India’s Supreme Court strikes down fundraising scheme in blow to Narendra Modi

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India’s Supreme Court has struck down the country’s main legal mechanism for corporate and individual donations to political parties, ruling that “electoral bonds” were unconstitutional in a decision seen as unfavourable to Prime Minister Narendra Modi’s party ahead of national elections.

A five-judge bench headed by chief justice DY Chandrachud made the ruling on Thursday in response to petitions brought by opposition politicians and a non-governmental organisation.

Modi’s Bharatiya Janata party is widely expected to overcome a divided opposition to secure a third five-year term in a staggered election to be held during April and May. 

The Supreme Court ruled that the funding scheme violated the right to information and could lead to “quid pro quo” arrangements between donors and political parties. It ordered the State Bank of India, which oversees the scheme, not to issue any more electoral bonds, effective immediately.

Electoral bonds have long been attacked by civil society groups for allowing corporations and individuals to make anonymous political donations, and for permitting unaccounted-for money to reach political parties, including from abroad. Parties were required to declare how much money they had received through electoral bonds, but not from whom.

Critics also argued that the system, though anonymised, favoured the BJP because the government could access information about donors via the SBI, which kept an audit trail of donations. This could also disincentivise donations to opposition parties, they said.

The Supreme Court also asked the SBI on Thursday to release details about submitted electoral bonds, including dates and amounts, dating back to 2019.

The Indian National Congress, India’s largest opposition group, has been canvassing the public for individual donations ahead of the upcoming vote, welcomed the court’s decision to strike down what it called a “‘Black Money Conversion’ scheme of the Modi government”.

“We hope that [the] Modi Govt will stop resorting to such ideas in future and listens to the Supreme Court, so that Democracy, Transparency and level playing field exists,” Mallikarjun Kharge, the Congress party’s president, wrote on social media platform X.

The BJP did not immediately respond to the ruling.

According to the Association of Democratic Reforms, an NGO that was among the petitioners to the court, the BJP received nearly 90 per cent of large corporate donations to five national political parties, which included Congress, in recent years.

Analysts and leftwing critics of the Modi government praised the court’s decision. “This is a welcome judgment,” said Nitin Sethi, founding editor of the Reporters’ Collective, which has reported extensively on the electoral bonds. “It undoes the BJP government’s attempt to legalise corruption and weaken Indian democracy.” 

The BJP introduced electoral bonds in 2017, presenting them as a way to cut back on the corruption and cash bribes it says flourished under former Congress-led governments before Modi took power in 2014. 

However, the electoral bonds system, one analyst said, had been “breaking the opposition”, especially the Congress party, and added that “no one knew who was funding whom”.

“It’s a historic verdict,” said Zoya Hasan, professor emerita of political science at the Centre for Political Studies at Jawaharlal Nehru University in New Delhi.

“It’s a big blow to the BJP because so much of their political control has depended on money power and much of this money has come through anonymous electoral bonds.”