Association for Democratic Reforms v. Union of India: how the Electoral Bonds Scheme was unanimously struck down

The Supreme Court's unanimous judgment of 15 February 2024 in Association for Democratic Reforms v. Union of India is the most consequential intervention in the architecture of political funding in the Republic's history. A five-judge Constitution Bench — Chandrachud, C.J., sitting with Sanjiv Khanna, J., B.R. Gavai, J., J.B. Pardiwala, J., and Manoj Misra, J. — struck down the Electoral Bonds Scheme and each of the statutory amendments enacted through the Finance Act, 2017, that had constructed the architecture.

The judgment is doctrinally important on three connected propositions: the right of the voter to information about the funding of political parties, the proportionality framework that constrains restrictions on Article 19(1)(a), and the constitutional limits of donor confidentiality as a justification for opacity in political funding.

The architecture struck down

The Electoral Bonds Scheme had been notified by the Government of India in January 2018, following amendments to four statutes enacted as part of the Finance Act, 2017. The amendments had operated together to construct an architecture for anonymous political donations.

The Reserve Bank of India Act, 1934 had been amended through the insertion of Section 31 to permit the issuance of electoral bonds by a scheduled bank notified by the Central Government — in practice, the State Bank of India. The bonds, in denominations from ₹1,000 to ₹1 crore, would be available for purchase by any citizen or company through specified SBI branches, and could be redeemed by an eligible political party within a specified window. The architecture preserved the identity of the donor as a matter between the donor and SBI; the political party redeeming the bond would not know — and the public would not be able to ascertain — who the donor was.

The Companies Act, 2013 had been amended to remove two restrictions on corporate political donations. Section 182, which had earlier required a company to have been in existence for three financial years before making a political donation and which had capped donations at 7.5 per cent of the average net profits of the preceding three years, was amended to remove both the qualifying period and the percentage cap. The requirement of board approval before a donation was relaxed. The provision requiring disclosure of the recipient in the company's profit-and-loss account was modified to require only the aggregate.

The Income Tax Act, 1961 had been amended through Section 13A to remove the requirement that political parties disclose to the Income Tax authorities the names of contributors of sums in excess of ₹20,000 where the contribution was made through electoral bonds.

The Representation of the People Act, 1951 had been amended through Section 29C to similarly exclude electoral-bond contributions from the disclosure obligations of political parties.

The combined effect was an architecture of anonymous donation, unlimited in quantum, unconstrained by the corporate-governance protections that had previously operated, and shielded from disclosure to the tax authorities and to the Election Commission.

The constitutional challenge

The petitioners — including the Association for Democratic Reforms, Common Cause, the Communist Party of India (Marxist), and others — challenged the architecture on three principal grounds.

The first was that the architecture violated the voter's right to information about political funding. The right to information had been recognised in the Article 19(1)(a) line of authority — from Indian Express Newspapers v. Union of India (1985) to Union of India v. Association for Democratic Reforms (2002) and People's Union for Civil Liberties (PUCL) v. Union of India (2003) — as a constitutionally protected dimension of free expression. The information that the architecture withheld — who was funding which political party, in what amounts, and on what schedule — was precisely the kind of information that the right to information was constructed to protect.

The second was that the architecture was disproportionate to its asserted objectives. The asserted objectives — curbing the use of unaccounted money in political funding and preserving donor confidentiality to protect donors from retaliation — could be served by means less restrictive of the right to information than complete anonymity. The architecture failed the proportionality test that the Court had articulated in Modern Dental College v. State of Madhya Pradesh (2016) and refined in K.S. Puttaswamy v. Union of India (2017).

The third was that the corporate-governance changes — particularly the removal of the 7.5 per cent cap on corporate donations — created the conditions for quid pro quo arrangements between corporate donors and political parties, in a manner inconsistent with the constitutional architecture for fair elections.

The Court's reasoning

The Bench accepted each of the three principal grounds.

On the right to information. The judgment held that the voter's right to information about political funding is a constitutionally protected dimension of Article 19(1)(a). The reasoning rested on three connected propositions. The first was that voting is a meaningful exercise of democratic participation only when the voter has access to the information necessary to evaluate the political parties seeking the voter's support. The second was that the funding of political parties is information that is materially relevant to that evaluation — because economic resources translate into political influence, and because the architecture of political funding shapes the conduct of political parties in office. The third was that the State has a constitutional obligation to facilitate access to this information, not to construct architectures that obscure it.

