Table Of Contents
- Facts
- Issues Raised
- Contention
- Rationale
- Defects Of Law
- Inference
Facts
This case revolves around the theory put up by the government in 2017 that then finance minister Late Arun Jaitley did present in the parliament about a new law to be introduced at the budget session which will make a case about the funding of elections valid and transparent in the eyes of law and voters. After this bill was passed and made a law Association of Democratic Reforms filed a PIL under Article 32 of the Constitution of India demanding a true meaning to what this law meant. The petitioners also included the leaders of CPI-M party.
The Government aimed at making a bond between the Donator and the party whom the money is to be donated (which will be hidden from public eye so that the ire of supporters does not touch the donators). The balance sheets of the respective companies and the parties at the time of filing the ITR would reflect the said amount. This was done to remove cash payments made in form of black money to political parties that would cripple the Indian economy if made for a long time.
Some More attributes related to Electoral Bonds:
- Any person or company can buy these bonds.
- The bonds are issued in multiples of 1k, 10k, 1 lakh 1 crore rupees.
- No restrictions on bond purchase quantity.
- Only parties with 1% previous vote share can redeem bonds.
- Bonds purchasable at authorized SBI branches via non-cash methods only.
- If not redeemed by the party these funds will go to PM Cares fund directly which will be used for upliftment of the funds for said party.
Till year (2018-2024) Rs. 16,518 Cr. of bonds were purchased from business entities.
Issues Raised
The petitioners claimed that the highest beneficiary of this scheme was BJP which was receiving funds more than other 6 parties when combined, i.e. 47% of the total money for bonds issued.
1. Citizens Have a Right to Know (Article 19(1)(a))
They argued that voters deserve to know who is funding political parties—this information is essential for making informed choices during elections. But the Electoral Bond Scheme hid the identity of donors, making it impossible to trace who gave money to whom. This lack of transparency, they said, directly undermines democracy.
2. It Creates Inequality (Article 14)
The scheme removed the limit on how much money a company could donate, even allowing loss-making or shell companies to give unlimited amounts. This, they argued, favored big businesses and allowed them to influence politics far more than ordinary citizens. It also meant that ruling parties could benefit more, since companies might donate to avoid trouble or stay in favor.
3. Threat to Free and Fair Elections
By keeping donations secret, the scheme made it hard to spot quid pro quo deals—where money is exchanged for political favors. The petitioners felt that this setup promoted crony capitalism and could easily distort election outcomes, violating the basic principles of our democratic system.
4. Misuse of the Money Bill Route
The government pushed these changes through as a Money Bill, which meant the Rajya Sabha (Upper House) couldn’t properly debate or block them. The petitioners said this was unconstitutional and manipulated procedure—because these changes went beyond financial matters and involved broader policy.
5. Foreign Influence is a Risk
Changes to the Foreign Contribution Regulation Act (FCRA) now allowed political parties to accept foreign donations. The petitioners saw this as a serious risk to national security—foreign entities could potentially buy influence in Indian politics.
Issues Raised by the Government (Union of India)
The government, on the other hand, defended the scheme, saying it was designed to improve how political parties are funded. Their main arguments were:
1. Fighting Black Money
One of the government’s biggest goals was to clean up political donations. Electoral bonds meant money would now go through banks and official channels—so it would be harder to use cash or shady transactions.
2. Protecting Donor Anonymity
The government said many donors are afraid of backlash—they worry that if their names are made public, rival parties might target them. So, keeping donations anonymous was a way to protect their freedom and encourage honest giving.
3. It’s Optional
No one was being forced to use electoral bonds. The scheme was voluntary, and any party or donor could still use other legal methods to give or receive money.
4. All Legal and Proper
They insisted that Parliament had every right to pass these changes. Since the scheme was about financial instruments and taxation, they believed it fit the criteria of a Money Bill under the Constitution.
5. Balancing Transparency with Security
While full disclosure might sound ideal, the government felt it could discourage donations or even cause economic harm. They claimed the scheme struck a balance between transparency and donor protection.
Contention
Petitioners’ Arguments:
[A] Unfair Influence on Elections
Petitioners argued that the amendment to Section 182(1) seriously harmed the principle of free and fair elections.
Originally, the law restricted corporate donations: companies had to be at least 3 years old, couldn’t give more than 7.5% of their average profits over the last 3 years, and needed board approval.
After the amendment, these safeguards were removed. Now, even shell companies or those not making profits could donate unlimited funds—opening the door to crony capitalism.
