Association for Democratic Reforms and Another v. Union of India and Others

Case name:-Association for Democratic Reforms & Anr. v. Union of India &Ors.

(The Electoral Bonds Case)

Case Citation and Basic Information

Full Case Name	Association for Democratic Reforms and Another v. Union of India and Others
Citation	2024 INSC 113; (2024) 5 SCC 1; 2024 SCC OnLine SC 150
Court	Supreme Court of India (Constitution Bench)
Date of Decision	February 15, 2024
Bench Composition	5-Judge Constitution Bench: •   Dr. D.Y. Chandrachud, C.J.I. (authored primary judgment for himself, Sanjiv Khanna, B.R. Gavai, and J.B. Pardiwala, JJ.) •   Sanjiv Khanna, J. (concurring opinion) •   B.R. Gavai, J. •   J.B. Pardiwala, J. •   Manoj Misra, J.
Petitioner(s)	Association for Democratic Reforms (ADR), Communist Party of India (Marxist), Dr. Jaya Thakur, and others
Respondent(s)	Union of India, State Bank of India (SBI), Election Commission of India (ECI)

Introduction

The landmark judgment of Association for Democratic Reforms v. Union of India (2024)[1] represents a monumental watershed moment in Indian constitutional law, electoral reform, and democratic governance. Decided by a unanimous 5-Judge Constitution Bench of the Supreme Court of India, the ruling invalidated the controversial Electoral Bond Scheme (EBS), 2018, which allowed individuals and corporate entities to donate unlimited, anonymous sums of money to recognized political parties through specialized promissory notes issued by the State Bank of India (SBI).

The significance of this judgment stems from its rigorous defense of voters’ fundamental rights under Article 19(1)(a) of the Constitution of India—specifically the implicit fundamental “right to know” essential information regarding political funding.[2] By striking down amendments made to the Reserve Bank of India Act, 1934, the Representation of the People Act, 1951, the Companies Act, 2013, and the Income Tax Act, 1961, the Supreme Court re-asserted that financial opacity in elections undermines free and fair elections, distorting the democratic principle of “one person, one vote” into “one rupee, one vote.” The decision dismantled a corporate-political nexus that had institutionalized anonymous lobbying, foreign influence risk, and regulatory capture under the guise of curbing black money.

Facts of the Case

In the Union Budget of 2017–2018, the Government of India announced the introduction of Electoral Bonds as a novel instrument aimed at cleansing political funding and bringing banking-channel legitimacy to electoral donations. To facilitate the implementation of the scheme, the Finance Act, 2017 introduced widespread non-germane structural amendments as a ‘Money Bill’ across four primary statutes:

• Section 135 of the Finance Act, 2017[3] : Amended Section 31 of the Reserve Bank of India (RBI) Act, 1934, authorizing the Central Government to empower any scheduled bank to issue electoral bonds.

• Section 137 of the Finance Act, 2017[4]: Amended Section 29A and Section 29C of the Representation of the People Act (RPA), 1951, exempting political parties from disclosing details of contributions received through electoral bonds in their annual contribution reports submitted to the Election Commission of India (ECI).

• Section 154 of the Finance Act, 2017[5]: Amended Section 182 of the Companies Act, 2013, removing the cap on corporate donations (previously limited to 7.5% of the company’s average net profits over the preceding three financial years) and eliminating the mandate requiring companies to disclose individual political party recipient details in their Profit and Loss Accounts.

• Section 11 of the Finance Act, 2017[6]: Amended Section 13A of the Income Tax Act, 1961, exempting political parties from maintaining books of accounts regarding political contributions received through electoral bonds.

On January 2, 2018, the Ministry of Finance officially notified the Electoral Bond Scheme, 2018.[7] Under the Scheme, electoral bonds were defined as bearer promissory notes payable to the bearer on demand, issued in denominations of ₹1,000, ₹10,000, ₹100,000, ₹1,000,000, and ₹10,000,000 by designated branches of the State Bank of India (SBI). The bonds were available for purchase by any Indian citizen or entity incorporated in India during specified 10-day periods in each quarter. The bonds carried no buyer or recipient name, had a validity period of 15 calendar days, and could only be redeemed by eligible political parties (registered under Section 29A RPA, 1951, having secured at least 1% of votes polled in the last general or state assembly election) through a designated SBI bank account.

