Supreme Court declares electoral bonds unconstitutional, directs SBI to stop issuing them

The 2018 electoral bonds programme, which permitted anonymous and limitless contributions to political parties on the grounds that it violated voters’ right to information, was overturned by a five-judge Supreme Court bench.

TBN 17/02/24 : A constitution bench, led by Chief Justice Dr. D.Y. Chandrachud, and including Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala, and Manoj Mishra, has ruled that it is against Article 19(1)(a) of the Indian Constitution to withhold voluntary political contributions from public office.

The Bench argued that one’s right to knowledge in a democracy encompasses the right to be aware of the source of political money. The only way to limit someone’s right to information is to use Article 19(2). But the basis for limiting black money is not “traceable” in accordance with Article 19(2).

Additionally, it has ruled that corporations’ unrestricted political spending violates the fundamental right to free and fair elections and is, as a result, clearly arbitrary under Article 14.

The court also invalidated the related changes included in the 2017 Finance Bill.

The State Bank of India (SBI), the bank that issues the bonds under the plan, has been ordered by the court to immediately cease issuing electoral bonds.

It has instructed SBI to provide information on all electoral bonds purchased up to this point, including buyer identities, purchase denominations, and political party names that have benefited from contributions.

The Election Commission of India has been instructed by the Bench to release the aforementioned material by March 31.

The 2018 electoral bond programme, which is described as “a bond issued in the nature of a promissory note which shall be a bearer banking instrument and shall not carry the name of the buyer or payee,” was being challenged in court.

Bonds may be issued in denominations of one thousand, ten thousand, one hundred thousand, ten hundred thousand, and one crore rupees in accordance with the scheme.


The Representation of the People Act (RPA) 1951, the Income Tax Act (1961), the Companies Act (2013), and the Foreign Contribution (Regulation) Act (FCRA) 2010 were amended to include the electoral bond programme through the Finance Bill (2017).

It was announced by amending Reserve Bank of India Act, 1934, Section 31, which deals with the issuance of demand bills and notes.

A number of petitions were submitted contesting the amendments on the basis that they violated the fundamental rights protected by Articles 14, 19(1)(a), and 21 of the Indian Constitution.

The petitioners contended that the election system eats away at the “very root of our democracy.” In support of the plan, the respondents claimed that it was essential for “eradicating unclean and black money in elections.”

Under the unamended RPA, political parties were required to report donations exceeding twenty thousand rupees from a single individual to the Election Commission of India under Section 29C (declaration of donation received by the political parties).

The reporting requirements were eliminated in 2017 if contributions were made using electoral bonds.

Only political parties registered under Section 29A of the RPA and those who have received at least 1% of the total votes cast in the most recent general elections for the House of the People or the legislative assembly are entitled to obtain electoral bonds, according to the plan.

As per the Companies Act, a corporation’s contribution to a political party cannot surpass 7.5 percent of its average net profit from the three consecutive financial years.

The Companies Act’s Section 182 (prohibition and limits regarding political contributions) contained a proviso that required this, but it was repealed in the 2017 modification.

A challenge to Section 182(3), which formerly required disclosure of the name of the political party to whom a donation was made as well as the specifics of the amount, was another alteration to the Companies Act.

Following the modification, it will no longer be necessary to reveal the identity of the political party to which the donation was made. All that needed to be revealed was the donation’s entire amount.

Before the amendment, Section 13A of the Income Tax Act of 1961 stated that any income received from voluntary contributions to a political party was exempt from income tax calculations as long as the political party kept a record of the contributions, including the names and addresses of everyone who made them.

Following the amendment, if political parties received such payments in the form of electoral bonds, they were no longer required to keep track of them.

Foreign donations to political parties and public employees were forbidden by the FCRA. The administration had “effectively” permitted foreign donations following the change.

Notably, the 2018 electoral bond plan was criticised by the Indian Election Commission.

Related Posts