Instead of increasing transparency, the petitioners said, the scheme made political funding even more opaque.
[B] Violation of Article 14 – Right to Equality
They claimed that the scheme favored larger, well-established parties that already had connections with big companies.
Smaller parties, independents, and those representing marginalized communities were at a disadvantage.
Using Article 14, they argued that any law that classifies or treats groups differently must:
Be based on clear and logical differences, and
Have a reasonable connection to its purpose.
The Electoral Bond Scheme failed this test—it did more harm than good, especially by keeping voters in the dark about funding sources.
Respondent’s Arguments:
[A] Encouraging Legal, Clean Donations
The government said the changes motivated companies to donate legally, rather than in untraceable cash.
Before the scheme, companies avoided donating via cheques because they’d have to disclose recipient details, risking backlash.
With the bonds, anonymity gave donors confidence and reduced the use of black money.
[B] Does Not Violate Article 14
They cited the Supreme Court’s “twin test” of classification (from Shayara Bano): laws can treat groups differently if it’s logical and related to the law’s goal.
The scheme limits misuse by allowing only registered political parties that secured at least 1% of the vote to cash bonds—so fake parties can’t benefit.
The goal, they argued, was to curb unaccounted donations realistically, not just theoretically.
ISSUE II: Right to Information, Shareholder Rights, and Amendments to Other Laws
Petitioners’ Arguments:
[A] Violation of the Right to Information (Article 19(1)(a))
Section 29C of the Representation of the People Act originally required parties to disclose donors giving more than ₹20,000.
After the amendment, donations via electoral bonds didn’t need to be reported—which, the petitioners said, violated the citizens’ right to know.
Since voters have the right to understand who funds political parties, this secrecy went directly against democratic principles.
[B] Violation of Shareholder Rights and Business Freedom (Article 19(1)(g))
The Companies Act amendment lets companies report only the total amount donated, not who they donated to.
This kept shareholders in the dark about the political affiliations of the company they invested in.
Petitioners said this created an informational imbalance, where auditors, the Election Commission, shareholders, and the public were denied critical details—violating economic and participatory rights.
Respondents’ (Government’s) Arguments:
[A] Amendments Enhance Transparency While Protecting Donor Rights
According to the government, anonymity was necessary to shield donors from being targeted for supporting a particular party.
They argued that the citizens’ right to know isn’t absolute—it has to be balanced against the donor’s right to privacy and free political expression under Article 19(1)(a).
Parties still had to maintain audited accounts, which they had to file with the Election Commission.
[B] Shareholder Interests Are Not Harmed
Shareholders would still know the total amount their company donated, even if the recipient party wasn’t named.
This, the government claimed, did not interfere with shareholder rights, as the broader financial picture remained visible.
[C] Tax Reforms Support Legitimate Funding
Changes to the Income Tax Act ensured that donations via bonds were tax-exempt, but only if they followed formal, traceable channels—no cash allowed over ₹2,000.
These measures aimed to reduce black money in politics by encouraging donations through regulated, bank-linked channels.
Rationale
1. Democracy Depends on Transparency
This case is fundamentally about protecting the integrity of our democracy. For voters to make informed choices, they need to know who is financially backing political parties. When such donations are hidden, it creates a serious problem—people can’t see who might be influencing political decisions behind the scenes.
2. Right to Know is a Fundamental Right (Article 19(1)(a))
The Constitution gives every citizen the right to freedom of speech and expression, and this has been interpreted to include the right to access political information—including information about how political parties are funded
Before this scheme, political parties had to report donations over ₹20,000 to the Election Commission. But with electoral bonds, this requirement was removed, meaning massive donations could go undisclosed. The petitioners argued that this was a clear violation of the right to know, which is essential for voters to hold their representatives accountable.
3. Violating the Right to Equality (Article 14)
The scheme also raised concerns under Article 14, which guarantees equality before the law. One major issue was the removal of the cap on corporate donations. Now, even companies that don’t make profits—or are simply shell companies—can give unlimited funds to political parties.
This puts smaller parties and independent candidates at a major disadvantage, as they don’t have the same access to large corporate donors. The system unfairly favors big, well-connected political parties and allows wealthy corporations to have an outsized influence on policy and elections.
4. Misuse of Money Bill Route
Another major concern was the way these changes were passed—in the form of a Money Bill, which doesn’t require approval from the Rajya Sabha (Upper House). This meant the government avoided proper parliamentary debate and scrutiny.
