Electoral bonds struck down

The Electoral Bond Scheme was introduced through the Finance Act, 2017, notified on 2 January 2018, as an instrument permitting anonymous donations to political parties. The bonds were interest-free bearer instruments purchased from the State Bank of India in fixed denominations ranging from ₹1,000 to ₹1 crore, encashable only by parties registered under Section 29A of the Representation of the People Act, 1951 that secured at least one percent of votes in the last general or state election. The 2017 amendments simultaneously altered the Companies Act, 2013 (deleting the 7.5 percent cap on corporate donations under Section 182), the Income Tax Act, 1961, the RBI Act, 1934 and the Representation of the People Act to enable the scheme and to remove disclosure obligations. The petitions, led by the Association for Democratic Reforms (ADR) and Common Cause, were filed in 2017 and finally heard by a five-judge Constitution Bench.

On 15 February 2024 a Constitution Bench headed by Chief Justice D.Y. Chandrachud, with Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala and Manoj Misra, delivered a unanimous verdict striking down the scheme. The Court held that anonymous electoral bonds violated the voter's right to information under Article 19(1)(a), holding that information about political funding is essential for the exercise of an informed electoral choice and is not outweighed by the donor's claimed right to informational privacy of political affiliation. The Court applied the doctrine of proportionality and the double proportionality standard to balance competing fundamental rights, finding the scheme failed the least-restrictive-means test because the State's objective of curbing black money could be achieved through less rights-infringing alternatives. It also struck down the amendment to Section 182 of the Companies Act permitting unlimited corporate funding as manifestly arbitrary under Article 14.

The Court directed the State Bank of India to cease issuing bonds immediately and to disclose to the Election Commission of India all details of bonds purchased since 12 April 2019 — including purchaser identity, denomination and encashing party. After SBI sought an extension and was refused, the data was published by the ECI in March 2024, revealing the donor-party matrix. The judgment did not order retrospective refunding of bond proceeds. As of 2026 the scheme stands abolished, and no replacement transparent-funding mechanism has been legislated, leaving Section 29C disclosure norms and the 1951 Act framework operative.

For the examination this topic is high-yield in the Polity and Governance segment of UPSC General Studies Paper II (functioning of the executive and judiciary, Representation of the People Act, election-related reforms) and recurs in current-affairs and CSS/BCS constitutional-law papers. Typical question angles include the constitutional grounds for striking down the scheme (Article 19(1)(a) versus donor privacy), the proportionality and double-proportionality reasoning, the legislative route through the Finance Act as a Money Bill controversy, and the broader debate on electoral funding transparency and the role of the Election Commission. Candidates should pair this with knowledge of the Indrajit Gupta Committee (1998), the 255th Law Commission Report, and the demand for state funding of elections.