Critically, the scheme guaranteed absolute anonymity: the buyer’s identity was protected under banking confidentiality, inaccessible to the public, competing political parties, or investigative agencies (except under court orders or police demands). Prior to the scheme’s notification, constitutional institutions including the Reserve Bank of India (RBI) and the Election Commission of India (ECI) raised grave structural objections. The RBI warned that bearer bonds could lead to money laundering and currency destabilization.[8] While the ECI filed a counter-affidavit stating that deleting disclosure mandates constituted a “retrograde step” that compromised electoral transparency.[9]

In late 2017 and early 2018, public interest litigations (PILs) were instituted before the Supreme Court by the Association for Democratic Reforms (ADR), the Communist Party of India (Marxist), Dr. Jaya Thakur, and others, challenging the constitutional validity of the EBS and statutory amendments. After years of interim hearings, the matter was referred to a 5-Judge Constitution Bench in October 2023, which reserved judgment after exhaustive arguments in November 2023

Legal Issues

The Constitution Bench framed four central questions of law for its determination:

1. Whether the Electoral Bond Scheme, 2018 and the consequential amendments to Section 29C of the Representation of the People Act, 1951, Section 182 of the Companies Act, 2013, and Section 13A of the Income Tax Act, 1961 violate the voters’ fundamental right to information guaranteed under Article 19(1)(a) of the Constitution of India.

2. Whether the fundamental right to information under Article 19(1)(a) can be restricted on the grounds of protecting donor privacy or curbing black money in political financing, and whether the Electoral Bond Scheme satisfies the constitutional standard of proportionality.

3. Whether the removal of the 7.5% net-profit cap on corporate contributions under Section 182 of the Companies Act, 2013 violates Article 14 of the Constitution by facilitating manifest arbitrariness, corruption, and distortion of the democratic process.

4. Whether financial anonymity in electoral funding undermines the constitutional requirement of holding free and fair elections, a core component of the Basic Structure of the Indian Constitution.

Arguments Presented

Petitioner/Appellant’s Arguments

The Petitioners, represented by Senior Advocates Prashant Bhushan, KapilSibal, ShadanFarasat, and Vijay Hansaria, presented comprehensive constitutional arguments:

• Violation of Article 19(1)(a) (Right to Information): Building upon established precedents such as Union of India v. Association for Democratic Reforms (2002)[10] and PUCL v. Union of India (2003),[11]  the petitioners argued that voters have a fundamental right to know the financial origins of political parties. Information regarding political funding is essential for voters to evaluate candidates, assess policy influences, and exercise a meaningful vote in democracy.

• Failure of Proportionality Test: The state cannot restrict Article 19(1)(a) except under the exhaustive grounds listed in Article 19(2). “Curbing black money” and “protecting donor privacy” are not enumerated grounds under Article 19(2). Even if curbing black money were considered a legitimate state objective, anonymous electoral bonds fail the proportionality test because less restrictive measures—such as electoral trusts with disclosure—already exist.

• Asymmetry of Information & Quid Pro Quo: Absolute anonymity exists only for the public. The government in power, through state-owned SBI and law enforcement agencies, can easily identify purchasers and recipients. This creates an unlevel playing field, exposing donors of opposition parties to state harassment while enabling the ruling party to grant policy favors or contracts in exchange for corporate funding (quid pro quo).

• Arbitrariness of Corporate Uncapped Funding: The amendment to Section 182 of the Companies Act, 2013, which deleted the 7.5% profit cap, allows shell companies, loss-making corporations, and foreign-controlled entities to funnel unlimited money to political parties, converting corporate wealth into political influence in violation of Article 14.

Respondent’s Arguments

The Respondents (Union of India and SBI), represented by Attorney General R. Venkataramani and Solicitor General Tushar Mehta, defended the scheme:

• Curbing the Menace of Black Money: The primary objective of the EBS was to incentivize legitimate, banking-channel political donations. Prior to 2018, political cash donations were entirely untraceable. Electoral bonds ensured that all transactions occurred through KYC compliant banking channels, effectively reducing cash corruption in elections.

• Right to Privacy of Donors: Donors have a fundamental right to privacy regarding their political affiliations under Article 21, as recognized in S. Puttaswamy v. Union of India (2017).[12] Disclosing political contributions exposes donors to political retaliation, harassment, and victimisation by opponent political parties when power changes hands.

• Harmonious Construction of Rights: The court must balance the voter’s right to know under Article 19(1)(a) against the donor’s right to privacy and informational self-determination under Article 21. The EBS represented a balanced legislative policy choice.

• Judicial Restraint in Economic Policy: Political funding mechanisms fall within the domain of legislative and executive economic policy. Courts should exercise judicial restraint and defer to legislative wisdom in complex fiscal and political regulations.

