• Legis Scriptor

Electoral Bonds – A Threat to Democracy

Authored By: Devashish Tiwari


Electoral bond was for the first time introduced in the Union Budget of 2017. An electoral bond is just like a normal bond which any Indian citizen or any entity can buy from Specified SBI Branches that can be donated to the party of its choice. As per the Ministry of Finance, any person/entity can buy an electoral bond from any specified SBI branch and it can transfer that bond to the political party. The said instrument can be encashed by the said party and later that political party can use this money in their rallies and other expenses. In January 2018 our Former Finance Minister Late. Arun Jaitley announced the guidelines and notified the Electoral Bond Scheme 2018 in Lok Sabha. The situation before 2017 was that if a party gets a donation of less than Rs. 20,000/- then the party didn’t need to reveal its source or donor name. Many parties exploited this rule by stating that most of the donations they receive are of less than Rs. 20,000/- and that they are not legally bound to reveal the donor name. Most of the political parties were receiving donations in the form of black money due to a void in the legal regime. Later, in the 2017 budget, the government capped its limit to Rs. 2000/- to barrage the entry of black money into politics by the introduction of electoral bonds. It’s a practice that has been facilitating the breeding of black money in politics. The Supreme Court gave it a green light in the case of Association for Democratic Reforms & Ors. vs. Union of India & Ors. rather than rightfully stonewalling the practice. The present article will examine the legal validity of the scheme and how it failed to fulfill the very purpose for which it was brought into practice. Violation of the Voters Right The Supreme Court on 26th March 2021 in the case of Association for Democratic Reforms & Ors. vs. Union of India & Ors. to the disappointment of many declined to stall the exercise of anonymous funding through political bonds. The erroneous practice of funding political parties 15 jolts the principles of democracy through its core by allowing for anonymous donations without any upper ceiling. The right to know has been incessantly been upheld by the Apex Court as a part of the right to freedom of speech and expression under Article 19(1)(a) of the Constitution. The Constitution Bench of the Apex Court in the State of Uttar Pradesh vs. Raj Narain and Ors.[i] observed that the citizens of this country have a right to know every public transaction arising out of a public act, a fundamental right flowing from Article 19(1)(a) of the Constitution, under the ambit of right to freedom of speech and expression. Similarly, in S.P Gupta and Ors. vs. President of India and Ors.[ii] the court observed that divulging of information regarding the functioning of the government shall be the rule and withholding of information from the public ought to be the exception and must be seldom exercised when public interests strictly require so. All these above observations establish that the right to know is a fundamental right enshrined in our democratic setup at various instances. The practice impinges on the right to know of the voters by withholding the complete information concerning the representative who will participate in the policymaking and will represent their interest in the parliament. The voter of this country ought to know the source of funding of the political party which represents their interest. Electoral bonds allow the ruling regime to manipulate the scale of convenience to its favour by keeping the opposition under its watch by tracing the donations to its originator through the State Bank of India. The whole exercise is executed by keeping the voters in dark as to whom and how much the entity is donating. The same is not only a grave assault on the democratic framework of our country by unduly favouring the ruling regime but also abridges the much cherished fundamental right of the voters. The United Nation Convention Against Corruption has strongly mooted in favour of transparency in political funding, which was endorsed by the law commission report of 1999 and 2015 for the public interest. We ought to take inspiration from countries that keep the political funding transparent since the battle should not be of money and muscle power but between political ideologies, at least in a democratic framework. The government in a democratic framework derives its legitimacy from the elections. If the procedure is tainted, the end product automatically becomes tainted, 16 likewise, if the electoral process is flawed with practices unduly favouring the ruling regime, the result of elections also becomes contaminated. Since the political party is subjected to such policies after every five years, they can’t be expected to act in good faith and that’s where the role of the judiciary comes into play as a neutral referee for enforcing fair democratic reforms. The Supreme Court’s reluctance of barraging the said practices raises eyebrows for not reflecting on the constitutional concerns raised by Association for Democratic reforms in its writ petition since the same level playing field is being denied to all the political parties.