The Bench engaged with the Government's argument that donor confidentiality served the legitimate interest of protecting donors from retaliation. The Court accepted that donor confidentiality could, in some respects, be a legitimate interest — but held that it was not adequate to justify the complete anonymity that the Scheme had constructed. Donor confidentiality could be served by less intrusive measures; the right to information required at least some disclosure.

On proportionality. The judgment applied the four-prong proportionality test that the Court had developed in the post-Puttaswamy jurisprudence: (i) the measure must be designated for a legitimate purpose; (ii) the measure must have a rational connection with that purpose; (iii) there must be no less restrictive but equally effective alternative available to achieve the purpose; and (iv) the measure must, in substance, not produce a disproportionate impact on the right.

The Bench held that the Scheme failed at the third prong. Less restrictive alternatives — including capped disclosure, disclosure to the Election Commission alone with confidentiality maintained from the political party, or partial disclosure for donations above a threshold — could have served the asserted objectives with less intrusion on the right to information. The Scheme's complete anonymity could not be justified as the only or the least intrusive means.

On the corporate-governance changes. The Bench held that the removal of the 7.5 per cent cap on corporate donations, taken together with the removal of the disclosure requirements, produced an architecture that was constitutionally unsustainable. The cap had served the purpose of preventing the concentration of political influence in a small number of corporate donors. Its removal — combined with the anonymity architecture — created the conditions for the very quid pro quo arrangements that the constitutional architecture for fair elections was designed to prevent.

The consequential directions

Having struck down the architecture, the Bench issued consequential directions. The principal directions were addressed to the State Bank of India, which had been the issuer of electoral bonds.

SBI was directed to submit, to the Election Commission of India, the details of all bonds purchased and redeemed between the operation of the Scheme and its striking down. The details were to include the dates of purchase and redemption, the denominations, the identity of the purchasers, and the identity of the political parties that had redeemed the bonds. The Election Commission was directed, in turn, to publish this information on its website within a specified timeline.

The directions produced — in the weeks that followed — an extensive public record of who had purchased electoral bonds and which political parties had received the corresponding donations. The compliance was, in places, contested; SBI sought and was granted a brief extension. But the substantive disclosure architecture that the judgment had directed was, in the end, implemented.

The doctrinal context

ADR sits within a substantial Article 19(1)(a) line of authority on the voter's right to information. Union of India v. Association for Democratic Reforms (2002) had recognised the right of the voter to know the criminal background and educational qualifications of electoral candidates. PUCL v. Union of India (2003) had reinforced and operationalised that right. Lily Thomas v. Union of India (2013) had disqualified convicted legislators with the effect of operationalising the voter's right to information about the legal status of representatives.

The ADR (2024) judgment extends this line to the funding of political parties. The doctrinal logic — that meaningful participation in democratic processes requires access to information about the parties seeking the voter's support — is the through-line.

What the judgment did not decide

Two limits should be flagged.

First, the judgment struck down the Electoral Bonds Scheme but did not articulate a comprehensive constitutional framework for political funding. The architecture that should replace the Scheme — whether through statutory amendment, executive notification, or judicial direction — has been left to the political branches.

Second, the judgment's disclosure directions operated on bonds already purchased and redeemed under the Scheme. The doctrinal frame for future disclosure architectures — including disclosure thresholds, the role of the Election Commission, and the relationship between donor confidentiality and the right to information — will need to be developed through future statutory or judicial work.

What practitioners take from the judgment today

For constitutional litigators in the Article 19(1)(a) and elections space, ADR (2024) is the operative authority on the relationship between the voter's right to information and political funding. The architecture of any future disclosure regime will be examined against the doctrinal frame that the judgment has set.

For litigators in the corporate-law space, the judgment is the authority that has restored — by implication — the architecture of constraints on corporate political donations. The 7.5 per cent cap, the qualifying period, the board approval requirement, and the disclosure obligations were each struck down through the Finance Act amendments; with the amendments struck down, the prior corporate-governance architecture has, on the most common reading, been restored.

For the broader profession, the judgment is the substantial Constitution Bench intervention in the architecture of political funding in a generation. The disclosure record that has, since, been produced is part of the political-history record of the period.

Related editorial pieces

• Kesavananda Bharati v. State of Kerala: the basic structure doctrine
• K.S. Puttaswamy v. Union of India: the right to privacy
• Kedar Nath Singh v. State of Bihar: sedition and the limits of Article 19(1)(a)
• Subramanian Swamy v. Union of India: criminal defamation and free speech