Authored By: Clinton Luvii Wics
CASE TITLE: Association for Democratic Reforms & Anr .v. Union of India & Ors. COURT: Supreme court of India.
BENCH: 5 Judge constitutional bench.
DATE: Tuesday 15th February 2024.
CITATION: 2024 INSC 113.
Parties Involved:
1: Association for Democratic Reforms & Anr (Petitioner). Represented by Advocate Prashant Bhusan.
The petitioner (Association for Democratic Reforms), is an Indian non-governmental organization established in 1999, it Works towards electoral and political reforms, focusing on transparency, accountability, and curbing the influence of money and crime in politics. ADR led the challenge against the 2018 electoral bond scheme, which allowed anonymous donations to political parties.
They argued that anonymity of the scheme violated the citizens’ right to information under Article 19 (1) (a) under the constitution and facilitated corruption.
2: Union of India & Ors (Respondent).
Represented by the Attorney General and Solicitor General of India.
The central government defended the electoral bond scheme. They argued that the scheme was introduced to promote transparency in political funding by ensuring donations were made through banking channels thereby reducing the influencing of black money, and that the donors privacy necessary to protect against retaliation.
FACTS OF THE CASE:
Background of the Case
The Electoral Bond Scheme, 2018 was introduced by the Government of India as a mechanism to fund political parties. It allowed individuals and corporations to purchase electoral bonds from the State Bank of India (SBI) and donate them to political parties. The key feature was anonymity: neither the donor’s identity nor the recipient’s details were publicly disclosed.
To operationalize this, amendments were made to several statutes:
∙ Representation of the People Act, 1951 – exempted parties from reporting donations received through bonds.
∙ Companies Act, 2013 – removed the cap on corporate donations and eliminated the requirement to disclose political contributions in financial statements.
∙ Income Tax Act, 1961 – exempted donors from disclosing details of bond purchases. ∙ Foreign Contribution Regulation Act (FCRA), 2010 – allowed foreign companies with Indian subsidiaries to donate.
Civil society groups like ADR and Common Cause challenged the scheme, arguing that it undermined transparency, accountability, and the democratic process
ISSUES RAISED:
∙ Whether the Electoral Bond Scheme violates the right to information of voters under Article 19(1) (a).
∙ Whether corporate donations without disclosure undermine democratic accountability. ∙ Whether the amendments to the Companies Act, Representation of the People Act, and Income Tax Act are unconstitutional.
∙ Whether donor anonymity can be justified on grounds of privacy or protection against retaliation.
ARGUMENTS OF THE PARTIES:
Petitioners’ Arguments (ADR and others)
Right to Know:
They argued that the Constitution guarantees voters the right to information under Article 19(1) (a). Just as voters have a right to know a candidate’s criminal record (PUCL v. Union of India, 2003), they must also know who funds political parties. Without this, voters cannot make informed choices about whether a party is influenced by certain corporations or interest groups.
Corporate Influence:
By removing limits on corporate donations and allowing anonymity, the scheme opened the door for massive corporate contributions. Petitioners warned this would distort democracy, giving wealthy entities disproportionate influence over policy decisions, while ordinary citizens’ voices would be drowned out.
Transparency:
Earlier laws required disclosure of donations above a certain threshold. The scheme removed these safeguards, making it impossible to detect corruption or quid pro quo arrangements (e.g., favorable policies in exchange for donations). Petitioners emphasized that secrecy in political funding undermines accountability.
Comparative Jurisprudence:
They pointed out that in most democracies — such as the U.S., U.K., and Canada — political donations must be disclosed. India’s scheme was an outlier, moving away from global standards of transparency.
Respondents’ Arguments (Union of India)
Privacy of Donors:
The government claimed anonymity protected donors from harassment, intimidation, or retaliation by political opponents. For example, a business donating to one party might fear reprisal if another party came to power.
Regulation:
They argued the scheme actually reduced corruption because donations had to pass through the banking system (via SBI), ensuring traceability and reducing cash-based black money in politics.
Legislative Competence:
Parliament has the authority to amend laws regulating political funding. The government maintained that the scheme was a policy choice within legislative competence, and courts should defer to Parliament’s judgment.
Balance:
The government framed the scheme as a balance between transparency and donor privacy. While voters might not know the donors, the Election Commission and authorities could access data if needed, thus maintaining oversight without exposing donors to public scrutiny.
The Core Clash
Petitioners emphasized democratic accountability and transparency as fundamental to free and fair elections.
Respondents emphasized donor privacy and reduction of black money, portraying anonymity as a protective measure.
The Supreme Court ultimately sided with the petitioners, holding that voters’ right to know outweighs donor privacy in the context of electoral integrity.