Court’s Reasoning and Analysis

The 5-Judge Constitution Bench delivered a unanimous judgment invalidating the Electoral Bond Scheme. Chief Justice D.Y. Chandrachud authored the majority opinion for himself, Justice Khanna, Justice Gavai, and Justice Pardiwala, while Justice Sanjiv Khanna authored a concurring opinion providing additional analytical rigor.

The Fundamental Right to Know under Article 19(1)(a)

The Court held that the right to freedom of speech and expression under Article 19(1)(a) encompasses the fundamental right to receive information. Extending the jurisprudence from the ADR (2002) and PUCL (2003) cases, the Court emphasized that electoral democracy depends on voters making informed choices. Financial contributions to political parties directly influence political agendas, policy formulation, and candidate selection. Information about political funding is therefore critical for assessing whether party policies are driven by public interest or financial reciprocity.

“Information about funding of political parties is essential for the effective exercise of the choice of vote… Money influences politics in two ways: it influences election outcomes, and it influences post-election policy decisions. The voter must know the financial sources to evaluate whether policies are being shaped by corporate capital.”

Application of the Proportionality Standard

To determine whether the violation of Article 19(1)(a) was constitutionally permissible, the Court subjected the EBS to the four-pronged Proportionality Test established in Modern Dental College (2016)[13]   and Puttaswamy (2017):

1. Legitimate Goal: The Court recognized that “curbing black money” in electoral politics is a legitimate state objective. However, “protecting donor privacy” in the abstract cannot override statutory transparency unless grounded in specific safety concerns.

2. Rational Connection: While banking-channel donations rationally connect to curbing cash transactions, complete anonymity bears no rational necessity to achieving clean political funding.

3. Necessity / Least Restrictive Means: The EBS failed this prong entirely. The Court noted that existing mechanisms, such as Electoral Trusts under Section 177A of the Income Tax Act (which aggregate donations and disclose contributor lists) or direct capped bank transfers, achieve the objective of curbing black money without depriving voters of information. Absolute anonymity was not the least restrictive measure available.

4. Balancing / Proportionality StrictuSensu: The Court held that the Scheme completely subordinated the voter’s fundamental right to information to the donor’s commercial privacy. Since corporate donations are predominantly made for influence and access rather than political expression, shielding corporate political expenditure from public view is disproportionate.

Balancing Donor Privacy and Voter Transparency

The Court carefully analyzed the tension between the donor’s right to privacy (Article 21) and the voter’s right to information (Article 19(1)(a)). Chief Justice Chandrachud distinguished between financial contributions made by individual citizens as an exercise of political expression/affinity and contributions made by corporate entities. While individual political affiliations deserve a degree of privacy, public disclosures of political donations are essential when transactions cross threshold limits to prevent systemic corruption.

Unconstitutionality of Corporate Donation Amendments (Companies Act, 2013)

The Court struck down the amendment to Section 182 of the Companies Act, 2013 as manifestly arbitrary under Article 14. Prior to 2017, the 7.5% profit cap ensured that only profit-making companies could donate a reasonable fraction of their net earnings to political parties. By removing this cap and permitting undisclosed donations, the amendment allowed shell companies, loss-making entities, and foreign-backed corporations to be weaponized for laundering money into elections, creating an extreme risk of corporate policy capture.

Judgment and Ratio Decidendi

Ratio Decidendi

The binding legal principles established by the Supreme Court are:

• Voters have a fundamental right to information under Article 19(1)(a) regarding the financial funding and donor sources of political parties.

• Anonymity in political funding violates Article 19(1)(a) and fails the constitutional test of proportionality because less restrictive, transparent banking mechanisms exist to combat black money.

• Removing corporate donation caps under Section 182 of the Companies Act, 2013 is manifestly arbitrary under Article 14, as it equates profit-making corporate speech with unlimited influence by shell or loss-making companies, jeopardizing free and fair elections.

Final Directions Issued by the Court

The Constitution Bench issued the following binding directions to restore electoral transparency:

1. The Electoral Bond Scheme, 2018 is declared unconstitutional and struck down in its entirety.

2. The State Bank of India (SBI) was ordered to immediately stop the issuance and encashment of any further Electoral Bonds.

3. SBI was directed to submit comprehensive details of all Electoral Bonds purchased since the interim order dated April 12, 2019 to the Election Commission of India (ECI) by March 6, 2024.

The required details included buyer names, purchase dates, exact denominations, and the specific political party recipients of each bond redeemed.

4. The ECI was directed to publish all electoral bond purchase and redemption data received from SBI on its official website for public inspection by March 13, 2024.

5. All uncashed Electoral Bonds remaining within the 15-day validity period were ordered to be returned by political parties and refunded to purchasers.

