In 2018, the government introduced electoral bonds as a means of political funding, allowing anonymous donations to political parties through the State Bank of India (SBI). However, this move faced opposition, notably from the Association for Democratic Reforms (ADR), a civil society organization advocating for electoral reforms.

A significant turn of events occurred on February 15, 2024, when the Supreme Court delivered a landmark verdict. It declared the electoral bonds scheme unconstitutional, citing violations of citizens' right to information. Additionally, the court struck down amendments to the Companies Act permitting unlimited corporate funding to political parties. The Supreme Court directed the SBI to cease issuing electoral bonds and mandated the disclosure of donor and recipient details to the Election Commission of India (ECI), which would then publish the information on its website.

Central to the court's ruling was the assertion that the electoral bonds scheme was arbitrary and infringed upon the freedom of expression guaranteed under Article 19(1)(a) of the Constitution. The court highlighted concerns regarding potential quid pro quo arrangements between donors and political parties, which could compromise the principles of free and fair elections. Emphasizing the paramount importance of the right to know in a democracy, the court criticized the lack of transparency and accountability in the scheme, raising apprehensions about the potential misuse of black money and foreign funds in the electoral process.

The verdict received widespread acclaim from activists, lawyers, and opposition parties, who viewed it as a monumental defense of democracy. However, the government expressed disappointment with the ruling and announced intentions to explore legal avenues for review, challenging the moral underpinnings of the scheme aimed at curbing black money and enhancing transparency in political funding.

What are electoral bonds and how do they work?

Electoral bonds, introduced via the Finance Act of 2017, represent a form of political funding allowing anonymous donations to registered political parties through the State Bank of India (SBI). These bonds, available in denominations ranging from Rs 1,000 to Rs 1 crore, can be purchased by any individual or entity, domestic or foreign.

Notably, the donor and recipient identities remain undisclosed to the public, the Election Commission of India (ECI), and tax authorities. The scheme underwent amendments to various legislative acts, including the Representation of the People Act, the Income Tax Act, and the Companies Act, facilitating corporate donations without a cap on net profit percentages, permitting cash donations up to Rs 2,000, and exempting parties from disclosing donations exceeding Rs 20,000.

What were the arguments against the scheme?

The petitioners challenging the scheme raised several arguments against it, such as:
They contended that the scheme violated citizens' fundamental right to information, arguing that transparency regarding the sources of political funding is essential for informed democratic participation.

Additionally, they argued that the scheme impinged upon voters' freedom of expression by depriving them of crucial information necessary for making informed electoral choices.

Critics also raised concerns about the scheme's impact on the integrity of elections, asserting that it compromised the principle of free and fair elections, a cornerstone of India's democratic framework.

Moreover, opponents argued that the scheme opened avenues for quid pro quo arrangements between donors and political parties, potentially leading to policy capture and corruption.

They further cautioned that the scheme's lack of transparency and accountability could facilitate the infusion of illicit funds, including black money and foreign contributions, into the electoral process, thus jeopardizing the nation's sovereignty and integrity.

Another contention was that the scheme was introduced without adequate public consultation or parliamentary debate, circumventing the democratic process and bypassing crucial parliamentary scrutiny, particularly in the Rajya Sabha.

What were the arguments in favour of the scheme?

The government's defense of the electoral bonds scheme rested on several key arguments:
Firstly, it contended that the scheme served the dual purpose of combating black money while simultaneously fostering transparency in political funding. This, it argued, was achieved through the mandatory utilization of banking channels and adherence to KYC norms during the purchase and encashment of bonds.

Secondly, the government asserted that the scheme offered a protective shield of privacy and anonymity to donors. It argued that without such safeguards, donors might be vulnerable to harassment or intimidation from rival political factions or state authorities if their identities were disclosed.

Thirdly, the government emphasized the scheme's role in diminishing political parties' reliance on cash donations, which it characterized as opaque and susceptible to misuse.

Furthermore, the government cited recommendations from various expert committees and reports, including those from the Law Commission, the Election Commission, and the NITI Aayog. These endorsements, it argued, lent credibility to the electoral bonds scheme as a legitimate mechanism for political funding.

Lastly, the government defended the scheme as a valid exercise of its policy-making prerogatives and legislative authority. It contended that absent clear evidence of arbitrariness or unreasonableness, judicial intervention in matters of policy formulation should be minimal.

What is the significance and impact of the verdict?

The court's ruling marks a significant milestone in upholding the foundational principles of democracy, transparency, and accountability. It ensures citizens' access to crucial information, including details of electoral bond donors and recipients, thereby reinforcing the right to information and freedom of expression. Moreover, the verdict bolsters the integrity of the electoral process by curbing the undue influence of money power and corporate interests, mitigating the risk of quid pro quo arrangements and corruption. Additionally, it serves to safeguard the nation's sovereignty and integrity by preventing the infusion of foreign funds and black money into the political domain.

Furthermore, the ruling sheds light on the government's assertions regarding the electoral bonds scheme as a means to reform political funding. Instead, it exposes the scheme's regressive nature, which runs counter to democratic principles and constitutional values. The judgment also raises pertinent questions regarding the legitimacy of amendments made to facilitate the scheme, particularly the circumvention of parliamentary scrutiny through the classification of bills as money bills.

Looking ahead, the verdict underscores the imperative for comprehensive electoral reforms and a participatory approach to address the pervasive issue of money in politics. It emphasizes the need for accountability mechanisms to ensure that political parties and candidates remain answerable to the electorate and the law. Ultimately, the court's decision signifies a triumph for democracy and the rule of law, reaffirming the judiciary's role as the guardian of constitutional principles.

In essence, the verdict heralds a new chapter in India's electoral landscape, one characterized by transparency, accountability, and public trust. It serves as a rallying call for the replacement of the electoral bonds scheme with a more transparent and accountable system of political funding, aligned with the interests of the people and the nation as a whole.

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• Electoral Bond Scheme: A Questionnaire
• Electoral Bonds Legality And Voters Right
• Electoral Bonds - the legalized form of corruption