’s legal and political history, reaffirming the supremacy of the law and the fundamental democratic principles of transparency and accountability.

Understanding the journey of electoral bonds—from their introduction in 2017 to their judicial invalidation in 2024— provides critical insight into how the highest court of the country upheld the right to information and safeguarded electoral integrity.

Background of Electoral Bond in India Political campaign financing in India has traditionally lacked transparency, with large, unregulated donations allowing black money and corporate influence to play a hidden yet significant role in elections. This lack of accountability made it difficult for the public to understand who was funding political parties and candidates. Against this backdrop, the Modi government introduced electoral bonds in 2017 as a way to reform political funding. Announced in the Union Budget that year, the scheme aimed to clean up election financing by reducing cash transactions and improving transparency. Under this system, individuals, corporations, and organizations could anonymously donate to political parties by purchasing electoral bonds through designated branches of the State Bank of India (SBI).

These bearer bonds, available in denominations ranging from ₹1,000 to ₹1 crore, had to be redeemed by the recipient party within 15 days. 1 The government justified the scheme as a way to facilitate legitimate donations while protecting donor privacy. Officials argued that the previous system, which relied on cash donations, encouraged black money and corruption. By channeling money through official banking channels, electoral bonds were presented as a way to ensure cleaner political funding. However, from the outset, opposition parties, transparency advocates, and constitutional experts raised serious concerns. They argued that the scheme effectively legalized unlimited and anonymous corporate donations, benefiting the ruling party while reducing public oversight.

Unlike the earlier system of electoral trusts—privately managed funds that disclosed their donors—the new system allowed the government-controlled SBI to handle donations while keeping donor identities secret. Critics also pointed out that this violated citizens’ fundamental right to know who was funding the political parties seeking their votes. The Representation of the People Act previously required donations above ₹20,000 to be publicly disclosed. By removing these transparency requirements and lifting donation limits, electoral bonds were seen as a step backward for democratic accountability. Despite widespread criticism, the scheme was launched in March 2018, and by October of that year, over ₹1,000 crore worth of bonds had been purchased, with

1 S.K. Muthyanolla & Rakesh Dubbudu, Understanding ‘Electoral Bonds,’ FACTLY (Feb. 26, 2025),

https://factly.in/understanding-electoral-bonds/.

the ruling BJP receiving over 95% of the funds. By 2019-20, bonds worth ₹5,000 crore were issued, with reports indicating that major corporations were the primary buyers. As the 2024 general elections approached, scrutiny of the scheme intensified. Opposition parties claimed that electoral bonds disproportionately benefited the ruling party while making it harder for them to raise funds. The Supreme Court, responding to legal challenges filed soon after the scheme’s introduction, eventually ruled the system unconstitutional. The court found that it violated principles of transparency and fairness, making its decision a landmark victory for democratic accountability. However, the full impact of the verdict will depend on whether the government releases complete details of past bond transactions, revealing who donated to which party and how much.

Ensuring free and fair elections requires voters to have access to this critical information, allowing them to understand the financial forces shaping political decisions and governance. Supreme court ruled Electoral Bond as Unconstitutional The Supreme Court of India recently delivered a historic verdict declaring the Electoral Bond Scheme unconstitutional and illegal. In a 4:1 decision, the five-judge bench ruled that the scheme severely undermined transparency in political funding and violated citizens’ fundamental right to information and make a informed decision. 2 Introduced in 2017 through amendments to the Finance Act and the Representation of the People Act, the Electoral Bond Scheme allowed individuals and corporations to donate anonymously to political parties.

The government defended the scheme, arguing that it would improve transparency and curb black money in election financing. However, between 2018 and early 2022, donations worth over ₹16,000 crore were made through electoral bonds—95% of which went to the ruling Bharatiya Janata Party (BJP). Concerns over the scheme’s legality led to multiple public interest litigations (PILs) being filed in 2017. 3 These challenges came from NGOs working on electoral reforms, such as the Association for Democratic Reforms (ADR), as well as opposition political parties. The 2 Supreme Court Strikes Down Electoral Bonds Scheme as Unconstitutional, Directs EC to Publish Details by March 13, Fin. Express (Feb. 15, 2025), https://www. financialexpress. com/india-news/electoral-bonds-verdictunconstitutional-supreme-court-cji-chandrachud/3395025/.

