The India Supreme Court unanimously declared unconstitutional the electoral bonds scheme on Wednesday, which previously allowed for anonymous funding to political parties. The electoral bonds scheme was first instituted by India Prime Minister Narendra Modi’s Union government in 2018. It allowed both individuals and corporations to anonymously fund political parties by purchasing electoral bonds from the State Bank of India. The court also directed the State Bank of India not to issue any more of these bonds. 

While responding to the multiple challenges against the legal validity of the central government’s electoral bond scheme, the court in a landmark verdict, held that voters have a right to information about political parties and their sources of funding. In doing so, the court found the electoral bond scheme violates article 19(1)(a) of the Indian Constitution, which guarantees the right to information to all citizens of the country.

Petitioners challenging the validity of the scheme argued that voters have a right to information concerning the public and the government, which includes financial contributions to political parties. The petitioners also claimed that the use of the electoral bond scheme is disproportionate. Through electoral bonds, the ruling Bhartiya Janta Party (BJP) collected Rs 5,271.97 crore and the Congress received Rs 952.29 crore between 2017 to 2022. The BJP received more than 57 percent of the money earned through these bonds.

The petitioners’ arguments were accepted by the court, which then offered Section 29C of the Representation of People Act, 1951 as a proportionate, less restrictive substitute. The court observed that all political parties were obligated to disclose any contributions exceeding Rs. 20,000 under this section, prior to its amendment by the Finance Act, 2017.

The five-judge bench, headed by the Chief Justice of India Dhananjaya Yeshwant Chandrachud noted that there was a “close association” between money and politics and the information about the funding of political parties was essential for voters to effectively exercise their choice of vote. The court also opined that a balance should be struck between a voter’s right to keep their political affiliations private and the right of a voter to know. Authoring the judgement for himself and the other judges on the bench, the chief justice said:

At a primary level, political contributions give a seat at the table to contributors, i.e., it enhances access to legislators. This access also translates to influence over policymaking. There is also a legitimate possibility that financial contributions to a political party would lead to quid pro quo arrangement because of the close nexus between money and politics. The electoral bond scheme and the impugned provisions to the extent that they infringe upon the right to information of the voter.

Initially aimed at improving party- funding and tackling black money by offering a transparent mechanism, the scheme was announced by former Finance Minister Arun Jaitley in 2017. Election bonds, which resemble bearer bonds or promissory notes, are interest-free financial instruments that can be purchased by individuals or organizations in India to support political parties financially. State Bank of India (SBI) is the sole issuer of these bonds, which are sold in denominations ranging from Rs 1,000 to Rs 1 crore and are issued solely for political donations.

The judgment comes in the backdrop of the upcoming national elections in the country, which are currently scheduled to occur between April and May.