JUDGMENT:
Unconstitutional:
The Court held that the Electoral Bond Scheme, 2018 was unconstitutional because it violated the fundamental right to information under Article 19(1) (a). The scheme’s design — especially donor anonymity — deprived citizens of knowledge about who funds political parties, which is essential for informed voting.
Right to Know:
Building on earlier precedents like PUCL v. Union of India (2003), the Court emphasized that the right to free speech and expression includes the right to receive information. Voters must know the financial sources of political parties to evaluate whether policies are influenced by particular donors or corporate interests.
Corporate Donations:
The amendments to the Companies Act, 2013 that removed limits on corporate donations and disclosure requirements were struck down. The Court reasoned that unlimited, anonymous corporate contributions create a risk of policy capture, where wealthy corporations can disproportionately shape government decisions.
Transparency:
The Court underscored that democracy thrives on openness. Secrecy in political funding undermines accountability, fosters corruption, and erodes public trust. Transparency is not optional but a constitutional necessity in electoral processes.
Directions
State Bank of India (SBI):
As the sole authorized issuer of electoral bonds, SBI was directed to compile and disclose comprehensive details of all transactions. This includes:
Names of donors (individuals and corporations) who purchased bonds. Bond numbers to ensure traceability and prevent tampering.
Dates of purchase and redemption to establish timelines of donations. Recipient political parties that uncashed the bonds.
Election Commission of India (ECI):
The Court mandated the ECI to publish this information in the public domain. This ensures that voters, civil society, and the media can scrutinize political funding patterns. The ECI’s role is to act as a neutral custodian of electoral transparency.
Immediate Disclosure:
The judgment required disclosure of past transactions, not just future ones. This retroactive transparency was crucial to uncover the extent of anonymous funding since 2018.
Public Accountability:
By directing the ECI to publish the data, the Court ensured that information would be accessible to all citizens, not just government agencies. This democratizes oversight.
Systemic Reform:
The ruling effectively dismantled the electoral bond framework, forcing political parties to return to more transparent modes of funding. It also signaled to Parliament that future reforms must prioritize openness and accountability.
LEGAL REASONING:
The Court’s reasoning rested on four interconnected principles:
Article 19(1) (a): The right to information is not a passive entitlement but an active component of free speech and expression. Citizens must have access to information about political funding to exercise their democratic rights meaningfully.
Democratic Accountability: Political parties are the engines of representative democracy. Since they contest elections, form governments, and shape policy, their funding sources must be transparent to ensure accountability to the electorate.
Corporate Influence: Allowing unlimited, anonymous corporate donations creates structural inequality. Wealthy corporations gain disproportionate influence, undermining the principle of political equality and skewing the democratic process.
Balancing Test: While donor privacy is a legitimate concern, it cannot outweigh the public’s right to know in matters that directly affect electoral integrity. The Court applied a proportionality test, concluding that transparency serves a higher constitutional value.
Significance
The judgment has wide-ranging implications:
Transparency Restored: It reaffirms that voters’ right to know extends to the financial lifelines of political parties, thereby strengthening informed participation.
Checks Corporate Power: By striking down provisions that enabled unlimited corporate donations, the Court curtails the risk of policy capture and entrenched influence by wealthy entities.
Judicial Landmark: The case stands alongside PUCL v. Union of India (2003) as a milestone in electoral jurisprudence, expanding the scope of voters’ rights from candidate information to party funding.
Global Relevance: The ruling aligns India with international democratic norms, where disclosure of political donations is standard practice, reinforcing India’s commitment to transparent governance.
Critical Analysis
Strengths:
The judgment firmly upholds democratic principles of transparency and accountability.
It recognizes the systemic dangers of unchecked corporate influence on politics.
By prioritizing electoral integrity over donor privacy, it strengthens the constitutional balance between rights and public interest.
Weaknesses:
The sudden requirement of disclosure may disrupt existing funding mechanisms and create uncertainty for parties’ mid-cycle.
Implementation challenges remain, particularly in ensuring that disclosure is complete, accurate, and accessible.
There is a risk of a chilling effect, where legitimate donors may hesitate to contribute due to fear of retaliation or political backlash.
Broader Implications:
Political parties must adapt to transparent funding models, potentially shifting towards grassroots fundraising or smaller contributions.
The judgment may catalyze broader reforms in campaign finance law, encouraging Parliament to design systems that balance openness with donor protection.
It sets a precedent for judicial intervention in electoral reforms, signaling that the Court will step in when legislative measures undermine democratic principles.
CONCLUTION:
The Supreme Court’s decision in ADR v. Union of India is a watershed moment in Indian democracy. By striking down the Electoral Bond Scheme, the Court reaffirmed that transparency is the lifeblood of democracy. Voters’ right to know the sources of political funding is essential for informed participation, accountability, and the integrity of elections.
This case will likely shape the future of electoral reforms in India, ensuring that political funding remains subject to public scrutiny and democratic principles.
