India’s Supreme Court Strikes Down Contentious Election Fund-Raising Tool

India’s Supreme Court on Thursday struck down a contentious fund-raising mechanism that allowed individuals and corporations to make anonymous political donations, a system that was widely seen as an advantage for Prime Minister Narendra Modi’s governing party.

Though the judgment came just months before the country’s next general election, probably too late to affect its outcome, activists said it could bring more accountability to campaign finance down the road.

The ruling on “electoral bonds,” as the fund-raising instruments are known, came a full six years after Mr. Modi’s government introduced them. According to political analysts, his ruling Bharatiya Janata Party raised immense sums of money during that period — both from electoral bonds and other means — money it has used to trounce its rivals in elections and drown out opposition voices more generally.

Under the contested fund-raising system, the government-owned State Bank of India, India’s largest commercial bank, issued paper bonds that could be purchased in exchange for donations to a political party of the donor’s choice. They range from just $12 to more than $120,000, with no limit on the number of bonds that a donor could buy.

Though the purchases were anonymous in the sense of not being publicly reported, every buyer’s identity was known to the State Bank of India, which is run by the federal government.

“This decision was undertaken for a laudable objective to bring in transparency in the electoral system. We respect the court order,” Ravi Shankar Prasad, a leader from the ruling party, said about the Supreme Court ruling. “We will give a proper response after studying the whole judgment.”

In its 232-page ruling, the judges wrote that they wondered how elected representatives could be held accountable to the electorate if “companies, which bring with them huge finances and engage in quid pro quo arrangements with parties, are permitted to contribute unlimited amounts.”

The Supreme Court, in other words, did not take seriously the notion that corporate donors were giving money to politicians purely out of a sense of civic duty. “The reason for political contributions by companies is as open as daylight,” its judges wrote. Yet “the integrity of the election process is pivotal for sustaining the democratic form of government.”

During court hearings, Prashant Bhushan, one of the lawyers who brought the case against the government, told justices that about 99 percent of issued bonds ended up with the governing party and its allies.

In its Thursday ruling, the five-judge bench declared the entire system unconstitutional, and directed the State Bank of India to cease issuing any more bonds. It also ordered that all funding received by political parties since April 2019 via the bonds be reported to the country’s federal election commission.

For decades, some Indians have clamored for transparency in campaign financing, as their elections have become more costly. By some estimates, Indian elections now cost even more than competitive elections in the United States.

The police often seize hoards of cash, liquor and other inducements from candidates and parties, that are meant to be distributed among voters before elections. Political observers say that politicians who deploy the most money to win elections tend to become corrupt the fastest, as they seek the earliest opportunity to finance their future campaigns.

In 2017, when Mr. Modi’s government introduced the electoral bonds system, his finance minister argued that it was needed to bring transparency into campaign funding. Opposition politicians and other critics noted that the nature of the system seemed better designed to benefit politicians already in power.

In a recent report, the Association for Democratic Reforms or A.D.R., a nonprofit working to clean up India’s elections, said that individuals and companies had purchased about $2 billion worth of electoral bonds as of last November, and that Mr. Modi’s party alone had received about 90 percent of the corporate portion of these donations in the previous financial year.

Jagdeep S. Chhokar, a member of the A.D.R. and one of the petitioners before the Supreme Court, said the judgment would prevent further damage of the kind done to the electoral system over the past few years and should help level the political playing field in the future.

“The scheme had the potential to give additional advantage to any ruling party that was in power. And it has the potential to choke funding to all opposition political parties,” by giving the government the power to surreptitiously monitor its rivals’ fund-raising efforts. “That mischief has been removed,” Mr. Chhokar said.