But the changes affected laws that go far beyond taxation—they impacted election rules, corporate donations, and foreign contributions. Using a Money Bill to push these amendments was seen as unconstitutional and a misuse of legislative procedure.
5. Free and Fair Elections Are Part of the Constitution’s Core
The Supreme Court has said that free and fair elections are part of the Constitution’s basic structure, meaning they can’t be tampered with. The Electoral Bond Scheme, by encouraging large anonymous donations, risks turning elections into a battle of wealth rather than ideas.
If political parties are funded by secretive, powerful interests, it raises the danger of crony capitalism—where policy decisions benefit big donors instead of the public. That’s a serious threat to democracy, where every citizen is supposed to have an equal say.
Defects of Law
1. Lack of Donor Transparency
One of the major flaws was that the scheme allowed political donations to remain completely anonymous. Neither the public, nor opposition parties, nor even shareholders of donating companies could find out which party received how much, and from whom. This defeated the purpose of transparency in political funding and denied citizens the right to make informed electoral choices.
2. Unchecked Corporate Influence
The removal of the 7.5% donation cap on companies allowed even newly-formed, loss-making, or shell companies to donate unlimited funds. This made it easy to route vast sums of money to political parties, raising serious concerns about crony capitalism and policy manipulation. It also created an uneven playing field, where wealthier parties with stronger corporate ties gained an unfair advantage.
3. Bypassing Shareholder Oversight
Amendments to the Companies Act meant companies no longer had to disclose which parties they donated to—only the total amount. This kept even the company’s own shareholders in the dark, removing a key check against misuse of corporate funds for political purposes.
4. Misuse of the Money Bill Route
Several important legal changes—touching areas like elections, company law, foreign funding, and tax exemptions—were pushed through as part of a Money Bill. This meant the Rajya Sabha had no power to challenge or modify these changes. Critics argued this was a manipulation of procedure that allowed the government to avoid full parliamentary scrutiny, violating the spirit of the Constitution
5. Dilution of Voter Rights under Article 19(1)(a)
The scheme blocked voters from knowing the financial backers of political parties, which undermined the fundamental right to information. This right is a key part of free speech and expression, and essential to making meaningful democratic choices during elections.
6. Arbitrary and Discriminatory Framework (Article 14 Violation)
The scheme created a legal structure that favored big, established political parties, especially those in power, by attracting more corporate donations. Smaller or independent parties couldn’t compete on equal terms. This violated the constitutional principle of equality, as the law gave disproportionate advantages to certain groups.
7. Opening the Door to Foreign Funding
Amendments to the Foreign Contribution Regulation Act (FCRA) allowed political parties to receive donations from foreign companies operating in India. This raised serious concerns about foreign influence on Indian elections and national policy, and compromised sovereignty and national security.
These legal defects collectively created a system that reduced transparency, encouraged unequal access to political power, and weakened democratic accountability—all of which run counter to the values enshrined in the Indian Constitution.
Inference
The major inference from this decision was carved out that any government cannot blindly ply according to their will and they cannot make laws that make the eligible voters of this country astray. Money has been an integral part of Indian politics and business along with political alliance are like a hand in glove situation. The supreme court in this case made a landmark decision referring to future governments to be cautious in making laws since there is always a watchdog in the form of Supreme Court present, following the rule of checks and balances.
Democracy cannot thrive in secrecy. While the government argued that the scheme curbed black money, the overwhelming secrecy it enabled instead created an opaque system vulnerable to misuse, unequal access, and political favoritism. The electoral bond scheme, as designed, failed to strike a constitutionally acceptable balance between protecting donor privacy and ensuring voter transparency.
Ultimately, the case underscores that transparency in political funding is not optional in a democracy—it is foundational. A lack of it erodes public trust, compromises electoral integrity, and weakens democratic institutions.
Citations (20th Bluebook)
Type of Petition: Writ Petition
The petition was filed under Article 32 of the Constitution of India which empowers individuals to approach to file a PIL.
Year of Filing of Case: 2017
Year of Judgement: 15th February 2024
Citation: 2024 INSC 113; [2024] 2 S.C.R 420
Case Number: Writ petition (Civil) No. 880 of 2017
Page Number: starts on page 420
Bench: CJI D.Y Chandrachud
Justice Sanjiv Khanna
Justice B.R Gavai
Justice J.B Pardiwala
Justice Manoj Mishra
Author: Ayan Ali Jafri
College name: Prestige Institute of Management and Research (Department of law) , Indore