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Challenging the Electoral Bond Scheme


Political parties in India have traditionally resisted public scrutiny of their fund sources and utilization due to the substantial amounts required to finance their operations, which cannot be solely sourced from party members and altruistic donors. Instead, these funds typically come from Big Business with expectations of reciprocity.


GS2- Important Aspects of Governance, Transparency and Accountability, Elections

Mains Question:

Discussing the evolution of political funding in India, analyse how legislative measures have acted as a barrier to the country’s citizen’s Right to Information. (15 marks, 250 words).

Political Funding and the Right to Information:

  • Civil society has long advocated for empowering voters by providing better access to information about electoral candidates and enhancing transparency in political funding.
  • Public interest litigation (PIL) has been effectively utilized in this campaign, emphasizing the citizen’s democratic right to information, an integral aspect of the fundamental right to speech and expression under the Constitution.
  • Despite these efforts, the political establishment has attempted to undermine these achievements through legislative manoeuvres and intricate schemes aimed at concealing the identities of corporate donors.

Attempts to make the System of Funding Opaque:

  • The United Progressive Alliance government introduced the Electoral Trusts Scheme in 2013, and the succeeding National Democratic Alliance government devised the more comprehensive Electoral Bond Scheme (EBS).
  • To pave the way for the EBS’s introduction in January 2018, safeguards limiting the influence of foreign money and big business in India’s democratic system were systematically dismantled.
  • The Foreign Contribution (Regulation) Act (FCRA) was retroactively amended in 2016 to allow Indian subsidiaries of foreign companies to donate to political parties, preventing disqualification for the Bharatiya Janata Party (BJP) and the Indian National Congress (INC) for violating the ban on foreign contributions.
  • An overhaul of the regulatory framework, including amendments to the Representation of the People Act (RPA), the Companies Act, the Income Tax Act, and the Reserve Bank of India (RBI) Act in 2017, further facilitated the introduction of the EBS.
  • Despite objections from the RBI, the Election Commission of India (ECI), and opposition parties, incorporating amendments into the Finance Bill expedited their passage without full legislative consideration.

Questions Raised in this Regard:

  • Before the EBS’s implementation, the Association for Democratic Reforms (ADR) and Common Cause filed a PIL challenging the constitutionality of the amendments to the legal framework of corporate donations introduced by the Finance Act of 2017.
  • The petition argued that these amendments violated the citizen’s fundamental ‘Right to know’ under Article 19(1)(a), without being justified by permissible restrictions under Article 19(2). The legality of the FCRA amendment through the Finance Act of 2016 was also contested.
  • The essence of the petition contended that the contested amendments posed a threat to the country’s autonomy, undermined transparency, encouraged corrupt practices by removing caps on corporate donations, and allowed contributions from loss-making and shell companies.

Effects of the above Amendments:

  • Consequently, the connection between politics and big business became more obscure. The instrument was seen as enabling special interest groups, corporate lobbyists, and foreign entities to exert control over the electoral process and influence the country’s governance to the detriment of the public.
  • The amendments, by relieving political parties of the obligation to disclose donor particulars, eroded the Election Commission of India’s (ECI) constitutional role and deprived citizens of crucial information regarding electoral funding.
  • Additionally, using a money bill to amend relevant laws was seen as subverting the legislative scheme outlined in the Constitution.

Present Status of Electoral Funding:

  • Over time, electoral bonds have become the preferred method of political donation, with bonds totaling ₹13,791 crore sold in 27 tranches until July 2023.
  • Research by the Association for Democratic Reforms (ADR) revealed that electoral bonds accounted for 55.9% of the ₹9,188 crore in donations received by 31 political parties.
  • While political parties may not solely depend on these inflows to meet their substantial funding needs, the receipts from electoral bonds enable them to engage with the formal economy, covering costs such as infrastructure expansion, equipment, and media publicity.
  • This advantage enhances their ability to influence voter behavior and electoral outcomes over rivals.
  • After a six-year wait, the challenge to the constitutionality of electoral bonds is nearing resolution. Meanwhile, several elections have taken place, with political entities in power benefiting from increased corporate contributions due to the Electoral Bond Scheme (EBS).

Government’s argument:

  • Notably, the government has emphasized the need to protect donor anonymity to shield them from retaliation by political rivals.
  • The Solicitor General argued that anonymity is essential to the right to privacy, although this fundamental right is not applicable to artificial legal entities.
  • The majority of electoral bond sales, over 94%, are in one-crore rupee denominations, beyond the capacity of individual donors.
  • Moreover, details of individuals contributing ₹20,000 and above are disclosed in party accounts, raising questions about the need for greater protection for corporate donors.


The pending public interest litigation (PIL) has experienced periods of inactivity interspersed with brief periods of activity. The Constitution Bench has expedited the hearing, and given the strength of the case against the scheme and the Supreme Court’s track record in expanding the right to freedom of speech and expression, there is optimism that the next round of elections will be contested on a relatively level playing field.

February 2024