3 Explained: What Are Electoral Bonds and Why Are They Being Challenged in Court, NDTV (Feb. 27, 2025), https://www. ndtv. com/india-news/explained-what-are-electoral-bonds-and-why-are-they-being-challenged-incourt-4530444.

petitioners argued that by allowing anonymous political donations, the scheme violated citizens' right to information under Article 19(1)(a) of the Indian Constitution. This article guarantees the fundamental right to freedom of speech and expression, which the Supreme Court has previously interpreted to include the right to access information about public matters and political candidates. The petitioners contended that by shielding donor identities and donation amounts, the scheme prevented voters from making informed choices, thereby infringing their constitutional rights. The government defended the Electoral Bond Scheme, arguing that it would enhance transparency by ensuring that all political donations passed through formal banking channels instead of being made in untraceable cash.

It also claimed that donor anonymity was necessary to encourage legitimate contributions, as public disclosure of donor details might deter individuals and organizations from supporting political parties of their choice. 4 In 2021, a three-judge bench of the Supreme Court began hearing the case. Recognizing the significant constitutional issues involved—particularly regarding citizens' rights—the court referred the matter to a larger five-judge constitutional bench in April 2022. After ten days of hearings starting in October 2022, the bench unanimously struck down the scheme as unconstitutional. 5 The majority ruling emphasized that the right to information could only be restricted under specific, well-defined conditions, such as concerns related to national security or public order. Protecting the identities of political donors did not meet these criteria.

The court also ruled that the government could not prioritize donor privacy over the fundamental democratic principle of transparency. Furthermore, the scheme failed to achieve its stated objectives—there was no evidence that anonymous donations had reduced black money in elections. Instead, the removal of limits on corporate contributions had given disproportionate influence to large business interests over the political process. This landmark judgment is a major victory for transparency, accountability, and voter rights. It reinforces the importance of disclosure in preventing undue influence in election financing. 4 B. Prakash, Interpreting the Illicit Nexus of Ruling Party in Form of “Electoral Bond Scheme”: After It Being Declared as “Unconstitutional” by Apex Court (2024), available at SSRN: 4816678. 5 D.

Singhal, How Electoral Bonds Open the Door for Legalizing Corruption in India? 28 Supremo Amicus 237 (2022).

While details of past bond transactions are being revealed, banning anonymous political donations is a crucial step in maintaining democratic integrity and preventing further erosion of transparency in India's electoral system.6 Concerns over transparency A key criticism of the Electoral Bond Scheme was that it severely weakened transparency in

political funding. By eliminating mandatory disclosure requirements, the scheme allowed political parties to receive large, anonymous donations, reversing years of progress in making election financing more accountable. 7 Previously, under Reserve Bank of India (RBI) guidelines, any political donation exceeding ₹20,000 had to be reported to the Election Commission, including details such as the donor’s name, address, amount contributed, and PAN number. Electoral bonds removed this requirement entirely, allowing parties to receive funds directly into their accounts without disclosing donor identities. This raised serious concerns about undermining transparency in elections. Critics argued that anonymity in political funding eroded accountability and created opportunities for corruption.

When political parties—responsible for shaping laws and policies—receive undisclosed funding, it opens the door for quid pro quo arrangements, where policies could be influenced by hidden financial interests. Activists highlighted that between 2018 and 2022, nearly ₹16,000 crore was donated through electoral bonds with no public record of who contributed what. This effectively legalized anonymous political donations, potentially including illicit or unaccounted money. 8 The government defended the scheme by claiming that transparency had to be balanced with donor privacy, as some contributors might not want their political affiliations disclosed. However, activists rejected this argument, asserting that the right to information is essential to a functioning democracy. They warned that the lack of transparency made it easy for illegal

6 Supreme Court Declares Electoral Bonds Scheme Unconstitutional, The Hindu (Feb. 15, 2025),

https://www.thehindu.com/news/national/electoral-bonds-scheme-unconstitutional-sbi-should-reveal-thedetails-of-donors-rules-sc/article67848211.ece. 7 D. Ananda, Electoral Bonds: A Peril to Democracy and Transparent Elections in India, 9 J. Liberty & Int'l Aff.