Transparency in the Scheme and Effect of Electoral Bonds on Black Money

The electoral bonds are annexed with a unique alphanumeric code, visible under ultraviolet light, which corresponds with the donation of an entity. The claim that the donations are anonymous, breaks apart under the slightest of scrutiny. The enforcement agencies can retrieve this information from the banking channels whenever required. Any entity donating to the opposition shall be wary of being persecuted by the ruling regime since the donations can be tracked to their originator using a unique alphanumeric code, assigned to each bond. The apprehension had been reflected, when the ruling regime secured 95% of the first tranche in 2018. The Bank, a public authority under the RTI Act, doesn’t respond to queries without the concurrence of the finance ministry, which is a testimony to the transparency of the scheme. The scheme has allowed the various legal entities, including shell companies, foreign companies, individuals, trusts, and or any other legal entities to donate an unlimited amount anonymously via the scheme. The ruling government has no legal obligation to disclose the donations received by various entities Also, the stand of the government that the creation of the electoral bond shall help in minimizing black money is totally off the mark and has no leg to stand on. RKW Developers Ltd, a company that was investigated by Enforcement Directorate for terror links donated Rs. 10 Crores to the ruling regime. The above instances just go on to show the level of misuse the scheme of electoral bond is prone, by withholding the identity of the donor from the general public. This scheme can allow anti-national elements to contribute anonymously to parties working against the interest of the nation. An organization can create 17 any number of shell companies to facilitate donations through the anonymous channel provided by electoral bonds. The exponent of the ruling regime that the black money shall be reduced is false, to say the least, and shall promote black money in politics which is only thriving.

Lack of Consultation and Misuse of the Practice by the Ruling Regime

The government of the day has forced through the scheme by subjugating other institutions by adopting undemocratic means. RBI Ex-governor Urjit Patel was one of the biggest opposers of the whole move and later resigned when his concern went unheeded. The RBI expressed its reservation that electoral bonds hardly vary from the attributes of the currency. Urjit Patel expressed disquiet by stating that the scheme can be misused by the shell companies to the extent of absurdity and shall possess a reputational risk to RBI for lubricating money laundering. The Election Commission of India too had expressed its concern for the issuance of electoral bonds by stating the same shall lead to the augment of illegal donations to political parties. Till October 2018, the Election Commission of India demanded the rollback of the scheme, but the concerns went unheeded. The government also brazenly violated the rules of the issuance of electoral bonds. The rule stated that there would be an opening of the window for 10 days for the issuance of bonds to donors in January, April, July, and October by the State Bank of India. The rules also provided for additional 30 days window in case of the general election. After the launch of the scheme in 2018, the first issuance was supposed to take place in April 2018 as per the rules, but the same was rescheduled to March 2018. The next issuance took place the very next month, April 2018 as a special window for 10 days. As per the rules, the special window can only be opened in a general election year, i.e. 2019, violating its own rules. Windows were opened as per the convenience of the ruling regime and the exemption was made the rules by again opening a window in October 2018. By the means of these repeated violations, the ruling regime itself demonstrated the level of potential of absurdity, this scheme can be put through.


In a democratic setup like ours, transparency should be the rule, opaqueness should be the exception, to be exercised under the rarest of the case for the public interest. Transparency will only aid and strengthen our democratic setup. The right to know is a fundamental right which in the present instance seems to be diluting post the decision of the Apex Court on the practice of electoral bond that has interpreted the right in a limited sense. As citizens of the country which has always shown great alacrity towards the equal access of information to the public, the continuous practice of anonymous donation to the political parties is a regressive step and is liable to strict judicial scrutiny. One also needs to note the lack of consultation by the ruling regime, despite many stakeholders expressing their concerns over the practice, the scheme was forced through despite the protests from all the stakeholders. Adding salt to the injury, the extent of misuse this scheme has been put through makes a strong case for the discontinuance of the practice. In the Authors view, the practice of withholding the identity of the donor from the public is doing more harm than good, therefore a reform should be introduced in the form of revealing the identity of the donor, the amount the donor is donating & the political party to which the donor is making a donation, which can be accessed by any voter in the public domain. Such reforms will only help in making way for transparency, which is much required and will help in further ushering our vibrant democracy, which we pride ourselves to be.