Controversial Electoral Bond Schemes Sparks Constitutional Concerns

Author – Arpit Garg (IMS Unison University, Dehradun)

Co-Author – Daksh Sharma (IMS Unison University, Dehradun)


On February 15, a bench of five judges headed by Chief Justice DY Chandrachud declared the electoral bond unconstitutional, citing violations of the right to information and Article 19(1)(a) of the Indian Constitution, which guarantees freedom of speech. The panel also declared all amendments made to the law, including the Representation of People Act, 1951, the Income Tax Act, and other relevant acts that took place due to electoral bonds held invalid, and ordered the State Bank of India (SBI) to cease issuing electoral bonds immediately and to provide the Election Commission of India with all relevant information, including donor names and recipients.

Electoral Bonds:-

Electoral bonds are a mechanism by which the government receives anonymous donations from individuals who meet the requirements specified for such donations. They were introduced in the Finance Bill, 2017 of 2017–2018 and went into effect on January 2, 2018.       
The only entity with the authority to deal with electoral bonds is the State Bank of India. It is able to issue and redeem these bonds.

Before the introduction of the electoral bond, there was another scheme. An electoral trust was introduced in 2013 by the UPA government. An electoral trust is a legal entity that collects voluntary contributions from individuals and companies and donates these funds to political parties. This facilitates the donation process for the government by channelising contributions through a centralized mechanism.

Only those companies that are registered under Section 25 of the Companies Act, 1956, are eligible to make an application for electoral trust. Section 29C of the Representation of People Act, 1951, says that if a party receives a donation amount of more than Rs 20,000, then the political party has to submit a report to the Election Commission of India. In this, only the person who is a citizen of India, the company that is registered in India, the person who is a resident of India, a firm, a body of individuals, or an association of persons can contribute. Those parties that are registered under the Representatives of the People Act of 1951 are eligible to receive the donation.         
One tool for making financial contributions to or funding political parties is an electoral bond. With no upper limit, these bonds are issued in multiples of Rs 1 thousand, Rs 1 lakh, Rs 10 lakh, Rs 1 crore, and Rs 10 crore. Within fifteen days of the date of issuance, these bonds are valid. These bonds are available for purchase for ten days in each of the following months: January, April, July, and October. Since the program’s inception, the Indian security press has produced 6,74,250 election bonds valued at Rs 28,531.5 crore. According to the report given by the Election Commission of India which states that from 2017–2018 to 2021–2022, the ruling party collected Rs 5,271.97 crores through electoral bonds, making it the party with the largest donation. The opposition party Indian National Congress (INC) received the second-highest donation, totaling Rs 952.29 crores by means of electoral bonds. The primary criticism of this arrangement subsequently emerged from the fact that the donor’s name is not stated on the bond.

Challenges for electoral bonds:-

1. Donors are more likely to engage in money laundering because of their anonymity than in previous cases when donors’ identities were disclosed. It is now unknown where the money came from. Because electoral bonds come in large denominations and there is no cap on the amount that may be transferred, it is easy for someone to launder a significant sum of money in a single transaction thanks to this lack of transparency, which encourages people to donate illegal cash to political parties. and turn it into white money. 

2. Election bonds violate the rights granted by the Right to Information Act of 2005, which guarantees openness between the government and the public by keeping donor information anonymous. This makes it harder for the public to learn where political funding comes from and compromises their ability to access information about political party funding, among other rights.

3. The public won’t receive any information regarding electoral bonds’ contradiction to a free and fair election, but the government will have complete access to it. This information can then be utilized to favour the donor and obstruct the process of a free and fair election.

4. Since the State Bank of India is the only central bank handling electoral bonds, it is easy for the ruling government to find out who is receiving donations from whom. This information can then be used to extort the individual by pressuring the company to make a donation to a particular political party.