89 (2023).

8 A.S. George, The Unconstitutional Nature of Electoral Bonds in India: Impacts on Political Transparency and the Democratic Process, 2 Partners Universal Innovative Rsch. Pub. 150 (2024).

money to flow into politics under the guise of electoral bonds. Moreover, because foreign entities could potentially donate anonymously, the scheme risked circumventing laws that previously restricted foreign influence in Indian elections.9 A Parliamentary Standing Committee reviewing electoral bonds noted that major

democracies—including the US, UK, France, Japan, Canada, and Germany—require public disclosure of political donations above a certain threshold. In contrast, India’s scheme uniquely permitted unlimited anonymous contributions through a government-run bank, effectively injecting unaccounted money into the political system. This lack of oversight and accountability, critics argued, struck a severe blow to electoral transparency. 10 Ultimately, this critique became central to the legal challenge against electoral bonds in the Supreme Court, with petitioners arguing that the scheme violated citizens’ right to information—an essential principle for ensuring free and fair elections.

Undermining Transparency: RTI Violations One of the primary legal challenges against the Electoral Bond Scheme was that it violated citizens' fundamental Right to Information, which is protected under the Indian Constitution. By allowing anonymous political donations, the scheme deprived voters of essential details about the financial influences behind political parties and candidates contesting elections. Article 19(1)(a) of the Indian Constitution guarantees the right to freedom of speech and expression. The Supreme Court has consistently interpreted this right to include the ability to seek, receive, and share information on matters of public importance. Transparency in political funding is a crucial aspect of this right, as knowing who funds political parties helps voters make informed decisions about their representatives and policies.

Critics argued that electoral bonds undermined this principle by creating a system where large corporate or private interests could fund political parties without public scrutiny. If a party received massive anonymous donations from a corporation and later passed policies favoring 9 E. Ogu, Supreme Court: Electoral Bonds Scheme Violates Voters’ Fundamental Rights, Ruling Unanimously, County Local News (Accessed on March. 1, 2025), https://countylocalnews. com/2024/02/15/supreme-courtelectoral-bonds-scheme-violates-voters-fundamental-rights-ruling-unanimously/. 10 A. Mehrotra & A. Upadhyay, Electoral Bonds: What the SC Judgment Means and How Political Funding Is Regulated in Western Democracies, ABP Live (2024).

that entity, it would amount to quid pro quo. However, because electoral bonds concealed donor identities, voters would remain unaware of such potential conflicts of interest, weakening democratic accountability. By enabling secrecy in political donations, electoral bonds created an "information black hole" around critical aspects of the electoral process. Activists described this as state-sponsored corruption, effectively legalizing undisclosed financial influence in politics. Globally, transparency in political funding is recognized as essential for maintaining free and fair elections. Without clear information on funding sources and amounts, elections can be skewed in favor of those with deep financial backing, allowing powerful entities to exert undue influence.

The Supreme Court has repeatedly upheld transparency in elections as a fundamental component of democratic rights, including freedom of expression and the ability to vote meaningfully. 11 However, electoral bonds introduced a level of anonymity in political financing that directly contradicted this principle. By challenging the scheme in court, critics forced the judiciary to determine whether anonymous political donations constituted a justifiable restriction on citizens’ right to information under Article 19(1)(a). Many legal experts argued that the scheme failed to meet the necessary criteria to justify blocking such crucial information from the public.

