🔎 1. Background

The Electoral Bonds Scheme, 2018, notified by the Government of India, allowed any person or company to buy bonds from the State Bank of India and donate them to registered political parties anonymously. The scheme amended:

• Section 29C, Representation of the People Act, 1951
• Section 182, Companies Act, 2013
• Section 13A, Income Tax Act, 1961

Key features of the scheme included:
✅ No disclosure of donor identity to the public
✅ Corporate donors allowed 100% profit donations, replacing previous 7.5% cap
✅ Bonds redeemable only by parties within 15 days, effectively funneling funds quickly and secretly.

Petitioner: Association for Democratic Reforms (ADR) challenged the scheme, arguing it legalized opaque political funding and violated voters’ right to know under Article 19(1)(a).

⚖️ 2. Key Legal Issues

1️⃣ Whether anonymous electoral bonds violate citizens’ fundamental right to information about political funding.
2️⃣ Whether the amendments to Companies Act and Representation of the People Act made via Finance Acts are unconstitutional for bypassing parliamentary scrutiny.
3️⃣ Whether the scheme violates the principles of free and fair elections, central to India’s democracy under the basic structure doctrine.

📝 3. Supreme Court’s Findings

🏛️ Bench: 5-judge Constitution Bench

• CJI D.Y. Chandrachud, Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala, and Manoj Misra.

📜 Majority Opinion:

✅ Violation of Article 19(1)(a)

• The court held that the right to information about political parties’ funding is part of the fundamental right to freedom of speech and expression.
• Electoral bonds create information asymmetry, where voters remain in the dark about who funds political parties.

✅ Unconstitutional Amendments

• The amendments enabling electoral bonds undermine transparency, and the removal of limits on corporate donations effectively allows unlimited corporate influence over politics.

✅ Threat to Free and Fair Elections

• Anonymous donations skew the playing field in favour of ruling parties, as data showed ruling parties receiving a disproportionate share of electoral bonds.

✅ Doctrine of Proportionality Applied

• The scheme failed the proportionality test, as the restriction on voters’ right to know was not necessary or the least restrictive method to achieve legitimate aims like preventing black money.

🛑 Held: Electoral Bonds Scheme unconstitutional

The scheme was struck down entirely, and SBI was directed to disclose details of all electoral bond transactions since the scheme’s inception.

📚 4. Constitutional Principles Applied

🗝️ A. Right to Know under Article 19(1)(a)

Building on State of UP v. Raj Narain (1975) and PUCL v. Union of India (2003), the court reaffirmed that voters have a fundamental right to know the financial details of political parties.

🗝️ B. Basic Structure Doctrine

The court emphasized that free and fair elections are part of the basic structure of the Constitution, and any measure undermining electoral integrity is unconstitutional.

🗂️ 5. Evidence & Data Considered

• ADR submitted data showing ₹12,000 crore worth of electoral bonds issued since 2018, with 76% purchased anonymously.
• 50% of bonds were redeemed by the ruling party.
• Corporate donations via shell companies increased manifold after the scheme.

📌 6. Significance of the Judgment

✅ Landmark Win for Electoral Transparency
The judgment restores accountability in political funding, one of the biggest sources of corruption in Indian politics.

✅ Curtails Corporate Influence
It reimposes pre-2018 caps on corporate donations, ensuring corporate entities do not disproportionately control electoral outcomes.

✅ Strengthens Democracy
By ensuring voters know who funds whom, the judgment strengthens informed electoral choices, a cornerstone of a healthy democracy.

✅ Judicial Oversight on Money Bills
Though the judgment did not conclusively rule on whether the scheme’s passage as a Money Bill was constitutional (unlike Aadhaar case), it flagged concerns over repeated misuse of the Money Bill route.

🌎 7. Comparative Perspective

Countries like the United States (post-Citizens United ruling) face similar challenges of dark money in politics. The Supreme Court of India’s stand contrasts with the U.S., where anonymous super PAC funding is allowed, making India’s judgment a progressive global precedent for electoral integrity.

📝 8. Directions Issued

1️⃣ SBI must publish all details of electoral bond purchases and redemptions, including donor and recipient information, on its website.
2️⃣ Government cannot issue new electoral bonds.
3️⃣ Political parties must return unredeemed bonds immediately.

📚 9. References

• Association for Democratic Reforms v. Union of India, (2024) 5 SCC 1.
• People’s Union for Civil Liberties v. Union of India, (2003) 4 SCC 399.
• State of UP v. Raj Narain, (1975) 4 SCC 428.
• Representation of the People Act, 1951.
• Companies Act, 2013.

🏁 10. Conclusion

The Supreme Court’s judgment striking down electoral bonds marks a watershed moment in India’s democratic journey. It establishes a clear constitutional mandate: political funding must be transparent to preserve the core values of free and fair elections. The verdict may catalyze comprehensive electoral finance reforms in the near future.