Critical Analysis

Significance of the Decision

The ADR (2024) ruling is widely recognized as one of the most consequential constitutional verdicts in the history of the Supreme Court of India. By enforcing institutional accountability on the executive branch and banking monoliths, the Court reaffirmed its role as the custodian of democratic norms. The judgment directly confronted the reality that unrestrained corporate wealth corrupts political decisionmaking, ensuring that the constitutional promise of free and fair elections remains meaningful.

Implications and Impact

The immediate operational consequence of the judgment was the release of thousands of electoral bond records by SBI under strict Supreme Court oversight. Subsequent data disclosures revealed that political parties had received over ₹16,000 crore via electoral bonds between 2018 and 2024, with the ruling party securing the vast majority of funds. The data exposed significant instances of corporate donations occurring shortly after government enforcement raids (e.g., Enforcement Directorate or Income Tax investigations) or immediately preceding the grant of major public infrastructure contracts, triggering widespread public debate on quid pro quo corruption and regulatory capture.

Critical Evaluation & Comparative Jurisprudence

While the judgment received universal acclaim from constitutional experts for prioritizing voter transparency, some scholars point out practical implementation challenges:

• Resurgence of Unaccounted Cash: Eliminating banking-channel bearer bonds without establishing a publicly funded alternative may inadvertently push political donations back into cash channels, re-igniting black money circulation during elections.

• Comparative Perspective (US vs. India): Unlike the United States Supreme Court’s ruling in Citizens United v. FEC (2010),[14] which treated corporate political spending as protected free speech under the First Amendment, the Supreme Court of India correctly rejected the notion that corporate capital enjoys unrestricted constitutional protection at the expense of voter equality.

• Future Reform Need: The judgment highlights the urgent necessity for statutory state funding of elections or strict statutory caps on political party expenditure to truly equalize the political playing field.

Conclusion

In Association for Democratic Reforms v. Union of India (2024), the Supreme Court decisively chose voter enlightenment over executive opacity. By striking down the Electoral Bond Scheme, the Constitution Bench preserved the core democratic doctrine that political power in a constitutional republic flows from informed citizens, not anonymous capital. The decision stands as a historic triumph for political transparency, institutional integrity, and the rule of law, setting an enduring global precedent for campaign finance regulation in constitutional democracies.

Reference(S):

Primary Cases

• Association for Democratic Reforms and Another v. Union of India and Others, (2024) 5 SCC 1 : 2024 INSC 113.

• Citizens United v. Federal Election Commission, 558 U.S. 310 (2010).

• Justice K.S. Puttaswamy (Retd.) and Another v. Union of India and Others, (2017) 10 SCC 1.

• Modern Dental College and Research Centre v. State of Madhya Pradesh, (2016) 7 SCC 353.

• People’s Union for Civil Liberties (PUCL) v. Union of India, (2003) 4 SCC 399.

• Union of India v. Association for Democratic Reforms, (2002) 5 SCC 294.

Statutes and Schemes

• Companies Act, 2013 (Act No. 18 of 2013), s 182.

• Electoral Bond Scheme, 2018, Ministry of Finance Notification S.O. 29(E), dated January 2, 2018.

• Finance Act, 2017 (Act No. 7 of 2017), ss 11, 135, 137, 154.

• Income Tax Act, 1961 (Act No. 43 of 1961), s 13A.

• Representation of the People Act, 1951 (Act No. 43 of 1951), s 29C.

• Reserve Bank of India Act, 1934 (Act No. 2 of 1934), s 31.

• The Constitution of India, arts 14, 19(1)(a), 19(2), 21.

[1] Association for Democratic Reforms and Another v Union of India and Others (2024) 5 SCC 1, 2024 INSC 113

[2] Constitution of  india [article 19(1)(a)]

[3] The Finance Act, 2017 [sec 135]

[4] The Finance Act, 2017 [sec 137]

[5] The Finance Act, 2017 [sec 154]

[6] The Finance Act, 2017 [sec 11]

[7] Electoral Bond Scheme 2018, Ministry of Finance Notification SO 29(E) (issued 2 January 2018).

[8] Reserve Bank of India Act 1934, [sec 3].

[9] Representation of the People Act 1951, s 29C

[10] Union of India v Association for Democratic Reforms (2002) 5 SCC 294.

[11] People’s Union for Civil Liberties (PUCL) v Union of India (2003) 4 SCC 399.

[12] Justice K.S. Puttaswamy (Retd.) and Another v Union of India and Others (2017) 10 SCC 1.

[13] Modern Dental College and Research Centre v State of Madhya Pradesh (2016) 7 SCC 353

[14] . Citizens United v Federal Election Commission 558 US 310 (2010).