12 Transparency Triumphs: The Effects of Donor Detail Disclosure The Supreme Court’s verdict on electoral bonds had a profound impact on political transparency, with its most significant directive being the mandatory disclosure of all donor details and transactions conducted through the scheme. The Court emphasized that transparency in political funding is essential to ensuring free and fair elections. As a result, it ordered the government to make all information about electoral bond transactions publicly available without delay. 11 R. Yadav & K. Yadav, The Electoral Bond Judgment—A Critical Analysis: Recent Judgment on Electoral Bond, 1 Motherhood Int’l J. Rsch. & Innovation 46 (2024). 12 Supreme Court Strikes Down Electoral Bonds Scheme; Cong Hails Verdict, BJP Says It Was Brought for Transparency, Big News Network, https://www. bignewsnetwork.

com/news/274127580/supreme-court-strikesdown-electoral-bonds-scheme-cong-hails-verdict-bjp-says-it-was-brought-for-transparency.

According to the ruling, the State Bank of India (SBI), which was responsible for issuing these bearer bonds, must submit detailed records to the Election Commission within four weeks. This includes data on who purchased the bonds, the number and denomination of bonds bought, and the date of purchase. Additionally, SBI is required to disclose which political parties encashed the bonds and the amounts received in their accounts. While political parties were not previously required to reveal these details, the Court strongly urged them to voluntarily disclose the amounts they received through the scheme. This ruling marks a major victory for transparency in political funding. Until now, the Electoral Bond Scheme had facilitated over ₹16,000 crores in anonymous donations, allowing political parties to receive vast sums of money without any public accountability.

By mandating the disclosure of donor identities and transaction details, the Supreme Court has effectively dismantled this secrecy. The Court upheld the fundamental right of citizens to know who is financing political parties, as this information is crucial for maintaining electoral integrity. It also pointed out that anonymous political donations contradict democratic principles and create the risk of quid pro quo arrangements, where parties may be influenced by large corporate donors in exchange for favourable policies. By ending the opacity surrounding electoral bonds, this judgment reinforces the importance of accountability in India's democratic system. 13 By requiring full disclosure of electoral bond transactions, the Supreme Court’s ruling ensures that questionable and undisclosed political funding will now be exposed.

Previously, any entity—including illegal sources or even foreign corporations—could anonymously contribute unlimited amounts to political parties by purchasing bonds through SBI branches. This lack of oversight raised serious concerns about potential misuse, money laundering, and undue foreign influence in Indian elections. Legal experts have praised the verdict for prioritizing transparency and reinforcing voters' fundamental right to information regarding political donations. The ruling strengthens democratic accountability by allowing the public to scrutinize the financial forces shaping political parties and their policies. By shedding light on previously hidden sources of funding, 13 K. Negi, Supreme Court Set to Deliver Verdict on Pleas Challenging Validity of Electoral Bonds Scheme for Political Funding, SwarajyaMag, https://swarajyamag.

com/news-brief/supreme-court-set-to-deliver-verdict-onpleas-challenging-validity-of-electoral-bonds-scheme-for-political-funding.

this decision marks a crucial step toward preventing undue influence in governance and ensuring a fair electoral process. Global Trends in Political Funding and Donor Disclosure The controversy surrounding electoral bonds in India sparked discussions on how political financing is regulated in democracies worldwide. Comparisons were frequently drawn with the systems in the US, UK, Canada, Germany, and other nations, where transparency in political donations is a key principle. 14 Unlike India’s electoral bond scheme, now-invalidated, most democracies require public disclosure of donations above a reasonable threshold. For example, in the United States, campaign donations exceeding $200 must be reported to the Federal Election Commission, including donor details, even if donors wish to remain anonymous.

In the United Kingdom, foreign donations are strictly banned, and individual contributions are capped between £500 and £2,500 depending on the recipient entity. Any donation exceeding £500 must be reported to the Electoral Commission. Canada has one of the most restrictive donation policies, allowing contributions only from individual citizens or permanent residents. Corporations, unions, and foreign entities are prohibited from donating. Additionally, individual donations to parties are capped at ,600 annually, and all contributions above $200 must be disclosed. 15 France imposes an annual donation cap of €7,500 per individual and €15,000 per corporation. Donations exceeding €150 require full transparency, and violations, especially involving foreign or anonymous contributions, carry strict legal penalties.

