Electoral Bonds Case Returns: Supreme Court to Hear Challenge to New Political Funding Rules in November
Petitioners say the replacement scheme recreates the anonymity struck down two years ago.
Key points
- Petitions against the scheme notified this year to replace electoral bonds are listed before a Constitution Bench in November.
- Petitioners say threshold-based reporting and a bar on party-wise publication recreate the donor anonymity struck down in 2024.
- The Union says the scheme discloses large donors to the Election Commission and that the design of funding rules is legislative policy.
NEW DELHI — The Supreme Court will hear in November a challenge to the political funding rules notified this year to replace electoral bonds, with petitioners arguing that the new scheme reconstructs, through reporting thresholds and a bar on publication, the donor anonymity that a five-judge bench struck down in February 2024. The matter has been placed before a Constitution Bench because it asks whether the 2024 judgment can be satisfied by disclosure to a regulator rather than to the public.
"Transparency cannot be optional for those who seek power," counsel for the petitioners told the court when the matter was mentioned for listing.
What the Supreme Court struck down in 2024
In Association for Democratic Reforms v. Union of India, decided on 15 February 2024, a five-judge Constitution Bench unanimously held the Electoral Bond Scheme, 2018 unconstitutional, together with the amendments made by the Finance Act, 2017 to Section 29C of the Representation of the People Act, 1951 (which had exempted bond contributions from reporting), Section 182 of the Companies Act, 2013 (which had removed the cap on corporate donations and the duty to name the recipient) and Section 13A of the Income-tax Act, 1961 (which had exempted bonds from the record-keeping that tax exemption requires).
The court held that voters' right to information about the funding of political parties flows from Article 19(1)(a); that the scheme's confidentiality was not the least restrictive means of curbing black money in politics; and that unlimited, undisclosed corporate funding was manifestly arbitrary under Article 14. It directed the State Bank of India to hand over purchase and encashment data to the Election Commission, which published it the following month.
What the new scheme does
According to the petitions, the replacement scheme allows contributions to parties through designated bank accounts, requires donor identity to be reported to the Election Commission only for contributions above a prescribed threshold, reports everything below the threshold in aggregate, and bars the Commission from publishing donor-wise data for individual parties. Companies may contribute within the restored statutory cap, but the scheme does not require them to name the recipient party in their accounts.
The petitioners' case
- Disclosure to a regulator is not disclosure to the voter. The 2024 judgment located the right in the voter, not in the Commission. A scheme under which the Commission knows but the public does not, the petitioners say, is the 2018 scheme with the bank replaced by the regulator.
- Thresholds invite structuring. A donor who splits a contribution into instalments below the threshold achieves complete anonymity by design. The petitions cite the aggregate reporting of sub-threshold contributions as evidence that the scheme anticipates exactly that.
- Article 14. Permitting companies to omit the recipient's name from their accounts, the petitioners argue, reinstates the opacity the court found arbitrary, even if the cap on quantum has returned.
The Union's defence
The Union's reply, filed last month, says the scheme was framed to give effect to the 2024 judgment, not to evade it. The court itself recognised in 2024 that donors have an interest in the privacy of their political affiliation, and a reporting threshold, the Union argues, is how the law has always balanced that interest against the right to information — Section 29C has required reporting of contributions above twenty thousand rupees since 2003. The scheme, it says, channels all contributions through the banking system, eliminates cash, and discloses every large donor to the constitutional authority responsible for elections. Beyond that, the Union contends, the design of funding rules is a matter of legislative policy to which the court should defer.
Transparency cannot be optional for those who seek power.
Counsel for the petitioners, in court
The law on political funding today
- Who may donate. Section 29B of the Representation of the People Act, 1951 allows parties to accept voluntary contributions, but not from government companies or foreign sources as defined in the Foreign Contribution (Regulation) Act, 2010.
- Reporting. Section 29C requires every party to report to the Election Commission, each financial year, every contribution above twenty thousand rupees, naming the donor. Failure forfeits the party's income-tax exemption.
- Cash. Section 13A of the Income-tax Act conditions a party's tax exemption on keeping records of contributions above twenty thousand rupees and on not accepting cash above two thousand rupees.
- Companies. With the 2024 judgment restoring the pre-2017 text of Section 182 of the Companies Act, a company may give up to 7.5 per cent of its average net profits of the three preceding financial years, by board resolution, with disclosure in its profit and loss account.
- Electoral trusts. Companies may also route contributions through electoral trusts under the 2013 scheme, which must disclose their contributors and the parties they fund.
What the bench will decide
The questions framed for the Constitution Bench are whether disclosure to the Election Commission alone satisfies the voter's right to information under Article 19(1)(a); whether a reporting threshold, and aggregate reporting below it, pass the proportionality test the court applied in 2024; and whether the scheme, having been notified by the executive rather than enacted by Parliament, can alter the disclosure regime of Section 29C at all. The petitioners have also sought an interim stay of the scheme ahead of the state elections due next year; the bench has said it will consider that request on the first day of hearing.
Timeline
- 2017 — Finance Act amends the RPA, Companies Act and Income-tax Act to enable electoral bonds.
- Jan 2018 — Electoral Bond Scheme notified; first tranche sold in March.
- Apr 2019 — Supreme Court orders parties to file donor details in sealed covers; scheme continues.
- Nov 2023 — Constitution Bench hears the challenge and reserves judgment.
- 15 Feb 2024 — Scheme struck down; SBI directed to disclose purchaser and encashment data.
- Mar 2024 — Election Commission publishes the bond data.
- 2026 — Replacement scheme notified; petitions filed.
- Nov 2026 — Constitution Bench hearing listed.
What were electoral bonds?
Bearer instruments introduced in 2018 that could be bought from the State Bank of India and donated to a registered political party, which encashed them within fifteen days. The purchaser's identity was not disclosed to the public or the Election Commission, and parties were exempted from reporting the contributions.
Why did the Supreme Court strike down electoral bonds?
In Association for Democratic Reforms v. Union of India (15 February 2024), a five-judge bench unanimously held that the scheme violated voters' right to information under Article 19(1)(a), that removing the cap on corporate donations was manifestly arbitrary under Article 14, and that the aim of curbing black money could be achieved by less restrictive means.
Are corporate donations to political parties capped?
Yes. A company may contribute up to 7.5 per cent of its average net profits of the three preceding financial years under Section 182 of the Companies Act, 2013, by board resolution and with disclosure in its accounts.
Do political parties have to disclose their donors?
Under Section 29C of the Representation of the People Act, 1951, every contribution above twenty thousand rupees must be reported to the Election Commission with the donor's name, and the report is published. Cash above two thousand rupees is not permitted under Section 13A of the Income-tax Act.
The Counsel will publish the Union's reply and the written submissions when they are placed on record, and will cover the hearing live. Companies and trusts planning political contributions should take advice from a qualified lawyer on the reporting obligations that apply while the challenge is pending.
Harsh Vardhan
Harsh reports on legislation, the law ministry and judicial appointments.
This report is for general information only and does not constitute legal advice. Readers should consult a qualified lawyer about their own circumstances. Case citations are to The Counsel Reports (TCR) unless otherwise stated.