‘Quid pro quo’ Senior advocate Kapil Sibal called this system quid pro quo, which means favour for favour or one hand washes the other, which means something done with the expectation of getting something. It is widely used in politics when big corporations donate money with the intention that when the political party drafts any law, they will consider the interests of the person who funded them. It is evident that the party in power receives the largest share of funding. As we can see, the Telangana Rashtra Samithi (TRS), which is currently known as Bharat Rashtra Samithi (BRS), has ruled the state for more than ten years. receives more funding than any other party in the state. Through electoral bonds, BRS was given Rs 913 crore between 2017 and 2023. In Andhra Pradesh, for example, the ruling Yuvajana Sramika Rythu Congress Party (YCP) receives more income through the electoral bond than other regional parties that are not in office. YCP was placed seventh in the nation and collected Rs 382 crore in electoral bonds.


The electoral trust retains 5% of the total funds for administrative purposes; the remaining 95% must be divided among the political parties. Electoral trusts must keep accurate records, a book of accounts, and a list of contributors and recipients. Electoral trusts must audit their trust with the Commissioner of Income tax. Through an electoral bond, the funds can be obtained by the party that received more than 1 percent of the vote in the most recent general election for the House of People or legislative assembly. Electoral bonds may only be encashed through a political party’s approved bank account, and they can be bought online or with a cheque.           

Role of SBI:-

SBI’s function in electoral bonds the only bank that handles electoral bonds is SBI, the government bank. Bonds are issued in multiples of Rs 1000, Rs 10,000, and Rs 1,00,000, with no upper limit. SBI makes it easier for the buyer to purchase these bonds by using its subbranches that are specifically assigned to this project. The bond in any denomination can be bought there by the buyer. SBI is in charge of adhering to the regulations and operating in accordance with the directives provided by the Election Commission of India. Additionally, SBI is needed to keep accurate records pertaining to electoral bonds. and it provides eligibility and other relevant information to the general public, as well as details of the purchasing process.

Case law:-

Association for Democratic Reforms & Anr versus Union of India & Ors.

The Association for Democratic Reforms, or ADR, is an association that advocates for electoral reforms enhancing political transparency constitutes one of its primary goal.

Amendments to the Foreign Contribution Regulation Act, 2010, the Representation of the People Act, 1951 (RoPA), Reserve Bank of India Act, 1934, Income Tax Act, 1961, and Companies Act, 2013 were introduced by the Finance Act, 2016. These changes made it possible for foreign corporations to give to political parties if they owned a majority stake in Indian enterprises. But the Communist Party of India (Marxist) and two non-governmental organizations, the Association for Democratic Reforms (ADR) and Common Cause, filed cases in the Supreme Court contesting the changes, claiming that the Finance Acts were improperly passed as money bills to avoid closer examination by the Rajya Sabha. Additionally, they contended that the plan authorized widespread election corruption and permitted non-transparency in political financing.

The Election Commission of India (ECI) objected to the Electoral Bonds Scheme, saying that it went against the objective of transparency in political financing and that preventing political parties from disclosing contribution information would prevent the public from learning about foreign funding. Political parties, according to the Union administration, mostly received financial contributions, creating an “unregulated flow of black money.”

The Supreme Court ordered all political parties to provide the ECI with donor information, bank account numbers, and donation details. The petitioners repeatedly came before the Court, but no stay on the scheme’s implementation was granted by the Bench. On February 15, 2024, the Court ruled unanimously that the Union’s 2018 Electoral Bonds (EB) Scheme was unconstitutional due to its infringement on voters’ constitutionally guaranteed right to information under  Article 19(1)(a).


Declaring the electoral bond unconstitutional was a controversial decision because, while the public can access the data about the electoral bond we registered, which ultimately keeps the system transparent, it also makes it difficult to find out who is making the donations and has a negative effect on the system. However, revealing the names of contributors is regarded as a negative thing; this will cause issues for the donors since the government who is in power will put pressure on them to give to people they did not.