In Germany, individuals can donate up to €1 million annually, while corporate donations are capped at €1. 5 million. Contributions exceeding €50,000 must be publicly disclosed and subjected to scrutiny, while anonymous cash donations are restricted to €500. 14 H. Conway, Why Are Political Primary Elections Government Funded, The Conservative Nut (Jan. 31, 2024), https://theconservativenut. com/why-are-political-primary-elections-government-funded/.

15 S., Political Transparency Importance – Why It Matters, Can. News (March 30, 2025),

https://www.biphoo.ca/transparency-politics/.

India’s electoral bond system, in contrast, allowed complete anonymity for political donations, including from foreign entities, with no upper limit. This lack of transparency made it an outlier among democracies. The Supreme Court’s ruling deemed the scheme unconstitutional, bringing India’s political funding regulations back in line with global standards of accountability. 16 That said, while transparency is crucial, some safeguards may still be needed to prevent the harassment of individual donors who make small contributions. Striking a balance between transparency and donor privacy, as seen in other democracies, remains an important consideration for India moving forward. Conclusion The Supreme Court’s decision to strike down electoral bonds reinforces the fundamental importance of transparency and accountability in political funding.

By eliminating donor anonymity, the Court has upheld the citizen’s right to information, ensuring that India’s electoral democracy remains fair and credible. Elections are the backbone of any democracy, and public trust in the electoral process directly impacts governance and democratic stability. When political financing is shrouded in secrecy, it creates avenues for corruption, policy manipulation, and conflicts of interest that can ultimately harm public welfare. If powerful financial interests can influence political parties and policymaking without scrutiny, democracy risks becoming a tool for the wealthy rather than a system that serves all citizens. Transparency in political donations allows voters to evaluate whether elected representatives prioritize public interest or cater to influential donors.

By mandating disclosure of electoral bond transactions and large contributions, the Supreme Court has restored essential safeguards against hidden financial influence in elections. This ruling ensures that political parties remain accountable to the people rather than undisclosed donors. While the government initially introduced electoral bonds as a means to reform political funding, the scheme instead facilitated unchecked, large-scale anonymous donations. Rather

16 S., Political Transparency Importance – Why It Matters, Bip Am. News (March. 27, 2025),

https://www.bipbipamerica.com/politics-transp-impt/.

than curbing black money, it exacerbated opacity, undermining the very principles of clean election financing. The Court’s ruling underscores that any reform in electoral funding must enhance democratic integrity rather than weaken it. In conclusion, by striking down electoral bonds, the Supreme Court has strengthened the fairness and credibility of India’s electoral system. The decision affirms that transparency in political financing is not just desirable but essential for maintaining a free, fair, and accountable democracy. The electoral bonds case has underscored the need for a well-regulated and balanced approach to political funding in India. While the Supreme Court’s ruling rightfully prioritizes transparency, there is also a need to ensure that regulatory measures do not discourage legitimate donations or create unintended consequences.

Elections require funding, but oversight is essential to prevent undue influence, conflicts of interest, and unfair advantages. Striking this balance is key to maintaining both fairness and accountability in the system. For example, while the Court ruled against donor anonymity in large contributions, a complete lack of discretion in disclosure could deter smaller, lawful donors who may fear political backlash. The existing Rs 20,000 disclosure threshold under election law serves a reasonable purpose by ensuring that only significant contributions require public disclosure while protecting small individual donors from potential harassment. Similarly, the Court’s reinstatement of the 7. 5% cap on corporate political donations is a step toward preventing excessive corporate influence.

However, there is room for debate on whether this limit should be moderately increased to 10-15% of a company’s profits, allowing businesses to contribute within reasonable bounds without creating disproportionate political leverage. A well-crafted policy should differentiate between large-scale donations that have the potential

to shape government policies and smaller, grassroots contributions from individuals and professionals that help strengthen democratic participation. Ultimately, the goal should be to create a regulatory framework that upholds transparency while encouraging broader civic engagement in political financing. The Supreme Court’s verdict on electoral bonds is a crucial step toward restoring electoral

integrity by curbing opacity in political donations. However, moving forward, policymakers must ensure that reforms strike the right balance—enhancing transparency and accountability without deterring lawful participation in the democratic process.