How the Association for Democratic Reforms vs Union of India shaped the Electoral Bonds Scheme in India : Author: Soheth A Robin
In Association for Democratic Reforms v. Union of India (2024), a nine-judge Bench of the Supreme Court of India unanimously held that the Electoral Bonds Scheme (2018) was unconstitutional. The article examines the constitutional and democratic implications of the judgment. The Bench ruled that the anonymity of donors of electoral bonds derogated the right of voters to information, which is implicit in Article 19(1)(a) of the Constitution, and therefore, was not in proportion to the state's interest in checking black money in politics.
ARTICLE
ABSTRACT
In Association for Democratic Reforms v. Union of India (2024), a nine-judge Bench of the Supreme Court of India unanimously held that the Electoral Bonds Scheme (2018) was unconstitutional. The article examines the constitutional and democratic implications of the judgment. The Bench ruled that the anonymity of donors of electoral bonds derogated the right of voters to information, which is implicit in Article 19(1)(a) of the Constitution, and therefore, was not in proportion to the state's interest in checking black money in politics. In doing so, it invalidated amendments made to the Companies Act, 2013, which allowed unaccounted contributions from corporations to political parties. The Court also held that such amendments were manifestly arbitrary and therefore violated Article 14 of the Constitution. By directing the disclosure of all transaction details of electoral bonds, the judgment ensured that the curtain of opacity around political funding would be lifted. Overall, by finding the electoral bonds scheme as invalid, the Supreme Court has set a benchmark for protecting democratically elected governments against corporate capture.
Keywords: Electoral Bonds, Supreme Court of India, Political Finance, Constitution, Government
1. Introduction
The credibility of a democracy depends on the transparency of campaign financing. Through the Finance Act of 2017, political donations in India were facilitated by the Electoral Bonds Scheme, which allowed individuals and corporations to make unlimited anonymous contributions to political parties of their choice via the State Bank of India. Indeed, the government claimed that the said law aimed to ensure the transparency of political donations while protecting donors from potential revenge by the government. However, the scheme ultimately created new opportunities for corruption by removing restrictions on corporate donations, such as the 7.5% profit limitation, and the provision of public disclosure of donations.
However, in the case of Association for Democratic Reforms v. Union of India, 2024, the Supreme Court ruled that the Electoral Bonds Scheme was unconstitutional as it violated the right to information by allowing anonymous donations. Thus, the case held that the right to know who finances political parties is implicitly protected by Article 19(1)(a). Therefore, the Supreme Court ruled in favor of the petitioners.
The relevance of this case is underscored by the fact that the government wanted to provide the opportunity for firms to buy political favors in return for their donations, which were made anonymously. At the same time, the Supreme Court ruled that the very fact of anonymity violates citizens’ right to information, which is a cornerstone of democracy. Consequently, the Court emphasized the importance of transparency in political financing, which would ensure fair elections. The significance of this ruling may also be determined by the fact that the Court canceled the amendment to the law, requiring full disclosure of all donations.
2. Constitutional Challenge: ADR v. Union of India (2024)
The Supreme Court delivered a historic verdict in the case of Association for Democratic Reforms v. Union of India (2024) through a unanimous Constitution Bench headed by the Chief Justice. The judgment held that political funding transparency is an essential ingredient for free and fair elections and therefore the electoral bonds scheme was struck down as ultra vires.
Key provisions of the Electoral Bonds Scheme, 2018 that were struck down
The electoral bonds scheme was introduced by the Government of India by way of the Finance Act, 2017 that amended the following:
• Exemption of political parties from disclosing donations from electoral bonds, by way of amendment of Section 29C of the Representation of the People Act, 1951. (Removal of reporting requirement of any donation of ₹20,000 or more to the Election Commission of India).
• Removal of restriction of 7.5% of average profit for contribution by corporates to political parties by amendment of Section 182 of the Companies Act, 2013.
• Removal of requirement of political parties to maintain a register of donors of electoral bonds for availing exemption under Section 13A of the Income Tax Act, 1961.
Issues raised in the petition and the Court’s observations thereon
1. Article 19(1)(a) – The Right of Voter to Know, as interpreted in the Union of India v. Association for Democratic Reforms (2002) and PUCL v. Union of India (2003):
The Court held that the constitutional right to freedom of speech and expression would include the right of a voter to know who is financing an election, especially since funding has a direct impact on elections.
2. Proportionality Test – The Union of India’s argument that the Electoral Bonds Scheme was a proportionate means to achieve the object of curbing black money:
The Court held that the goal of the Electoral Bonds Scheme was a legitimate one but the means were not a proportionate to it as:
• Even without disclosure as envisaged under the Electoral Bonds Scheme, there were other measures that could achieve the goal, namely Electoral Trusts and the option of direct payment under Section 13A of the Income Tax Act, 1961.
• The restriction of disclosure of the identities of donors would have an adverse impact on the ability of voters to make informed decisions at the time of voting.
3. The argument that amendment of Section 182 of the Companies Act, 2013 was arbitrary and violative of Article 14:
The Court held that the amendment of Section 182 was arbitrary as unlike individual citizens, corporates do not contribute to political parties out of ideological or political solidarity but expect some quid pro quo. Since the amendment removed the cap of 7.5% of average net profit for the last three years, it may result in corporates that are not even in profit contributing to political parties, which may lead to a deal being struck where the government would give something to the corporates in return for the contribution.
Public disclosure of identities of donors following the verdict
The State Bank of India provided the details of the donors to the Election Commission of India in March 2024. The disclosure showed that over ₹16500 crores were spent through the electoral bonds since its inception in 2018 till 2024. It also emerged that a small group of big corporate houses and infrastructure, mining and pharmaceutical companies buy the biggest bonds worth ₹1 crore. Moreover, over 50% of the money donated was redeemed by the ruling party.
The verdict removed the veil of secrecy around the identity donors behind big-ticket donations to political parties and ensured transparency in political funding.
3. Conclusion
In ADR v. Union of India, the Supreme Court held that blanket donor anonymity violates the right of voters to information guaranteed by Article 19(1)(a). It further held that the impugned Scheme was not a proportionate means of achieving the end of checking unaccounted cash. Further, the removal of caps on corporate donations was said to be manifestly arbitrary under Article 14 since it allowed the capture of the electoral process by shell corporations. The judgment achieved some long-awaited transparency in political funding and restored faith in the fairness of elections. Yet India still requires comprehensive electoral funding reform to ensure that political donations are transparent and do not affect election outcomes. The Supreme Court's decision will go a long way in curbing the flow of unaccounted money into the political system.
References
1. Kaur, J. (2026). ASSOCIATION FOR DEMOCRATIC REFORMS & ANR. v. UNION OF INDIA & ORS. Zenodo (CERN European Organization for Nuclear Research). https://doi.org/10.5281/zenodo.22665759
2. Sahoo, N. (2024). Political finance in the digital age: The case of India. https://doi.org/10.31752/idea.2024.30
3. Choudhary, V. (2026). Justice K.S. Puttaswamy (Retd.) v. Union of India, 2017. Zenodo (CERN European Organization for Nuclear Research). https://doi.org/10.5281/zenodo.20988912
4. Election Commission of India, Disclosure of Electoral Bonds Data as Supplied by State Bank of India(published pursuant to directions in Ass'n for Democratic Reforms v. Union of India, W.P. (C) No. 880/2017) (Mar. 14/21, 2024).