SC strikes down electoral bonds: Full timeline and scheme explained

Electoral bond scheme: What it is, why it was introduced and how the controversy played out with a complete timeline of events here

A five-judge Bench of the Supreme Court (SC) led by Chief Justice of India (CJI) D Y Chandrachud has declared the electoral bond scheme as "unconstitutional" on Thursday. This comes after a series of hearings surrounding the controversial government scheme launched in 2018 that allowed anonymous donations to political parties.

Here is everything you need to know about the electoral bonds scheme and a complete timeline of events.

What are electoral bonds?

Electoral bonds, introduced in 2018 by then Finance Minister Arun Jaitley, are interest-free banking instruments designed to facilitate transparent political funding. Citizens of India or entities incorporated within the country could purchase these bonds from specified branches of the State Bank of India (SBI). Available in various denominations from Rs 1,000 to Rs 1 crore, these bonds came with a lifespan of 15 days and allowed donors to make anonymous contributions to eligible political parties.

Why was the electoral bonds scheme introduced?

The introduction of electoral bonds aimed to "cleanse" the system of political funding by providing a legal and transparent mechanism for individuals and corporations to contribute to political parties. By channelling donations through formal channels, the government sought to reduce the influence of black money in politics.

READ: SC's electoral bond ruling will reinforce power of votes over notes: Cong

Controversy surrounding electoral bonds

Despite the intended transparency, electoral bonds sparked controversy even before they were formally introduced.

Non-governmental organisations (NGOs) like the Association for Democratic Reforms (ADR) raised concerns about their impact on accountability and transparency. Critics argue that the anonymity of donors undermined transparency, as voters would be unable to ascertain which individuals or organisations are funding political parties and to what extent. Moreover, there are concerns about the potential misuse of electoral bonds, particularly through the involvement of shell companies.

The central government, on the other hand, argued that the scheme was necessary to safeguard donors' political affiliations under the right to privacy.

READ: SC says electoral bonds unconstitutional, asks SBI to submit all details

Full timeline of electoral bonds scheme

May 14, 2016

The Finance Act, 2016 amended the Foreign Contribution Regulation Act, allowing foreign companies with a majority share in Indian companies to donate to political parties.

March 31, 2017

The Finance Act, 2017 made several amendments, including exemptions for political parties from disclosing contributions received through electoral bonds. Section 31 of the RBI Act was also amended, permitting the Union government to "authorise any scheduled bank to issue electoral bond[s]."

September 2017 - January 2018

Two NGOs - ADR and Common Cause - and the Communist Party of India (Marxist) filed petitions with the SC to challenge the amendments, arguing that the Finance Acts were passed as money bills, preventing scrutiny from Rajya Sabha (Upper House of Parliament).

Petitioners also argue about the public's right to information and the lack of transparency in the scheme.

January 2, 2018

The Ministry of Finance issues a notification introducing the Electoral Bond Scheme, aiming to cleanse political funding.

Under the 2018 Scheme, certain branches of SBI were authorised to sell electoral bonds in denominations of Rs 1,000, Rs 10,000, Rs 1,00,000, Rs 10,00,000, and Rs 1,00,00,000.

March 25, 2019

The Election Commission of India (ECI) files an affidavit opposing the Electoral Bond Scheme, citing concerns about transparency in political finance. ECI also discloses that it had shared these concerns in a letter to the Union government dated May 16, 2017.

ECI also shares concerns regarding how the scheme could prevent information regarding foreign funding from coming out, "which could lead to Indian policies being influenced by foreign companies."

April 1, 2019

The Union government defends the scheme, claiming it promotes transparency and accountability in political funding. The Centre added that KYC details would ensure accountability and that there was only one authorised bank to issue such bonds.

April 12, 2019

A Bench led by Chief Justice Ranjan Gogoi, with Justices Deepak Gupta and Sanjiv Khanna directs political parties to submit all details of donations, donors, and bank account numbers in a sealed cover to the Election Commission.

November 2019 - October 2020

Petitioners approached the Court multiple times and filed for urgent hearings on the matter before the Bihar elections.

March 26, 2021

ADR seeks stay on the scheme in early 2021. On March 26, 2021 the Supreme Court declined to stay the scheme, dismissing concerns about foreign corporate influence.

The Bench led by Chief Justice S A Bobde, with Justices A S Bopanna and V Ramasubramanian, discouraged petitioners from approaching the court with the same applications.

October 16, 2023

The Supreme Court referred the case to a five-judge Constitution Bench to address the constitutional validity of the electoral bond scheme after the petitioner approached the court to hear the case before the 2024 Lok Sabha elections.

October 31, 2023

The Constitution Bench led by CJI Chandrachud, with Justices Sanjiv Khanna, B R Gavai, J B Pardiwala, and Manoj Misra, heard arguments over three days, focusing on increased corporate funding, black money circulation, and voters' right to information.

November 2, 2023

The Constitution Bench reserves judgment on the case and directs the Election Commission to provide comprehensive data on donations received by political parties through the scheme up to September 30, 2023.

February 15, 2024

Electoral bonds were struck down as unconstitutional by the Supreme Court.